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  5. BQE: Was looking at the financials for this company. [BQE Water Inc.]
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Investment Q&A

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Q: Was looking at the financials for this company. They appear to have had a very strong Q3 with revenue increasing 78% year over year based on management's strategy to focus more on water treatment services rather than sales of recovered minerals. However, there are only 1.2M shares outstanding with insiders owning approximately half. Further, the Company is continuing to buy back stock in spite of the already low float. Do you think they are possibly setting up for a "go private" transaction? Otherwise, why would they do this? Do you see value in investing in this company?

Thank you for your service to investors

Brad

Asked by Brad on April 18, 2024
5i Research Answer:

We think it is a risky investment due to it's microcap nature ontop of it being very thinly traded. The repurchasing of shares could simply be a way that BQE is trying to return capital to its shareholders but certainly insiders' percentage ownership increases and if it were to go private this does make it much easier. But note the company has been listed for more than 20 years already so we might not expect this. BQE does hold some characteristics of a company that could go private with a good balance sheet and decently cheap forward P/E at 14x. However, shares are trading at a 10-year high so this may not make the most sense timing-wise to go private. The last few quarters have been solid and while it may be getting interesting the liquidity and size risk are too high for us to consider investing. Cash flow was negative in the most recently reported 12-month period.