Equity Edge #8 — Pitch A Ticker

The Spaces featured a rapid-fire pitch session with four tickers across fintech, defense, energy storage, and biotech, each followed by concise Q&A. Tanner pitched Chime, a U.S. neobank focused on underbanked consumers, highlighting 9.1M active users, 29–39% YoY revenue growth, improving loss rates on micro-loans, and a path to a broader financial super app despite current GAAP losses. Michael presented Kraken Robotics (TSXV: PNG.v; OTC: KRK and F), emphasizing its role as a key supplier of subsea batteries and sonar to Anduril’s UUV programs, strong margins, profitability, capacity expansions, and potential uplisting as catalysts. Contribution Margin Positive covered EOS Energy (EOSE), the U.S. zinc-bromine long-duration storage leader, outlining IRA credit advantages, DOE loan support, automation-driven cost curves toward ~$150/kWh COGS, expanding backlog/pipeline, and funding for scale—tempered by a demanding valuation. Mo E pitched Grail (GRAL), a multi-cancer early detection blood test company (50+ cancers) growing volumes via Quest and a strategic Samsung stake for Asia, with FDA approval targeted in early 2026. Hosts Amit and Stock Talk probed financial durability, valuation, concentration risk, and regulatory timelines, repeatedly stressing due diligence.

Equity Edge Episode 8 — Ticker-Pitch Series (Summary and Notes)

Format and Participants

• Structure: 3-minute stock pitches followed by ~3–4 minutes of Q&A per pitch.
• Hosts:
  • Amit (Host/Moderator)
  • Stock Talk (Co-host; long-term investor, not a day trader)
• Presenters:
  • Tanner — pitched Chime (neobank)
  • Michael — pitched Kraken Robotics (TSXV: PNG.V; OTC: KRKNF)
  • Contribution Margin Positive — pitched Eos Energy (long-duration energy storage)
  • Mo (imo.e) — pitched Grail (ticker: GRAL)
• Disclaimers/Housekeeping:
  • Hosts emphasize doing your own research; neither host indicated owning the pitched names.
  • Show will continue with this format if well received; next session planned for next Wednesday.

Pitch 1: Chime — U.S. Neobank Aiming for a Low-Fee, Super-App Future

• Core thesis (Tanner):

  • Chime is a U.S. “neobank” (no bank charter) focused on less affluent consumers historically underserved by large banks (e.g., overdraft fees, high credit card costs).
  • Product suite: debit cards; secured credit; SpotMe (small-dollar, short-term advances); credit-building tools; aiming for “no/low fee” banking, including second-chance access for near-zero FICO users.
  • Growth/scale: ~9.1 million active users; recent top-line growth ~29% YoY (last quarter), with past four quarters at 39%, 32%, 37%, 28% YoY.
  • Economics: payments-led with very low direct credit exposure; targeting 90%+ gross margins; incremental adjusted EBITDA margins targeted at ~50% longer-term. Average revenue per user is rising.
  • Roadmap: 2026 expansion into joint accounts, custodial accounts, and brokerage—the “super app” play (comparables: SoFi, Robinhood, Cash App, PayPal).
  • Newly public: IPO around $40; shares down >50%; market cap ~$7.5B, viewed as inexpensive versus peers (on P/S or adjusted EBITDA vs. SoFi, Robinhood, Cash App) for risk-adjusted upside.

• Financials and profitability (from Q&A):

  • Not GAAP-profitable; reported net loss ~($50M) last quarter (around -10% net margin). Some prior quarters showed positive prints; overall still in investment mode.
  • Adjusted EBITDA positive (~$65M, ~6% margin), with significant SBC due to recent IPO; management’s long-term target is >50% incremental adjusted EBITDA margin by 2026.
  • Operating expenses (member support/ops, S&M, tech/dev) increasing as they scale.
  • Tech insourcing: building “Chime Core” in-house to reduce third-party processing costs (previously on platforms like SoFi’s Galileo), a multi–tens of millions annual savings opportunity.

• Risk and resilience discussion:

  • Macro: Amit asked about consumer weakening and rising delinquencies for lower-end households. Tanner reports Chime isn’t seeing that stress in its data; SpotMe loss rates ~1.2% and improving, aiming for ~1% steady state.
  • Mix shift: fastest-growing segment is Chime’s “higher income” cohort (> $75k), albeit still lower than SoFi/RH typical “high-end” definitions.
  • Primary risk: payments volume slowdown would hit revenue, but limited direct credit risk due to product mix (secured credit, debit, small SpotMe advances with improving loss rates).

• Technical/market context (Stock Talk):

  • Chart attempting to break a longstanding downtrend (poke above the 50-day). Limited public financial history given the recent IPO.

Pitch 2: Kraken Robotics — Batteries and Sonar for Anduril’s Subsea UUVs

• Core thesis (Michael):

  • Kraken Robotics supplies subsea batteries and synthetic aperture sonar (SAS) to Western navies and offshore energy customers; most importantly, it is a key supplier to Anduril’s underwater UUV programs (e.g., Ghost Shark XL, Dive-LD).
  • “Call option on Anduril”: As Anduril scales production (Australia’s billion-dollar contract, U.S. Navy prototypes, broader Western rearmament), Kraken’s per-vehicle content and volumes can drive outsized growth.
  • Access edge: The stock is harder to access (TSXV/OTC; not on Robinhood) and is pre-uplisting; Michael expects uplist to TSX then eventually NASDAQ, potentially unlocking broader demand.

• Business detail and unit economics:

  • Per-vehicle content (USD): Ghost Shark XL carries ~$5.5M of Kraken hardware. Dive-LD carries ~$1.0–$1.7M.
  • Capacity in place for scale: C$250M of battery capacity ($177M USD) across Europe and Canada; Anduril’s Rhode Island facility is online to ramp.
  • Diversified revenue streams: Besides Anduril-linked batteries/sonar, Kraken’s services business (offshore energy surveys) grew ~85%; total Q3 revenue grew ~60% with record sonar and battery shipments. Acquired 3D at Depth (underwater LiDAR), which is performing well.

• Financials and margin profile:

  • Recent quarter gross margin ~59% (boosted by services mix). Historically positive profitability with last year near ~20% net margin.
  • Guidance: ~C$130M revenue and ~C$30M adjusted EBITDA (reaffirmed), implying solid adjusted margins at small scale.

• Valuation and catalysts:

  • Trades at materially lower price/sales than many drone/defense names (which often have no profits). Expected uplisting (TSX, then possibly NASDAQ) and broader awareness are key catalysts.
  • Defense tailwind durability: Even if the broader AI equity cycle cools, Western defense rearmament (e.g., undersea UUV readiness goals by 2027) is seen as a secular spend priority.

• Key risk: Customer concentration in Anduril (Amit’s question).

  • Mitigants (Michael): Deep supplier lock-in in defense; Kraken’s batteries have multi-year lead (3× energy density vs. competitors; rated for deepest depths). Anduril has already fielded U.S. Navy prototypes and won major AUKUS contracts; switching suppliers would add years of delay to Anduril’s largest program.

• Stock Talk’s perspective:

  • Familiar with the platform and products (SAS, subsea batteries); impressed by healthy gross margins, profitability at small scale, and outlook; requested and received updated financials confirming margin strength and positive adjusted EBITDA on ~C$130M revenue.

Pitch 3: Eos Energy — U.S. Zinc-Bromine Long-Duration Energy Storage (LDES)

• Core thesis (Contribution Margin Positive):

  • Eos (ticker referenced as EOS/EOS Energy) targets the 4–16 hour duration band where lithium-ion economics and safety are challenged; secular tailwinds include AI/data center load, renewables penetration, grid congestion and curtailment, and electrification.
  • Technology advantages: Z3 (launched 2024) zinc-bromine batteries are non-flammable, quiet, indoor-safe, cycle-agnostic, and U.S.-manufactured. Qualifies for IRA 45X/48E credits (structural margin tailwind and domestic supply-chain edge).

• Scaling and cost curve:

  • Manufacturing transition from pilots to industrial automation; first automated line online June 2024.
  • Project AMAZE scales capacity to ~8 GWh by 2027; backed by a $303M DOE loan guarantee (strong technical/commercial validation). COO says additional lines can be added every ~90 days to scale alongside bookings, preserving capital discipline.
  • Cost trajectory: targeting ~$150/kWh COGS; modeling uses ~$250/kWh selling price ex-credits, implying attractive gross margins even before IRA benefits.

• Commercial momentum:

  • Shift from pilots to multi-site institutional frameworks:
    • Frontier Power: 5 GWh framework; 16 projects progressed under the U.K. cap-and-floor program (8–12 hour duration).
    • Emanate Energy: up to 750 MW (starting 2026).
    • Talen Energy: multi-GW data center + AI infrastructure framework.
    • IEP Camp Pendleton: 400 MWh.
    • Expanding utility/data center pipeline: Duke, NextEra, Dominion.
  • Metrics: Q3 backlog ~$644M (grew to >$900M with Q4 orders); pipeline just under ~$23B (>90 GWh). Q3 revenues up ~35× YoY; QoQ gross margin improved by 92 percentage points.

• Financing and guidance:

  • June 2024 Cerberus investment $315M (met all 16 milestones with no incremental dilution).
  • DOE loan $303M; recent $450M equity raise (bookled by Goldman) and $600M upsized convertible; fully funded to scale near-term.
  • Management reiterated 2025 revenue guidance ~$150–$160M; forecast to exit Q1 gross-margin positive.

• Valuation debate (hosts’ Q&A):

  • Stock Talk: Technologically compelling; TTM revenue up ~350%; chart technically strong; valuation hard to pin given rapid inflection—more speculative than established peers.
  • Amit: How to justify ~62× sales?
  • Contributor’s framework:
    • Model 2027–2028: four automated lines, faster cycle times yield ~10.7 GWh; ASP ~$250/kWh; revenue ~$2.7B.
    • Cost/margin: COGS $150/kWh; IRA credits ($48/kWh) further enhance economics; ~55% gross margin on modelled volume.
    • OpEx assumption: SG&A + R&D $185M; EBITDA ~$1.38B (50% margin).
    • Valuation: Applying 17–32× EV/EBITDA range (base ~25×) yields ~$37.2B EV; net of ~$700M debt and adding ~$200M cash, divided by ~550M FD shares implies ~$62/share (sensitivity to macro, execution, margins).
  • Accounting noise: The large negative EPS last quarter was largely due to non-cash warrant derivative mark-to-market as the stock rose ~90% from Q2 to Q3.
  • Context: Former SPAC with prior “science project” execution risk and near-bankruptcy fears in early 2024 (low cash pre-Cerberus). With financing and automation in place, thesis pivots to industrial execution at scale into a strong LDES demand cycle.

Pitch 4: Grail (GRAL) — Multi-Cancer Early Detection (MCED) via Blood Test

• Core thesis (Mo / imo.e):

  • Grail offers a simple blood test (e.g., at Quest) that screens for >50 cancers, detecting cancer-derived DNA fragments (ctDNA) at very low concentrations—designed to identify cancers at stages 1–3, often before symptoms or standard screening would detect.
  • Personal relevance: Presenter with family history of kidney cancer seeks routine early detection; test currently ~$1,000 (mostly self-pay), with insurer reimbursement beginning to expand.
  • Scale potential: Hypothetical U.S. penetration of 10M tests/year → ~$10B revenue; recent strategic partnership: Samsung acquired ~5% stake to open Asian markets, materially expanding TAM.

• Business position and traction:

  • Origin: Spun out from Illumina to focus exclusively on MCED.
  • Distribution: Available at Quest; building insurer coverage; last quarter performed ~45,000 tests; continued sequential growth.
  • Financial snapshot: ~ $4B market cap; early-stage, currently loss-making; stock up ~500% YTD; presenter’s average cost ~$27; now his third-largest position (behind Tesla and Palantir).

• Key risks and milestones:

  • FDA: Full approval targeted for early 2026; interim benchmarks ongoing with reportedly ~96% accuracy in studies. Regulatory outcome is a major catalyst/risk.
  • Clinical operations: False positives/negatives remain a reality; however, MCED output routes patients to confirmatory, cancer-specific diagnostics (Grail identifies risk, does not treat).
  • Execution: Scaling payer reimbursement and global distribution (via Samsung/Asia) are pivotal; strong momentum could persist, but biotech/regulatory risk remains material.

• Host/Co-host views:

  • Amit: Asked about underlying detection methodology and FDA risk; Mo notes ctDNA fragment detection at very low concentrations and acknowledges regulatory dependence; expects further upside on FDA approval.
  • Stock Talk: Has traded it on catalysts earlier; not a deep biotech specialist; acknowledges momentum and potential.

Cross-Cutting Themes and Takeaways

• Execution at scale as the differentiator:

  • Chime: Driving super-app expansion with low credit risk, insourcing tech to cut costs; must translate high gross margins into sustainable profit.
  • Kraken Robotics: Defense supplier with high per-unit content; dependent on Anduril’s undersea ramp but supported by strong unit economics, backlog visibility, and sector tailwinds.
  • Eos Energy: Transitioned from tech validation to automated industrial production; IRA tailwinds, large frameworks, DOE/Cerberus support; valuation rich on near-term metrics but potentially reasonable on 2027–2028 scale scenarios if execution and margins materialize.
  • Grail: Pioneering MCED; expanding distribution and payer coverage; Samsung stake signals global intent; FDA approval in 2026 is a major catalyst.

• Customer concentration and platform access:

  • Kraken’s Anduril dependency is the central risk; mitigated by defense lock-in and technology edge.
  • Chime’s exposure is to transaction volumes more than underwriting risk.
  • Some names remain hard to access on retail platforms (Kraken pre-uplist), which can delay discovery.

• Market and policy tailwinds:

  • Defense rearmament and undersea autonomy (Kraken/Anduril).
  • Grid reliability for AI and renewables; incentives via IRA (Eos).
  • Preventive healthcare and global screening adoption (Grail).

• Final notes:

  • Hosts reiterated that they don’t currently own the pitched names and urged independent research.
  • Next session planned for next Wednesday; format likely to continue given strong audience interest.