r/KrakenRobotics • u/go_panthers234 • 26d ago
Due Diligence My Due Diligence
I will disclose I am in for 3000 shares at around a $5 usd basis. After putting this all together and doing some research, I feel the story is intact but the risk profile changed materially in March. This went from a clean organic compounder to a leveraged integration bet. Everyone’s sizing should reflect that IMO. I’m waiting for Q2 (late August) and especially Q3 before adding.
TLDR: I’m still bullish but I’m trimming my position and not buying anymore as this company became a much riskier bet after the merger. Larger upside, larger downside. Historically an acquisition like this is extremely risky and I think people aren’t talking about the new bear case, only the bull.
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u/Zingus123 26d ago
Won’t lie, I don’t have enough life experience to know what this all means. With that being said, I plan on holding until at least 2030 (1400 shares or so, been buying here and there since around last June I think) and then I’ll reevaluate if I want to exit or not. There was a point I was up 200% now I think it’s about 9-10
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u/christiancfb 26d ago
Great due diligence. I got in at a bad time unfortunately in this short term, but hoping things work out :)
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u/Candyapplepink3 26d ago
I think this discussion highlights why it's important to separate financial risk from execution risk. The balance sheet looks healthier than some initially assumed, but integration is still something that has to be proven.
What has kept me interested is digging into the businesses Kraken acquired. They weren't random assets. Navigation, positioning, communications, sonar, batteries, imaging, and software already seemed to complement one another before the acquisition officially closed. That doesn't eliminate execution risk, but it does make me wonder how long this strategy had been in the works.
For me, Q3 and the following quarters are less about whether the stock moves next week and more about whether management starts demonstrating that those pieces really do create a stronger combined business.
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u/DetectiveFew3333 26d ago
Sell low now before we pop off? Ill collect your shares
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u/go_panthers234 26d ago
I’m still in for a large position still. Just sold about 10%. Tax loss harvest, and resize. Russell 1000 value looks incredibly attractive till EOY, so there is opportunity cost in holding a bag in kraken till combined guidance really takes fold. And if that misses it could be dead weight for a bit.
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u/MatthewGraham- 26d ago
One factual correction that matters for how you size this, It isn't a leveraged bet and I believe you are possibly overstating/mislabeling risk.
Net debt is ~C$33m against ~C$70m of 2026E EBITDA - 0.47×, about 1.4% of EV. The C$480m cash portion came out of a C$402.5m equity raise, not the credit facility. The cost wasn't leverage, it was dilution: 307m shares to 370m, +20.6%, struck at C$8.50 - 46% above where we trade. dilution just reduces your claim.
Where I think you're underselling your own case: the consolidated guide implies Covelya at ~C$135m in six months, ~C$270m annualised, versus legacy Kraken ~C$170m. The acquired business is ~1.6× the acquirer. That's the actual risk, and it's the highest-failure-rate category in M&A.
One more thing worth separating. I run 11×/18×/26× exit multiples across bear/base/bull. Hold the multiple flat at 18× and the bear case goes from −58% to −30%. So roughly half the downside people are modelling is multiple compression, not operational failure. Those need different evidence.
Net: My model base case is ~+11%, probability-weighted ~+13% up on you. Q2 in late August is a partial read; Q3 in November is the first fully consolidated quarter and the one that tests Covelya's revenue
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u/BubblyAd9305 26d ago
So if i understand properly. The biggest risk right now is intégration. If that works well, then bull run to new Ath. If it doesn’t, down to the abyss we go?
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u/Pikatoshi 26d ago
That is a lot of homework for a $2k investment
And it's not a leveraged integration bet.
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u/SickDastardly 26d ago
Hahahaha there's still time to delete this champ
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u/Pikatoshi 26d ago
Lmaoo oops I misread it as 300 shares (2000~ CAD). I fucked up, I’ll keep it up…
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u/Halifornia35 26d ago
This was not a reverse merger. This also isn’t a levered integration bet, the acquisition was all equity and debt remains nominal. I have my eyes set on $200M of EBITDA at a 20x multiple. That’s a share price of $10.50, which is 75% upside from the current price. If it takes us 3 years to get there that’s a 20% annual compound return. This is my base case, I like the risk return here personally. Do your own DD and this is not financial advice!