By Ernest Dela Aglanu, Benzinga
A company with an investment style seemingly similar to the legendary Berkshire Hathaway Inc. (NYSE: BRK.A) is reporting significant gains in its portfolio of companies going through IPOs, uplists, and spinoffs. Berkshire Hathaway, best known for its CEO Warren Buffet, one of the world’s wealthiest men and the “Oracle of Omaha”, owns big stakes in businesses in insurance, distribution, manufacturing, retailing, rail transportation, energy generation, and more.
Insurance generates the most revenue for the company, but manufacturing generates the most earnings before taxes.
Berkshire Hathaway’s stock is the most expensive stock on Nasdaq. On February 24, the stock was priced at $456,460 and currently has a market capitalization of about $670 billion. The company’s stock is so expensive that a single share is worth more than a house in many parts of the U.S.
A Fast Rising Alternative?
If you are an avid follower of Berkshire Hathaway’s business model and intrigued by how many businesses it has fostered, the name DSS, Inc. (NYSE American: DSS) could warrant attention.
Unlike Warren Buffet’s company, which owns pure-play companies like Geico, DSS is not an investment firm but rather an incubator–building and spinning off companies with the goal of giving retail investors pure-play opportunities for additional stock.
For some context, a spinoff occurs when a company splits off a portion of its business into a separate company and distributes shares of the new entity tax-free to the parent company’s shareholders. Some prominent companies that have pursued spinoffs include General Electric Company (NYSE: GE), Johnson & Johnson (NYSE: JNJ), and 3M Co. (NYSE: MMM). In joining these big players, DSS has evolved into a multi-industry business growing through acquisitions.
The company has a diversified portfolio including biotech, a REIT focusing on healthcare facilities, a bank, and an alternative trading platform for token exchange, amongst other targeted businesses.
The company’s Net Asset Value as of September 30 last year was $182.6 million, while Net Asset Value (NAV) per share was $1.31. Revenues were up by 172% year-on-year, total assets were $264 million, and asset growth was over 200%.
DSS reports that its diversified, sustainable businesses driving strong cash flow and profitability are mainly:
Premier Packaging Corporation — Innovative product and consumer packaging solutions.
Impact Biomedical — Developing and acquiring companies and assets in biotech/healthcare.
Decentralized Sharing Systems — Peer-to-peer decentralized distribution marketplace and direct marketing model
DSS PureAir — Advanced technology that provides innovative, high-quality air and surface purification and filtration
American Pacific Bancorp — Provides a complete range of banking and lending services
DSS Securities — Investing and acquiring in fund management and market-making firm. Currently, with $1.7 billion assets under management.
American Medical REIT — Medical REIT targets hospitals and acute care facilities in secondary and tertiary markets.
Digital Securities Exchange — Developing and acquiring assets in securities trading and management, including digital asset exchanges and utility token exchanges.
Spinoffs With The Goal Of Giving Investors Pure-Play Opportunities
A Zacks Small-Cap Research report released in September 2022 revealed that DSS plans three (3) spinoffs in the next nine months: Impact Biomedical, American Pacific Bancorp, and American Medical REIT, with the first one, Impact Biomedical, potentially worth up to $160 million. The imminent spinoff of Impact Biomedical (its red herring has been filed) is in the comments phase with the U.S. Securities and Exchange Commission (SEC) with the eventual spinoff expected in the next quarter.
Impact Biomedical is expected to file an amended S-1 and have a record date set in Q2 and could IPO within the next two quarters. The company’s valuation is expected to be determined by the bankers and the markets.
DSS believes a spinoff of American Pacific Bancorp could happen quickly as it is a far less complicated entity — the spinoff could be executed by as early as the third quarter of 2023.
“We expect it would be valued at the typical four to five times loans outstanding for commercial lenders, which currently stand at $40 million, thus valuing it at $160 million to $200 million. We believe it is earning approximately 10% on average on its loans. DSS’s current enterprise value is now $65 million,” the company said.
AMRE REIT, on the other hand, has an 8% cap rate and is expected to reach $200 million to $250 million in assets before IPO’ing, which DSS anticipates could happen in Q3 of 2023. Again, this IPO process will provide DSS shareholders with a “no-cost” investment in a separately traded company.
DSS says it plans to retain at least 50% of each entity in all three cases — the same will apply for future spinoffs beyond the initial three— but the Company assures shareholders would get a certain percentage. New shares will be issued to raise capital to support the growth of each newly public company.
DSS appears to be a company that offers investors the opportunity to acquire a portfolio of curated pure-play companies in the form of stock dividends. In simple terms, when one of DSS’s companies goes public, if you own DSS stock, you’ll get their stock automatically, too — and benefit from individual increases in shareholder value with each spinoff. As DSS executes its business plan, more investors will most likely learn of these periodic spinoffs to participate in these ongoing stock dividends.
This article was originally published on Benzinga here.
DSS is a multinational company operating businesses within nine divisions: Product Packaging, Biotechnology, Direct Marketing, Commercial Lending, Securities and Investment Management, Alternative Trading, Digital Transformation, Secure Living, and Alternative Energy. DSS strategically acquires and develops assets to enrich the value of its shareholders through calculated IPO spinoffs and a parametric share distribution strategy. Since 2019, under the guidance of new leadership, DSS has built the necessary foundation for achievable growth through the formation of a diversified portfolio of companies positioned to drive profitability in multiple high growth sectors. These companies offer innovative, flexible, and real-world solutions that not only provide mutual benefits for businesses and their customers, but also create sustainable value and opportunity for transformation.
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Rick Lutz- TraDigital IR