The Curious Case of Code Rebel (NASDAQ:CDRB)

Code Rebel Corp. is a software firm based out of Kahului, Hawaii, and was founded in 2006 by Arben Kryeziu. CDRB went public on 5/19/15 and priced at $5/share. At the end of its first day of trading it was up over 200%. By the end of the first week of trading CDRB had hit a high of ~$40. It now trades in the mid $30s.

Code Rebel creates software and hardware that integrate a user’s Apple and Windows computers. So essentially Code Rebel does this: they have a universal mouse and keyboard that someone can use to control their Mac and PC without having to switch between different hardware.

Here are some facts I gathered about Code Rebel:

  • Their IPO was bookrun by a sole underwriter, Burnham Securities, who most recently bookran the China Commercial Credit (NASDAQ:CCCR) IPO in August of 2013, and CCCR is down 90%+ since then.
  • CDRB is based in Hawaii, which is not exactly a hotbed for technology and software-development.
  • CDRB claims to have only 5 employees, which is not nearly enough people to be constantly churning out code and new product ideas.
  • CDRB’s main product, the iRAPP terminal, faces competition from such large companies as Citrix and VMWare, so this will give a small company like CDRB difficulty competing.
  • CDRB’s gross sales in 2014 were $223K, up from $146K the prior year, which do not justify a $500 mm valuation

Now, ask yourself these questions:

  • Does CDRB have any chance at competing with big players such as CTXS and VMW?
  • Does the track record of the underwriter of their IPO bode well for future performance of CDRB stock?
  • Do CDRB’s financials justify such a lofty valuation?
  • Why is a software firm with 5 people based in Hawaii even worth $500 mm in the first place?
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