Red Violet – Spin Off To $0.00 – Possible Russell 2000 Mistake + Questionable Management

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We are short, Red Violet (NASDAQ:RDVT), because we believe it is going to drop by >60% within the next month due what we think was an incorrect inclusion in the Russell 2000 index (similar to what happened with Longfin). Furthermore, we will detail additional legs to the short thesis where we raise concerns about the long-term viability of the core Red Violet business and present significant evidence of alleged fraud and deception at previous companies run by Red Violet’s management team & board members which consist of Michael Brauser & Philip Frost.

Red Violet (RDVT) is a recent spin-off from Cogint (now renamed Fluent). Cogint spun-out a business unit that is in a precarious financial position. It recorded a $21.5 million net loss in 2017 on only $8 million of revenue. At the current run-rate RDVT will burn through all the cash on the balance sheet within 15 months which made us turn our attention to the management team and their track record of destroying shareholder value. 22 of the 23 companies we have found Michael Brauser to be involved in (either at an executive level or as a significant shareholder through his Grander or Marlin Capital investment vehicles) have resulted in average shareholder impairments of 85%. In addition to this there are numerous allegations of questionable conduct including:

  • SEC Subpoenas & DOJ investigations
  • California DOJ investigation
  • Civil lawsuits alleging fraud
  • Insider Enrichment – Brauser & Family used RDVT predecessor company COGT to enrich themselves via consulting agreements for family members, paying for private planes, issuing >$50 million of free stock.
  • Paid Stock Promotions & historically using MissionIR for investor relations

We believe the best case scenario for this remaining business is a punitive capital raise, which brings us to the question of the integrity of the management team and their track record of shareholder wipeouts. We believe their track record makes them undeserving of additional capital (unless of course you are happy for them to spend it on private jet travel and dubious consulting agreements with family members which they were fond of doing at the pre-spin company, Cogint).

The above are a litany of problems at Red Violet that will doom them in the long-term but investors should be more interested in why the index fund glitch will likely result in significant forced selling. We believe index selling will significantly depress RDVT’s share price by >60% in the next month, with the removal announcement coming on May 11th.

Potential Index Mistake – Erroneous inclusion in the Russell 2000

We think Russell 2000 made another Longfin (NASDAQ:LFIN) type of mistake by including a company that does not fit the criteria of the Russell 2000. We have already informed FTSE-Russell (who owns the Russell 2000) of this possible mistake which will likely result in exclusion either immediately as was the case with LFIN or at the latest will be announced on May 11th when the Russell Rebalance is announced.

It is our opinion that FTSE-Russell Index Funds inadvertently helped pump up RDVT’s valuation by +80% by mistakenly adding them to the Russell 2000. The first 10 days of a spin-off’s regular trading normally involve forced selling as index funds & mutual funds that received shares in the spin-off dump them in the regular market. It makes common sense, a Portfolio Manager receives shares in a company he’s never heard of, so he sells them. However, the first 10 days after Red Violet’s spin-off the stock went from $5 share price to $9.77. We think that this happened due to a very simple index fund mistake. You see Red Violet was just added to the Russell 2000 Index at COGT’s market cap level when they shouldn’t have been based on Russell’s criteria.

We think FTSE-Russell made a simple error, they incorrectly calculated the market cap of the spinco, Red Violet. According to the FTSE Russell press release they likely estimated RDVT’s market cap was $413m market cap ($40 per share * 10.33m shares which was the company’s illiquid “when-issued” market cap on negligible volume). The company’s actual market-cap was a paltry ~$53 million. We believe this mistake led to Russell declaring that the market cap of the spin-off Red Violet (really $53 million at $5 a share) was higher than Cogint Inc (now Fluent, a $200 million company). As a result, RDVT was accidentally added to the Russell 2000 in COGT’s place (link to announcement). This caused the index funds to start buying aggressively in order to get to the % of the index that RDVT would make up if it were indeed a ~$400 million company. Lucky for you, very soon they we think they will be selling just as aggressively which will cause RDVT to go down by >50% on heavy volume in our estimation.

After the spectacular blowup of LFIN, US investors should be well aware that mistaken index inclusion (and subsequent deletion) can lead to a significant mispricing & opportunities followed by forced selling and large shareholder wipeouts. Here is an article from the Financial Times explaining the Longfin mistake in case you aren’t aware (FT Article). Longfin more than doubled in price from $32 to $71 once it was added to the Russell 2000 index, only to collapse back to $10 right after the index funds sold all their shares on March 28th/29th.

To confirm that this occured you can check the holdings of some of the Russell 2000 funds. For example – RDVT is currently owned by Guggenheim’s Russell 2000 Product (see pg 50 of Guggenheim Investment Funds Russell 2000 – sort alphabetically)

The Imminent Removal:

We have already informed the FTSE-Russell of this potential error. We did the same when they made a mistake earlier this year with Longfin Corp (LFIN). Which collapsed after the index funds liquidated their position. We think FTSE Russell can choose to remove RDVT immediately and abruptly (like LFIN) or at the very latest will announce their removal on May 11th, which is the Russell Rank Day. We believe that the ranking for the Russell 2000 will show that Red Violet will no longer qualify to be in the Russell 2000 due to their market cap being <~$160 million (this is our estimated cut-off for inclusion).

Amputating above the knee – The Red Violet Spin

We believe that spinning off RDVT was akin to COGT amputating a gangrenous leg to stay alive.

We strongly suspect Cogint spun RDVT off to remove Michael Brauser and his board members & management team from the business (and all of them went with Red Violet). This group had been arguably enriching themselves via absurd consulting agreements, free RSU’s worth $50 million (Source – 2017 Proxy pg 18 ), reimbursements for private jets, and exorbitant payments to family members. We will highlight these insider enrichment transactions and show why we think that cutting out the “gangrene” was a condition for Blue Focus Limited to invest $100 million into Cogint/Fluent (press release).

Spin-offs can sometimes offer attractive opportunity to buy a mispriced business at a discount. Red Violet though is the opposite and instead presents a great Short Opportunity!

  • Index/Mutual funds were forced buyers. Due to the Russell 2000 mistake index funds became forced buyers not sellers. To be corrected soon!
  • Focused Business. Red Violet’s business is now focused, but unfortunately it is a cash burning disadvantaged business that is likely to run out of cash within the next 15 months.
  • Underfollowed but Overvalued = Red Violet is underfollowed but it is extremely overvalued at ~8x price to sales.
  • Bad Management Team & Board – Normally you want to follow the expert management team. In the case of RDVT all the bad actors from COGT that are associated with other stock promotions, fraud lawsuits, etc went with Red Violet.

A Brief History of Red Violet – It was a SPAC, Reverse Merger, went through 3 Name Changes, Auditors resigned due to alleged fraud & confirmed revenue misstatements, and now is a Spin-off of the cash burning IDI segment. (more in Appendix A on their history)

About the Business – Red Violet’s underlying business is unprofitable and structurally disadvantaged:

After index funds dump Red Violet, retail shareholders will still be left with a terrible underlying business.

  • Fundamentals for the business are horrific. The IDI Business, which is Red Violet’s main business, has never turned a profit. 2017 Net Loss was $21.5 million, remaining cash balance is just $20 million, and even after management adjustments for litigation (future litigation risk is going with the spin) it had a negative Adj EBITDA of $8m.
  • Exorbitant costs: SG&A + Sales & Marketing = ~150% of Sales and this is on a 17.6% Gross Margin business.
  • Red Violet’s only revenue generating business is idiCORE, a product that is structurally disadvantaged since they have less access to and integration with robust data sources.
  • Insiders are already selling at prices below today’s – YES, week 1 of Red Violet’s existence saw large insider sales. Ryan Schulke the now FLNT CEO, sold 115k shares at just $5.00 (Insider Sale)
  • Red Violet has even already tried the Block-chain Shuffle – they created a seemingly meaningless blockchain division.

Red Violet (IDI’s) disadvantaged business – Red Violet’s idiCORE business is re-selling data from credit bureaus and other data sets (eg, DMV, voter registration, criminal background) to clients like private investigators. They access the databases and then charge customers a fee to utilize their access & aggregation, which is undifferentiated and indefensible, as many companies already do this, including the credit bureaus themselves. A recent 2017 study of private investigators ranked IDI tied for 5th in the field (link). The primary flaw is that they do not have access to better data than their competitors. They get most of their personal data from doing background checks from the major 3 credit bureau’s. Additionally, IDI has a huge problem as 2 of those 3 credit bureaus have bad relationships with IDI (now Red Violet). They were just sued by Transunion for intellectual property theft which IDI settled for $7 million in 2017 (settlement link) and another major credit bureau Equifax previously sued Michael Brauser (Executive Chairman of RDVT) for civil fraud (link). We believe this means that IDI can only buy their data from 1 source, Experian. We think Experian has been able to exploit this and charge higher prices to IDI than competitors which will never enable them to produce an actual profit. The result is Red Violet is struggling with high COGS from a sole data provider who makes up 43% of their COGS – (pg F14 of S-1) and they also have worse data then their competitors.

If you are a customer who is going to entrust your identification check business or any big data analytics to a company would you rather trust Palantir, TransUnion, LexisNexis (RDVT’s named competitors in their S-1 – Pg 18 ) or another Michael Brauser Company (we will go into his history later)?

Red Violet (IDI) better hope their customers don’t use Google.

Googling “Michael+Brauser+Fraud” has 10,300 relevant results!

Googling “IDI + Inc + Fraud” yields 1 customer lawsuit, 3 securities class action notices, and 1 article about the company being worthless all within the top 10 search results of Google. These things alone make a salesman’s job almost impossible.

Forewarn Segment – is a new business in the Red Violet portfolio that is meant for Real Estate agents to do due diligence on their clients. The service began being offered in October 2017 at a price of $4 a month per agent and has received such poor traction that Red Violet has begun giving it away for free. This recent press release indicates that they are currently making the service available at no cost to both Florida’s Mid-State Association of Realtors and to BHHS Colorado Properties. We question the value customers place on the software if RDVT were unable to win seats at a cost of only $48 per year.

Logically, it makes sense why they can barely give away Forewarn since this product is meant to warn real estate agents if a client has past bankruptcies, verifies current property & vehicle ownership, or has a criminal history. We spoke to multiple real estate agents and they confirmed that any decent real estate agent would be able to ascertain if their client was qualified for a purchase since a banks would’ve pre-qualified their clients for loan would by verifying assets, etc. Delivering searches to non-paying subscribers still cost Red Violet money as they need to pay to access the underlying data bases.

Blockchain Division – Questionable connection to Blockchain

In January 2018, the Cogint & Red Violet teams already tried to jump onto the blockchain bandwagon by forming a questionable strategic alliance with Dragonchain. The stated goal of this “block-chain” solution is to try to provide KYC (know your client) solutions & ID verification on the blockchain. This is somewhat confusing for us given the purpose of the block-chain is that it is a decentralized ledger for transactions so you don’t have the same counterparty risk as other transactions, and thus you trust the ledger and don’t need ID verification. Also, for the majority of people that are using cryptocurrency they likely do not want these transactions documented so would not be signing up for banking KYC services anywhere. We will give a shout out to Dragonchain for being able to get off a mildly successful ICO raising $13.6 million via an ICO (this happened before Red Violet invested) to support DragonCoin. DragonCoin Founders suggest that people HODL their DragonEggs.

This 1st meaningless announcement of a blockchain business (Press Release here) was just Red Violet’s attempt to jump onto the crypto wave despite lacking a marketable product, customers, or any crypto related technology. It reminds of Long Island BlockChain Corp (formerly Long Island Iced Tea) who changed their company name but continued doing the same Iced Tea business. The first blockchain press release announcing a blockchain partnership failed to garner any investor interest. Then Red Violet/Cogint doubled down and purchased a small minority interest in DragonChain (less than 5% according to block-chain press release 2). This still attracted little to no investor interest.

I guess Brauser can’t convince John McAfee to help him promote blockchain related stocks anymore. According to reporter Teri Buhl, Brauser & Honig are trying to sue John McAfee since they “didn’t make enough money from MGTI” (article link, legal complaint).

In case you are wondering, the company’s SEC filings do not mention any crypto related business/technology nor any blockchain IP is mentioned or contemplated anywhere in Red Violet’s business model or Form 10. The only mentions thus far in Red Violet’s SEC filings is that they have a subsidiary named “Red Violet Blockchain & Analytical Solutions.”

Terrible Fundamentals:

Pro Forma revenue at RDVT increased by $4.0 million from 2016 – 2017 but it has taken a Sales & Marketing and G&A to increase by $13.9 million to accomplish this. The company’s FCF burn was 16.9 million in 2017 alone (based on our analysis), so we don’t think the $20 million provided by Cogint in order to push all the bad actors out to Red Violet is enough cash to even last them 2 years.

(Source – S1 pg 9 & 48)

Fraudulent Conveyance: Given the state of Red Violet’s cash burn, it is not surprising that their lawyers thought it was important to include Fraudulent Conveyance as a real risk. Fraudulent conveyance would be relevant in the case of Red Violet if the company filed for bankruptcy within 2 years of being spun-out of Cogint (source). This seems like a likely possibility given that 2017’s annual cash burn was $10 million and they only had $20 million of cash when they were spun-out. So the company will either run out of cash or face a dilutive equity raise:

Characters Involved – Michael Brauser & Co – Lawsuits alleging fraud, SEC subpoenas, DOJ investigations, etc:

Past failures are no guarantee of future performance.

“Fool me once, shame on you, fool me twice shame on me”

In case you own shares in Red Violet we think it is important that investors know the background of the characters involved. The head of Red Violet is Michael Brauser, who is the Chairman of the Board & Major Shareholder. Michael Brauser, his brother (a Red Violet paid consultant), and board of directors have a history of shareholder wipeouts and fraud accusations a mile long.

Michael Brauser has been described in the following terms by Business Insider He’s been sued multiple times for fraud involving small, public companies.” But investors shouldn’t just take Business Insider’s word for it, so we will highlight all the reasons why they said that. And later we will present evidence of close to two decades of Michael Brauser track record, SPOILER ALERT it includes >20 shareholder wipeouts

Accusations/charges against Brauser & Friends include:

  • SEC subpoenas – A recent common sight at Michael Brauser companies are SEC subpoenas. An SEC enforcement subpoena came for Brauser involving a company he was invested in, MGT Capital (SEC Subpeona) last year that requests communications between the company and Brauser specifically by his name & via his investment company Grander Holdings. Riot Blockchain one of his most recent investments just received a SEC subpoena too.
  • Civil Fraud Accusations – there are multiple. Equifax Lawsuit accusing Brauser of civil fraud (link – pg 6)- Equifax sued Brauser accusing him of manipulating financials. Specifically, they filed a civil fraud case against him for creating fictitious receivables and utilizing accounting overstatements to hid Naviant’s true financial condition. Michael Brauser was the CEO and on the Board of Directors of Naviant.
    • Sunair (NYSE:SNR) sued Brauser, et al for federal securities laws violations. (link)
    • Kast vs The Tube Media Corp – Michael Brauser also was sued on January 30, 2009, for fraud and breach of fiduciary duty (Kast v. The Tube Media Corp., 09-06285, in the Circuit Court for the 17th Judicial Circuit in and for Broward County, Florida)
    • Brauser’s partner in founding Marlin Capital, Barry Honig name in an SEC Securities Fraud Plea Agreement – Yes DTC lawsuit (OTC:YESD) – (Securities Fraud Plea agreement (pg 13-16) for running a manipulative “pump & dump” scheme). Specific accusations against Brauser’s investment partner Barry Honig. The plea details how Honig (and likely by association & reputation Brauser) pull all the strings of these stock promotions.
  • Director, Management, or Large Investor in >20 companies that are complete shareholder wipeouts.
  • California DOJ investigating – The California DOJ is investigating Brauser, Honig, and the Frost Group according to Teri Buhl, an investigative reporter’s, Article – (Teri Buhl Article)

SEC Subpoenas:

It appears the SEC Enforcement Division has an awful lot of interest in the Brauser & Honig Companies recently.

They recently subpoena MGT Capital Investments (OTCQB:MGTI) and it is not surprising to see why Michael Brauser was named. Michael Brauser purchased 1.2 million shares of the company right before it began being “pumped” and went through a business model shift to crypto. Grander Holdings (Michael Brauser’s investment vehicle) was specifically named in the MGT Capital SEC Subpeona twice and then all communication with Michael Brauser was specifically requested by the SEC Enforcement Division.

MGT Capital has since collapsed – John McAfee’s mysterious new company got crushed

RIOT Blockchain (NASDAQ:RIOT), one of the current Brauser (~2% owner) & Honig (previously 11.4% owner) companies just received a subpoena from the SEC. They were subject to an amazing CNBC Expose. The CNBC expose uncovered that RIOT was likely being operated out of the office of Brauser’s friend & investment partner, Barry Honig. (Barry Honig and Michael Brauser run an entity called Marlin Capital Partners together – Source). Even the Wall Street Journal got involved in calling BS on this company and Honig & Brauser dumped the stock – WSJ article;

SEC subpoena (pg 16 of 10-k)

  • Brauser is involved via Grander Holdings, his personal investment vehicle and as recently as February has been trying to unload his shares.

(source pg 7 & 8 of Riot Blockchain Offering Statement)

Equifax Lawsuit accusing Brauser of civil fraud – Michael Brauser’s largest success (the sale of Naviant to Equifax in 2002) turned out to be just another façade as Equifax later sued Brauser accusing him of manipulating financials. Equifax sued Michael Brauser for Fraud & Breach of Contract. (link) Specifically, they filed a civil fraud case against him for creating fictitious receivables and utilizing accounting overstatements to hid Naviant’s true financial condition. Michael Brauser was both the CEO and on the Board of Directors of Naviant. This case was ultimately settled out of court. (read the full case of Equifax, Inc. v. Michael Brauser, et al., Case No. 04-80754 (S.D. Fla.) on pacer.gov)

Director, CEO/Chairman, or Large Investor in >20 companies that are complete shareholder wipeouts.

Phillip Frost Sources – (Whalewisdom.com, Lakewood Capital 2013 Expose on Opko; SNTI)

Michael Brauser Sources – (Michael Brauser’s Portfolio; SEC Info, Lakewood Capital 2013 Expose on Opko, MSLP; SNDN)

Barry Honig Sources – (SEC Info; whalewisdom.com, Connected to RDVT & FLNT (COGT) via Marlin Capital’s ownership, COOL; VPOR)

Insider Enrichment – Michael Brauser & Family History at COGT

Michael Brauser & his brother have been arguably enriching themselves at Cogint (COGT) shareholder’s expense and this is set to continue at Red Violet. Michael Brauser actually paid himself >$50,000,000 in stock awards for his consulting services. (pg 90 & 91 of 14C). We suspect that is why a condition of the new investor in COGT/FLNT was that Brauser & his consulting contract both have to go with the Red Violet entity.

The consulting agreement with Michael Brauser was amended on June 23, 2017 to force him to stop his ridiculous payouts from COGT (New Consulting Agreement). But along with spinning off the money losing IDI (now Red Violet) business, Red Violet also inherits Michael Brauser’s consulting agreement and the baggage that comes with that. (Page 7; Full Agreement)

(Source – 2017 Proxy pg 18)

Daniel Brauser, Michael Brauser’s son was even getting rich off of COGT as he was paid $240,000 for “consulting services.” (Source – 2017 Proxy pg 32)

Private Plane Rental from Brauser Aviation LLC – Apparently Michael Brauser got the company to rent a private plane from Brauser Aviation LLC. A ridiculous cost for a small cap cash burning company. (Source – 2017 Proxy pg 32)

More Insider enrichment – 2M free shares! (2,000,000 of free RSU’s granted to Marlin Capital for consulting on acquiring TBO. Marlin Capital is Michael Brauser’s & Barry Honig’s Joint Investment Vehicle – Source) (Source – 2017 Proxy pg 32)

Cogint bad apples all went with the spin RDVT – (Dubner, Brauser, the other Board Members connected to shareholder wipeouts went with RDVT) – Based on reading the proxy around the agreement we think that Fluent management or Blue Focus Limited (Fluent’s new investor) pushed out the people that were arguably enriching themselves at company’s expense or perhaps they left due to their change of control agreements. Either way Red Violet now has the whole barrel of bad apples leading it.

  • Executive Chairman of RDVT is Michael Brauser
  • Management of RDVT all involved in a past bankruptcy – CEO, Derek Dubner, CSO Ole Poulsen, and COO James Reilly all involved in TLO (Assets sold in bankruptcy auction)
  • Steve Rubin – RDVT Director (involved in MBVX, KVIL, SVON, CDOM) – he is also on CDXC’s board and was on that board with felon Hugh Dunkerley of Code Rebel Fame (source) – excerpt from US DOJ report on Code Rebel Fraud – JASON GALANIS and HUGH DUNKERLEY were arrested in the Central District of California.”
  • Robert Swayman – Another RDVT director. Swayman has served on Vapor Corp (NASDAQ:VPCO), which is now Healthier Choices Management Corp (OTCPK:HCMC) and trades for $0.0001 (stock chart of the VPCO/HCMC wipeout)

Another explanation for the spin-off besides off-loading the poor perfoming IDI business could be further greed and that comes from Michael Brauser and Derek Dubner getting paid out on a change of control clause:

Paid Stock Promotions for COGT & Connected to shady IR Firms (Mission IR, DreamTeam, and RedChip)

  • Cogint (Red Violet’s predecessor) is connected to the MissionIR (Link). DreamTeam & MissionIR were sanctioned by the SEC (link)

  • Cogint has also been promoted by another known stock promotion IR firm – Red Chip (link, see paid disclosures here). Red chip also actively promotes another FuzzyPanda exposed name Zion Oil & Gas (ZN).
  • Barry Honig & Michael Brauser companies have shifted to using IRTH recently. This sharesleuth article exposes some of the IRTH illegal tactics around paid undisclosed stock promotion.

Appendix A)

A Brief History of Red Violet – SPAC, Reverse Merger, 3 Name Changes, Auditors resigning due to reporting false revenue numbers, and now a Spin-off!

Red Violet came to the public markets as the child of a SPAC that bought a “China Hustle” advertising company, followed by a reverse merger, 3 company name changes, 1 big 4 auditor resignation, and finally a spin-off of the cash burning segment of Cogint which we believe to have been an already poor business.

2007 – Search Media – created when Ideation Acquisition Corp (a SPAC) purchased a Chinese company and became Search Media. (Source – Settled lawsuit alleging false & misleading statements). Philip Frost became a major shareholder.

  • In 2010 SearchMedia was ultimately discovered to have been overstating revenue and did a significant revenue reversal, its auditor KPMG resigned citing deficient controls & suspicious related party transactions. This Lawsuit against SMIL alleging fraud that the company settle sums it up (SMIL lawsuit)

2012 – Tiger Media – Search Media was renamed Tiger Media (IDI) – Best description is a Chinese out of home advertising company (source pg 1). Tiger Media was formed during the Chinese Reverse Merger Boom highlighted in the “China Hustle Documentary” (source)

2015 – March 21 – Tiger Media acquired in a reverse merger by The Best One = Tiger Media + TBO changes name to IDI Inc. (source pg 1, also here). Derek Dubner joins as CEO & Michael Brauser joins Board as Executive Chairman.

2015 – December 8 – IDI Inc (IDI) acquires Fluent (source pg 1)

2016 – September 14 – IDI Inc (IDI) changes name to Cogint Inc (COGT) – (source)

2017 – September 6 – Cogint Inc (COGT) announces “spinning-off” money losing IDI inc assets as Red Violet (RDVT) (Source – Separation Agreement);

2018 – March 27 – Red Violet (RDVT) becomes a public company – All board members or management that have either been accused of fraud or been involved in other company’s that have gone down by >85% go with the spin and join Red Violet

2018 – April 16 – Cogint changes (COGT) name to Fluent (NASDAQ:FLNT) – presumably to separate new company from Cogint’s shady past.

Appendix B)

Further Reading/Resources on Brauser, Frost, and Honig:

Thanks to the multitude of other short sellers & reporters that have exposed Michael Brauser, Philip Frost, and Barry Honig related companies in the past. We suggest that diligent investors read some of the great work by PumpStopper, BleekerStreet, Unemon, Lakewood Capital, Teri Buhl, CNBC and the WSJ in order to gain even more context.

Valuation:

We would normally start by providing our own methodology for valuing RDVT but luckily Red Violet CEO, Derek Dubner, has an investing blog where he has provided his own advice on how to value companies. Derek’s investment advice is that “a company with a P/E Ratio at par with the overall market or a relatively lower one is a good purchase.” Thus, we will follow Derek’s own advice in valuing Red Violet and by that metric we think that RDVT will ultimately be worth $0.00 since they have never earned positive EPS or EBITDA.

Our immediate price target comes from valuing the idiCORE money losing business at 0.5x sales + the current estimated cash balance of $18.3 million which = $22.33 million or $2.16 a share.

Long-term we think that the company will be worth $0.00 in <18 months when all the cash is gone, either that or, they will be forced to do a dilutive equity offering.

Near-term price target of $2.16 and 1.5 year out price target is $0.00.

Conclusion – Strong Sell – Short!

Red Violet represents a great opportunity as lots of spin-offs do. In this situation it is as a Short! The suspect management, terrible business fundamentals, involvement of Michael Brauser & Philip Frost, insider enrichment of the company, and history of shareholder wipeouts present an amazing opportunity. The real urgency to sell now is to sell before the index funds do.

More important than the cash burn that will cause Red Violet to dilute shareholders/file for bankruptcy within the next 18 months or the Brauser & Co management team is the near-term selling that will come from the Russell 2000. In the next month (or sooner) the Russell 2000 index funds will be forced to dump all the shares they recently acquired of RDVT which will cause the stock to collapse by 50% or more via likely forced index selling.

Disclosure: I am/we are short RDVT.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The author and accounts consulted by them are short RDVT. This can but does not necessarily include negative positions in derivatives. The author holds no duty to update the disclosure of their positioning at any time and reserves the right to change positioning at anytime without notice. We have contacted Red Violet management and given them an opportunity to reply to all our questions/allegations and they have not replied as of the time of publishing this article.