B2Digital Inc (OTCMKTS:BTDG) could be the most interesting story on the OTC that you’ve never heard of. This is “the development league” for mixed martial arts. That’s an established narrative thread that continues to hold water, and it provides a platform for growth and an investable opportunity as the company’s model pushes toward its next stage.
What does that next stage look like?
We would assume, based on company communications, that it has to do, actually, more with its gym segment than its PPV MMA events. This is despite the fact that the company has started to grow rapidly in its event results, with multiple events setting new company records in PPV numbers as it ramps up through its widening audience reach following the establishment of its Amazon Fire and Apple TV OTT access, granting it access to as much as 70 million new potential viewers, and its B2InstaStore marketing platform, which appears to have materially impacted its results over recent weeks.
Through all of that, positive as it may be, the fitness facility segment is likely to be the big beneficiary and motor of the company’s expansion and the channel through which it pays off over time for its shareholders.
It’s All About the Ink
Think about it this way: Xerox was one of the most successful companies of the 20th century. Do you know how Xerox made the lion’s share of its profits? It wasn’t by selling printers. The printers were just a device to make a market for its ink sales. By establishing a dominant brand in printer technology, it created a massive market for a much more profitable industry in high-margin sales of a cheap-to-produce consumer product – printer ink.
You might look at B2Digital Inc (OTCMKTS:BTDG) in a similar way.
While its MMA events are the high-profile facet of the business model, the real money is likely to flow from its branded fitness facilities. Everything it does, in terms of its high-profile MMA events and B2 content production and distribution, while being clearly positive for establishing an increasingly visible and recognizable brand, might ultimately pay off for BTDG shareholders via its fitness facilities as they represent the tangible channel for cash flows from operations over time, in theory.
There’s already evidence of this in play, with its September quarter data now publicly available, showing about 75% sequential quarterly growth from the gym segment over recent months.
Note that the company has stated publicly that it sees this as a roll-up strategy, which suggests that it will be accelerating the pace of its acquisitions in this space.
Roll it Up
And this is a particularly inviting idea for BTDG given the nature of the unbranded gym space during the age of Covid-19, where the status of a “distressed asset” has become the norm, as smaller local gyms lack the deep pockets necessary to bridge their model across the divide to a post-vaccine world.
That creates a huge opportunity for a company like BTDG, which has financial resources and the established brand to gobble up distressed assets with big future value and ramp them up under the umbrella of its branding to supercharge the impact of any marketing investment in terms of ROI.
That may already be underway given the results we see in play now.
If this model is further ramped up over coming months, the numbers can grow rapidly, putting the stock on institutional investment radars in a hurry. In fact, we have already perhaps started to see this, with the company’s announcement of the Triton $5 million common stock investment agreement announced last month.
That type of capital flowing in holds the potential to act as an organic accelerant for B2Digital Inc (OTCMKTS:BTDG) by removing the risk of dilution as it harnesses the power of the roll-up strategy in the warm shadow of its leading MMA brand.
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