After announcing that it has executed a governing company agreement, SG Blocks Inc (NASDAQ: SGBX) is gaining in multiples. In fact, early gains are in excess of 140%. Here’s what’s happening:
Stop wasting your time! Start finding winning trades in minutes with Trade Ideas!
SGBX Skyrockets On Governing Company Agreement
In a press release issued early this morning, SG Blocks announced that it has executed the company agreement for CPF GP 2019-1 LLC. The company is a Texas limited liability company.
According to the press release, SGBX will have a 50% interest in CPF GP. Moreover, CPF GP is the managing member of CPF MF 2019-1 LLC. The company anticipates that the newly-established entity will own the 302-unit multifamily project in Sullivan County, NY, and will oversee the development, leasing and management of the project.
The new project will have a construction cost of about $55 million, with the first phase of construction coming with a cost of $22 million. However, neither SGBX nor CPF GP will be footing the majority of the bill.
In fact, it is expected that CPF GP will contribute about 10% of the total equity capital required for the project. The other 90% of funding will be provided by investors that have already been defined.
In the first phase of construction, the company expects that it will see revenue in the amount of $13 million. Gross profit margins on this revenue are expected to come in at $2.6 million.
In a statement, Paul Galvin, Chairman and CEO at SGBX, had the following to offer:
This agreement was a significant achievement and marks the first step in the rollout of our platform approach to projects in our backlog and pipeline that we believe will help accelerate revenue recognition on projects by SG Blocks. We anticipate that SG Blocks will retain equity ownership in the projects, thereby positioning our shareholders to benefit when the project is completed and ultimately sold.
This Is Significant News
The news that was released this morning is significant for SG Blocks and its investors. After all, the new project is anticipated to generate significant revenue. Moreover, the company will be 50% owner, meaning that its revenue will see a significant increase upon the completion of the first phase of the project.
Moreover, the financing of this deal was impressive. To get the project rolling, SGBX will only be contributing $1.3 million to CPF GP. From there CPF GP will only have to pony up 10% of the total production cost, the first phase of which will amount to just over $2 million. This is essentially chump change compared to the significant revenue potential offered by the project.
While it is possible that the stock will see some profit taking after today’s strong run, the long term prospect here is compelling to say the least.
Stop wasting your time! Start finding winning trades in minutes with Trade Ideas!
Never Miss The News Again!
Join our free mailing list below to receive actionable updates!