KC Underweight Deal: A Magnetized Lighter
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Summary
As of June 4th, 2019, 360 ONLY Novelty Co. has $6,000 of a minimum target of $10,000.
In our series of rating the crowdfunding deals, today we are weighing the pros and cons of 360 ONLY Novelty Co. The purpose of the analysis is to assist investors in making an informed decision before investing.
360 ONLY Novelty Co. is the developer and, with funds from the current raise, the wholesale manufacturer of several products including lighters, divot tools, jewelry, eyeglasses, and handbags. The unique proposition of the company is that the products are equipped with an encapsulated neodymium magnet.
The addition of the neodymium magnet to items like lighters and divot tools enables these products to be attached to any metal surface – preventing loss and ease of use.
The concept is technologically interesting. However, it is at this point that a question arises: Are consumers so bothered by losing their lighters and divot tools that they would invest in a magnetized alternative?
The reason this ‘magnetization’ hasn’t been done before, according to management, is the lack of strong, durable magnets that can safely affixed to such items.
Fair enough.
But we do wonder just how viable such an enterprise is in the long term. What follows in an in-depth look at 360 ONLY’s merits as an early-stage investment.
Overview
1. Undifferentiated Products
In our estimation, the products of 360 ONLY, including the 360 ONLY Lighter, 360 ONLY Divot Tool, 360 ONLY Jewelry, and others are what consumers call “nice to have” not “must have” products.
The unique proposition is an encapsulated neodymium magnet that allows items to be attached to any metal surface. The day is saved and the loss of one’s lighter is prevented. Or so the theory goes. But loss hasn’t really been prevented, the specific ‘home’ for a given item has only been shifted.
The US Provisional Patent is useful, but the patent does not hold much value as the products are not fulfilling a pressing need or a strong demand in the market. All in all, it is simply a lighter with a magnet!
2. Competition
Beyond the fact that magnets on the products do not automatically add value to an item, the target market of the 360 ONLY products becomes highly competitive.
Basically, 360 ONLY is competing with other lighter companies, divot tool companies, and handbag companies. And there is plenty of competition to go around. The company believes that its provisional patent for the encapsulated neodymium magnet will work as a barrier to the competition.
The magnet is not adding much value to the products, and in the absence of the magnets, there are thousands of lighter companies just an Amazon or Google search away.
3. Lack of Operating History
Although founded in 2016, 360 ONLY does not have any operating history, customers, or revenues.
The valuation of the company and the projections of sales and revenues are assumptions, and there is no way of knowing if the products will have willing customers.
The funds from the current round of crowdfunding will be used to manufacture 360 ONLY Lighters and build inventory. Any investment should be deemed highly risky
4. Uncertain Future
360 ONLY claims that their product, 360 ONLY Lighter, is projected to have rapid sales growth, high gross profit margins, and repeat purchases. The company also states that the lighter will be showcased in Magic Carpet Ride The Movie in 2019. The unique marketing opportunity is expected to affect the visibility and sales of the 360 ONLY Lighter positively.
Our concern is that even if the product succeeds in the short run, due to the lack of value-creation, there is minimal guarantee that it will do well in the long term as well. The products promoted through movies may create a short-term impact on the target audience and influence purchases, but the popularity will likely fade.
Wall Street has Morningstar, S&P, and Bloomberg
The equity crowdfunding market has KingsCrowd.
Rating
The Rating: Underweight Deal
Due to a lack of truly unique products, an uncertain future, and high competition in the target market, we are assigning 360 ONLY Novelty Co. the rating of Underweight Deal.
The products of 360 ONLY, including its lighters and divot tools, are not solving an existing problem in the market. At the same time, they do not seem to be adding any value for the customers. Be it jewelry, divot tools, or lighters, adding a magnet does not make for a truly unique product.
To top it all off, 360 ONLY also exhibits the inherent risks of all crowdfunding and early-stage investments. Namely, the issued securities may remain illiquid for an extended period of time, and investors may end up losing their entire investment. Therefore, investors should exercise caution before investing.
If you have any questions regarding the underweight rating of 360 ONLY Novelty, you can reach us at hello@kingscrowd.com.
