Problems at Applied Digital (APLD)
Applied Digital (NASDAQ: APLD — $861 million) claims to “design, develop and operate next-generation datacenters across North America to provide digital infrastructure solutions to the rapidly growing high performance computing industry.” The Bear Cave believes Applied Digital relies on puffery over substance and is a perfect case study on our market’s bizarre underbelly of reverse mergers, microcaps, and shell companies.
Applied Digital was incorporated in Nevada in 2001 under the name Reel Staff “to provide staffing services to film, video, and television production companies.” In 2002, it did a stock merger with Flight Safety Technologies and pivoted to air travel safety technology. In 2008, it pivoted to plasma technologies and later changed its name to “Applied Science Products.” In 2009, the company pivoted again and acquired Cummins Family Produce, a potato processing and packaging business. Operations wound down in 2014.
Then, in December 2020, the company “filed a Certificate of Reinstatement/Revival with the Secretary of State of the State of Nevada” and in April 2021 the company changed its name to “Applied Blockchain” after acquiring crypto mining assets. In March 2022, the company told the SEC it “ceased all crypto mining operations” and in November 2022 the company renamed itself “Applied Digital” to focus on “next-generation datacenters.”
Applied Digital is now led by Wes Cummins, the company’s Chairman and Chief Executive Officer. Mr. Cummins’ involvement dates back to February 2007 when he joined the board of the company, then called Flight Safety Technologies. In January 2009, the company acquired Cummins Family Produce from Mr. Cummins in a deal that gave Mr. Cummins “control over 60% of the voting shares of the company.” That stake has since been reduced to roughly 25%.
Shares are now up over 800% in the last twelve months, supported by a community of retail investors excited about the company’s ambition to “lead the datacenter evolution.” In its latest investor presentation, Applied Digital claims its next-generation datacenters can cater to, among other things, “machine learning, language processing, crypto mining, and artificial intelligence.”
The Bear Cave will take the under.