Soundhound AI's ( $SOUN) is an AI momentum giant with feet of clay. ( Too many red flags.)
A single breach of trustworthiness in a financial security is enough to destroy its value. And let’s be real here: SoundHound AI is junk.
SoundHound AI, Inc. creates independent voice AI solutions that help businesses in the automotive, TV, IoT, and customer service sectors provide high-quality conversational experiences. Founded in 2005 by Iranian-Canadian computer scientist Keyvan Mohajer at Stanford University, the company has been described by Mohajer, in an interview with Pear VC's founding partner Pejman Nozad, as a "15-year-old startup." This is likely due to its extensive product development, culminating in the success of its music recognition app, SoundHound, which grew from 2 million users in 2010 to 100 million by September 2012.
In 2022, Soundhound went public via a SPAC merger with EarlyBird Capital, a Long Island-based firm known as an early promoter of SPAC mergers. EarlyBird Capital has faced issues with inaccurate and late financial reports from May 2017 to April 2021 and has been investigated for its role in the Microvast Holdings offering, raising concerns about potential investment fraud. The firm was fined $12,000 by FINRA. Many EarlyBird Capital companies have filed for bankruptcy:
American Virtual Cloud Technologies (AVCT) filed for bankruptcy protection in January 2023.
Tattooed Chef (TTCF) filed for bankruptcy protection in June 2023.
Akazoo (SONG) settled with the SEC for defrauding investors out of tens of millions of dollars by grossly misrepresenting its user base and financial profile as being in the millions when, “in reality, the company allegedly continued to have limited operations, no subscribers, and marginal revenue.”
Faraday Future Intelligence (FFIE) has crashed to near zero and is currently trading as a worthless penny stock shell.
Soundhound AI alignment within the hot AI sector has so far protected it from crashing like the other EarlybirdCapital combinations. How long will that last?
I consider Soundhound AI stock a speculative sham riding on AI euphoria itself, supported by a senseless financial bubble feeding on a multi-decade-long policy of Central Bank credit injection. The company's current fundamentals are completely disconnected from its trading value. This has provided its leadership with an exit ramp to dump millions of shares and enrich themselves while hemorrhaging capital on senseless acquisitions and pilling up losses.
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Soundhound is a cash-bleeding business with decrepit operations.
With a market capitalization of $6B, $ SOUN's most recent quarter showed only $25M in revenue, for -$33M of net losses.
Its operational margins are down -139%, with a cash balance of only $135M against $43M in total debt.
Clearly, the company's operational results and capital structure are disasters that are completely out of tune with the speculative euphoria that has driven the stock +700% Y/Y.
As recently as Feb 2024, Soudhound was trading at a little bit over $2/share until it was reported that NVIDIA had snatched a hefty chunk of the company shares, skyrocketing the stock over 50% on the day. The momentum has not shown any signs of deceleration, and Wedbush recently boosted its price objective to $22/share, maintaining its “outperform rating.".
However, the company's net equity value + liabilities is a generous $499M. When compared to a market cap of $6B and its negative net income, it is fairly easy to ascertain that $SOUN is condemned to eventually fall in line with its operational metrics valuation in the near future.
The company's leadership has thus fully taken advantage of the rising momentum to dump as many shares as possible on the market.
Quiver Quantitative recently reported that:
KEYVAN MOHAJER, the CEO of $SOUN ($SOUN), sold 465,394 shares of the company on 12-09-2024. We received data on the trade from a recent SEC filing. This was a sale of approximately 16.8% of their shares. Following this trade, they now own 2,299,148 shares of $SOUN stock.
$SOUN Insider Trading Activity
$SOUN insiders have traded $SOUN stock on the open market 29 times in the past 6 months. Of those trades, 0 have been purchases and 29 have been sales.
Here’s a breakdown of recent trading of $SOUN stock by insiders over the last 6 months:
KEYVAN MOHAJER (CEO) has traded it 6 times. They made 0 purchases and 6 sales, selling 1,172,118 shares.
MAJID EMAMI (VP, Engineering) has traded it 5 times. They made 0 purchases and 5 sales, selling 798,555 shares.
Eric R. Ball has traded it 5 times. They made 0 purchases and 5 sales, selling 271,506 shares.
James Ming HOM (Chief Product Officer) has traded it 3 times. They made 0 purchases and 3 sales, selling 91,631 shares.
LAWRENCE MARCUS has traded it 3 times. They made 0 purchases and 3 sales, selling 105,000 shares.
TIMOTHY STONEHOCKER (Chief Technology Officer) has traded it 3 times. They made 0 purchases and 3 sales, selling 244,376 shares.
MICHAEL ZAGORSEK (Chief Operating Officer) has traded it twice. They made 0 purchases and 2 sales, selling 66,092 shares.
NITESH SHARAN (Chief Financial Officer) has traded it twice. They made 0 purchases and 2 sales, selling 62,112 shares.
https://www.quiverquant.com/news/Insider+Sale%3A+CEO+of+%24SOUN+%28SOUN%29+Sells+465%2C394+Shares
Over the past year, corporate officers, led by CEO Keyvan Mohaver, have been rapidly cashing out options and selling shares in a liquidity-rich market.
On December 6 and December 9, Mohajer sold a total of 833,435 shares of Class A common stock, amounting to approximately $12.5 million. The shares were sold at prices ranging from $15.0009 to $15.0412 per share, notably near the stock's 52-week high of $16.07.
In conjunction with these sales, Mohajer also acquired shares through the exercise of stock options. On December 6, he acquired 368,041 shares at a price of $2.1777 each, and on December 9, he acquired an additional 465,394 shares at the same price. These transactions were conducted under a prearranged Rule 10b5-1 trading plan established in August 2024.
Following these transactions, Mohajer holds 2,299,148 shares of SoundHound AI.
Over the past year, no stock purchase has been recorded from corporate insiders who, however, have continuously taken advantage of every rising momentum to cash out their options and shares.
In all, SoundHound AI has experienced a dramatic rise over the past year, fueled by AI enthusiasm and supportive macro factors for speculation and stock trading. However, the company’s fundamentals are quite weak. Essentially, SoundHound AI is a penny stock that has become a meme. Speculators, trend followers, and especially the company's executives have profited from the stock's surge.
Real investors would be better off avoiding this company and safekeep their capital for better value opportunities. $SOUN is just vampire stock for insiders’ self-enrichment and a hollow shell for speculative gamification and little else. Honestly, the party may last much longer than expected, given the disconnected markets of the day, but at some point in time, fundamentals will force a reckoning, and meme schemes like $SOUN will crash.
Stay away or trade with caution.
I estimate the stock to be worth less than $3/share.
"My reports are not trading recommendations but alerts against what I have deemed as dystopian financialism. I believe that the financial markets are holding the rest of society hostage with its levitated securities, thus preventing a healthy pricing restructuring that would help the overall pricing economy find a balance and provide relief to consumers and households. A healthy economy creates real goods and services at an affordable price/value. Unfortunately, the bulk of the current economy depends on financialization and securitization, which are engineered out of nothing while enabling connected institutions (companies, banks, money management funds) to sell their issues at huge profits. All I try to do is pinpoint hyper-financialized abuses and try to educate and inform. Most stocks are not worth their weight in gold; it's just that simple.
Protect your capital at all times.