Crossroads Impact: Advantaged Leader in Growing, Massive Market

Rimmy Malhotra of Nicoya Capital presented his in-depth investment thesis on Crossroads Impact (US: CRSS) at Best Ideas 2023.

Thesis summary:

Rimmy first presented Crossroads Systems in January 2019 at approximately $7 per share. Since then, it has paid a $40 per share special dividend.

The company has rebranded to Crossroads Impact and has repositioned itself as the largest publicly traded Community Development Financial Institution (CDFI). Crossroads Impact operates as a specialty finance company focused on “impact” investment within low to moderate census tracts (LMI) and to women and minority entrepreneurs as an originator of SBA loans.

Given its structurally lower cost of capital, coupled with government incentives, Crossroads appears poised to deliver double-digit growth rates, with target ROEs in the high-teens, all within a low-leverage and low-risk framework.

In 2023 the company should uplist to a major exchange, as the first catalyst in closing the valuation gap. Rimmy estimates the equity will be worth $30 per share within three years, as compared to the recent price of $11 per share.

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About the instructor:

Rimmy Malhotra is Portfolio Manager at Nicoya Capital. The Nicoya Fund is an investment partnership with limited investing constraints. Coupled with a stable of very long-term oriented partners we invest in a concentrated and deliberate fashion across a wide variety of industries, and company sizes. Currently, Rimmy serves on the board of HireQuest (ticker: HQI) , Infusystem (ticker: INFU) & Optex Systems (ticker: OPXS), and previously served on the board of Peerless Systems. Rimmy served for three years as a United States Peace Corps Volunteer in Central America. He earned an MBA in Finance from The Wharton School and a master’s degree in International Affairs from The School of Arts & Sciences at the University of Pennsylvania where he is a Lauder Fellow. Mr. Malhotra holds undergraduate degrees in Computer Science and Economics from Johns Hopkins University.

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