MDB Capital Holdings, LLC Class A common 2026 Q2 Earnings Call

So at this time, I'd like to turn the call over to Chris Marlett.

Chris? Thanks, Tony. Well, great.

Let's get the deck up here. Great. Thanks again, Tony. Everyone, thank you for joining today. I wanted to thank you all for joining. It's been a really interesting time period for us, and we're making a lot of very important changes. I think that I'm excited to communicate our focus and where we're headed going forward for the balance of the year. A quick overview of the agenda, really. I wanted to talk about sort of the backdrop of the microcap markets and what it means for us and really our plan for maximizing our core assets. I don't think that we've done a good enough job about talking about our core assets.

We kind of like to change up the presentations occasionally to basically give you a different way of looking at it, understanding what we've built at MDB and what we think the value is. Those four core assets, some of you might know about, but I'll talk a little bit more as we get into the presentation. We've also got real financial discipline. When you look at our financial statements, it's very hard to really discern exactly what's going on. I'm trying to simplify that so that you understand that we have really a core operating platform that we can make very efficient, that has a lot of leverage. Our objective is to provide that leverage without any real dilution. That's the key. With all of our companies, whether it be a portfolio company that we're trying to help to get to commercialization and value creation, or whether it's MDB doing the exact same thing.

It's called leverage without dilution. That's sort of what's inherent in all the companies that we get behind. Not to use it as an excuse, but really, I don't know that it's generally well known that this sector that's sort of the sub-$200 million market cap area that we operate in of companies we're taking public has been really sort of evacuated to some degree. Where all the concentration is really if you take the top 20 companies that are public today, they comprise over 50% of the total equity market value in the U.S.

If you look at even venture funding, such a huge percentage of it is going to these very, very large companies. The small companies are really languishing, not only in sort of the public markets, but also in the private markets. When you look at the headline numbers of the Anthropic and OpenAI's getting funded, the money moving around is really staggering. When you look underneath it and you look at these small companies, it's a very, very different picture. When you look at overall funding, about 70% of all funding has gone towards AI-focused companies. While we have what I think are some great AI-based companies in our portfolio, I don't know that that translates into total valuation.

I do believe that we've got a great shot of our sort of AI-enabled companies getting into that trend, and that's really what we're focused on for the balance of the year. If you really look at it, both ends of the barbell are very different, and sort of all these kind of tiny companies, both in the traditional venture world and in the public venture world, are sort of being neglected. When you look at these small IPOs, we've talked about it before, but the number of public companies has been dropping in the U.S. We've gone from roughly 8,000 public companies around 2000 to less than 4,000 today. Even though there's 1,000 companies sort of in this sub-$200 million market value area, it only comprises about 2% of the total market capitalization.

If you figure 25% of the companies are in this space, yet it only comprises 2% of the equity market value. These institutional investors, not that they necessarily drive stock prices, but it's just really an indicator of fund flows. What we found is once a company gets to a certain market value and institutions start to participate, we start to see value expansion many times. The game is really how do you get enough coverage, how do you get enough people involved so that eventually what ends up happening, when these companies get to a certain market value, they start to really scale in valuation. We see that consistently. When you look at a lot of these companies, there's a huge difference between a company trading at a $100 million valuation and a $500 million valuation.

You'll see vast valuation differences, and I think the game is, as it gets bigger, it gets a wider audience of people looking at it. Even though you'll say, "Oh, wow, the small cap indices rebounded sharply in the second quarter," the average market cap of, let's say, the Russell Microcap Index is over $2.5 billion, which is a totally different market than the market we're playing in. Again, it's just an artifact that we haven't seen before historically in the development of MDB. It's sort of gone to an extreme level. We do think that at some point, monies rotate. Money typically rotates to value at some point or where there's the most upside. We actually think if the really big end of the spectrum, today we made new highs, that if that segment got pressured, we don't really see that as a real risk for our segment.

We actually think that money will still have to rotate somewhere. We do think that if the big market comes down, it's not necessarily going to hurt the small ones that we think are actually sort of on the floor. We look at it as it's kind of hard to fall off the floor. Again, no promises, plenty of risk factors there, but I just think that that's our view of where the markets are and what we see as the potential opportunity as money rotates again. What does that mean for us and what we're doing? We're not happy with where we're at. We certainly didn't go public with the idea of this happening and our stock being down from where we took the company public.

But when you think about when we went public, the last three companies we had taken public before we had gone public all went to billion-dollar valuations. We expected that in that kind of marketplace, our shareholders would do phenomenally well if, let's say, our next companies went to billion-dollar valuations. That, of course, has not happened. But it doesn't mean that our companies don't have that potential. In fact, many of these companies that we've launched before were trading at very low valuations. Then next thing you know, things changed. If you look at something like a company like Pulse Biosciences that we really started the company, formed it, took it public. The stock, we took it public at 4, it went to 40 or high 30s, came down again, went to the 40 again, down to $1.

Everybody thought it was left for dead, and today it just made another new high at $46 a share. Again, it can be super volatile and fortunes change with these things. It's really amazing to see what's happened over the last five, six years in this micro-cap sector. I can't emphasize anymore that we feel you're sort of as good as your last performance. When we had Preventice Solutions get bought for $2.9 billion, again, everybody thought it was dead and going nowhere, and next thing you know, it gets a buyout offer close to five times the price it was trading at. Again, this is not a promise, it's just perspective. It's really all it is. Many times we've seen these companies do this, and it doesn't shake our conviction in the potential of these companies. But the price is the price, right?

You guys are looking at the prices and saying, "Wow, maybe these guys at MDB aren't so smart." Our perspective is we've been through this before. Again, I sit here the same way you do. I don't like seeing my stock being down. I certainly don't like the fact that we sold this to other people and the stock is down. But it doesn't change how we feel about what we've developed. We still feel very bullish about what we've developed. We also feel very bullish about our ability to create new companies and a lot of value. We think that we've built a great team, a great platform, and a great process for doing that.

But you got to have winners, and a part of that is the rotation of the asset class, and part of it is picking the right things and making sure they get to commercialization. So really what we're doing is we're working very hard to realize the potential of each asset, and that's where we've sort of redoubled our focus on our existing portfolio to make sure they get to those key value inflection points. So what we've done, we talked about scaling from one launch every 18 months to 3 to 5, what we talked about at year-end. We talked about AI transforming our sourcing and diligence and our launch models. We still believe all of that. And building a venture portfolio so that we can broaden the risk amongst many companies.