December 8 was a bit of an embarrassing day for SOUTHERN HOME MED COM STK USD0.01 (OTCMKTS:SHOM). The company was forced to put out a clarification on an earlier press release, admitting a slip (purposeful or not) in rhetoric, and its implications. Southern Home’s share price took a hit on the back of the clarification, and now sits a little over 62% off early December highs.

The thing is, this looks like a bit of a panic driven sell off. The situation under clarification isn’t all that different from that inferred initially, yet practically all of the gains accrued on the back of the news have been slashed off market cap.

So what’s the deal?

The company announced a deal with Coca Cola East Japan on December 1, putting out the following PR headline:

“Southern Home Medical Inc. Subsidiary signs a Testing Contract with Coca-Cola East Japan”

Now, this has a couple of implications – one direct, one not so, but just as important. The direct implication is that a company the size of The Coca-Cola Co (NYSE:KO) wants to do business with Southern Home, and this bodes well for future revenue generation potential. The deal involves some monitoring equipment, reportedly in the form of 3,0000 wearable systems, which Coca Cola is going to give to its delivery drivers with the goal of limiting the number of traffic accidents and collisions the delivery drivers have.

The second implication, the indirect but just as important implication, is the gateway into Japan that this deal represented for Southern Home. It’s not easy to do business with Japan, and that difficulty ramps up exponentially when you’re looking at giants like Coca Cola. If Southern was to actually do this deal with Coca Cola, it would mean it had ticked all of the regulatory boxes needed to do so, and would therefore mean it could (relatively) easily do business with other entities in the nation.

That’s not exactly how things turned out, however. Here’s an excerpt from the most recent company release (put out at the request of Coca Cola East Japan):

“The contract and subsequent order was not done directly between SHOM and Coca-Cola East Japan but enacted by an agent who was purchasing product for Coca-Cola East Japan.”

So, the deal is with an agent purchasing on behalf of Coca Cola. Why is this important? Well, because it’s not actually Coca Cola that the company dealt with. It’s not that important, however, from a market cap perspective, right now. Going back to the two above outlined implications, the clarification nullifies the second, but the first remains. Southern Home has still sold 3,000 of its units in a very tough market, and whether the contract bears a Coca Cola signature or not, its sales team are still going to be able to tell potential clients that Coca Cola delivery drivers in Japan are using Southern’s system to reduce accidents and – by proxy – increase bottom line.

We think this is still a great step forward, and that there’s substantial value in the closing of this agreement. As such, we think that the pullback that has basically written off the agreement from a value-add perspective, is an opportunity to get in at a discount ahead of markets addressing the oversell.

Now, this isn’t risk free, of course. There’s a lot of opacity when it comes to financials, and capital standing is uncertain. All we really have to go off is press releases and a few filings.

With that said, from a trading perspective, there’s definitely some near term value in a readjustment play here, albeit a short term one for those looking to skirt the risk.

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Disclosure: We have no position in SHOM and have not been compensated for this article.