and any others interested in straight talk.
My investment interest in VNX began in the Fall of 2003 when I happened to read the 'red herring' offering memorandum prepared by a brokerage firm by the name of 'Philadelphia Brokerage'. The CEO of the company at that time was named 'Blad'. During the reading, I was more than a little surprised to find that two of the gentlemen who were (and remain still) on the board of the company happened to be on the board of a company for which I had personally raised the money for some 25 years earlier through two 'Reg D' private placements and one 'Research and Development Ltd Partnership' some 25 years before. I took a passive interest, which is to say that I started accumulating stock while it was trading in the OTC bulletin board under the symbol VNXD in the September/October 2003 period. The price was generally in the $3.80 to $3.90 range at the time. When the 3 million share offering finally was priced by the Philadelphia Brokerage, it came at a price of $5 / share, with a green-shoe provision being exercised as well. Expectations and risks were both at rather elevated levels at the time, and for a brief period, the stock rose off of the $5 offering level, for perhaps a month or more.. and if my memory is correct, topped in the $7 plus range soon thereafter.
As it became clear that schedules and hopes were fading, you can see from the chart of the shares' price, the smiles turned rather glum in fairly quick order. As 2004 wore on, losses and frustrations with expectations in the street were the rule. There were several wicked declines... sometimes on rather sizeable blocks, as those of who stuck around got more 'opportunities' to add to our positions than we ever wanted. If you've ever had the sad and depressing experience of feeling like a 'bag holder', you'll know what it was like for all of 2004 and very early 2005.
Then, in early 2005, Mr. Jim Crabbe, who is chairman of the board, made the decision to replace the CEO. Hope, which can be nearly contagious to those who are suffering, raised its' head as one Mark Newburg came on the scene.
It was at that point, since I had a significant 'long term bag holder' position well established, that I decided to do much more personal 'due diligence' into the situation, and do it 'directly'. I have been taunted and scorned, mocked and chastised extensively by those who would wish this company to fail, for having taken that initiative. Be that as it may, since I make investment decisions for many clients, I felt that it was appropriate and... given the dramatic decline in fortunes and stock price, entirely called for as well.
Mark Newburg's role with the company has been to initially quickly prioritize and take the necessary and creative steps to transform what was a near 'shipwrecked' situation, into one that now (and here we transition from history to future prognostications) is poised to become profitable in very short order.
The critics are entitled to their fun and frolic, for truly Shuffle Master has been the unquestioned 'king pin' in the table gaming equipment space... absolutely no question about it. In fact, VNX would long ago have been gone, were it not for Jim Crabbe and others who continued to struggle with hopes of finally becoming successful. That former leadership was utterly inept is obvious. Mr. Newburg arrived 'just in time'... and in my opinion, will prove to be more than capable in his efforts.
I hope that will help you in establishing a more 'balanced' perspective.
Good luck to you in your endeavors,
Agree with PJ ...best post you've ever put out here and more in line with what I expected to read from you when I first visited this board a few months ago. Although I may not agree with everything you said, I can at least respect the frankness of the content.
I differentiate between the company and the investment, mainly because the timelines are different. I'll be out of my investment long before the Casino RFID market goes "gray". Although VNX may not be the best "company" in the field, it still can offer some opportunity for investors to profit. For example, If I had managed to snap up a boatload at 1.95 (which I did not), I would be one happy investor - even today @ 2.50 (+25%) and would probably sell a significant portion in the 3-4 range.
I think that it will take a few profitable quarters for the market or any prospective buyer to price VNX above 4.
Since you mentioned buyout - which is always a possibility in an emerging market. What does VNX really have to "sell"? Is the "dolphin marketing deal" transferrable and if so who would be candidates for the buy since we now know that dolphin utilizes the same exact RFID chip technology (Magellan) as PGIC/GPIC? In truth I am confused exactly how VNX actually got their marketing deal with Dolphin since PGIC is the "Master Gaming License" holder for the next generation(s) of Magellan products.
"In June 2005, the Company entered into an exclusive global master license with
Magellan Technology Pty, Ltd. of Australia for Magellan's rights to the next
generation RFID reader tag and related intellectual property for any gaming
applications. The Company also entered into an agreement to purchase a minority
equity investment in Magellan. "
So where will that leave Dolphin/VNX as Magellan technology evolves?
On the table hardware side, it is apparent that the products had problems in the past but the new management is trying to correct that. Bad experiences are hard to overcome but can be done so through pricing,replacement guarentee, customer service and regular upgrades. Do you think that VNX can overcome both their own past and the 800 pound gorillia compr=etition that SHFL represents?
We seem to agree that VNX will not displace SHFL in the forseeable future. But the market is large and a small company can live comfortably and profitably with a small percentage of a large market. Even if the sale quantity was not extrordinary, VNX has recently demonstrated that they can make sales to large customers in the international market (Galaxy) and that is a good start. What percentage of the casino table hardware market do you think that VNX can realistically close over the next 3 years? 1% 3% 5%? 10% more?
>>>Be that as it may, since I make investment decisions for many clients,<<<<
Given that you claim to be making investment decisions for many clients, I would hope that you have not goaded them into further investment in this losing proposition. Averaging down from $6 to $4, does not make you a prudent advisor. Having been in the position of being an investment advisor, I know that your mistake in judgement should not equal the financial ruin of your clients. Did this investment ruin your IA career? You have a problem. You are married to your stock.