I am not certain why FD has his rabid attack so focused on Aware. Was he fired from the company? Lose money investing here or both? It is obvious he has issues and he is entitled to an opinion but he is overstepping what is prudent. The ratings he gets are his own and he owns very little in the way of shares in this issue.
Sentiment: Strong Buy
4) Many directors, executives and individual contributors left Aware over the last 2 years. Since the beginning of 2010, 6 out of 7 directors departed. This is an unusual level of turnover. Was there some concern about what was going on at Aware? Did these directors feel conflicted about something? From the outside looking in, this adds increased level of suspicion that there are internal problems that shareholders should know about.
5) The Tzannes brothers look to have created a huge conflict of interest for shareholders, now running a patent management business. Is there new patents coming from them related to technology they worked on at Aware? How about all the Aware guys that have turned up at Qualcomm? New patents there? Now that is a worry. Qualcomm actually knows how to build a billion dollar IP licensing business. Here's an interesting comparison, QCOM IPO'd in 1991, a few years ahead of Aware, but while Aware was also building its business. QCOM stock has appreciated 100x's in that time frame. Aware's stock price has declined 14% since its IPO in 1996.
Do I need to continue?
For example, what if it was simply that they screwed up the VIE disclosure for several quarters but they don't want to be on record answering a bunch of questions about it, admitting it publicly, and drawing attention to it ... and so they've gone overboard with a complete CC & 8-K blackout? A written Q&A might give them a way out - to address our real concerns without their getting beaten up over the screwed up VIE disclosure.
I could see Aware being hesitant to disclose information to a private party (Privet). I imagine any disclosures need to be public. Would written Q&A afford management greater latitude and less vulnerablity than say an 8-K? Obviously they can't make false statements under either. But couldn't they (legally) disclose less or partially via Q&A than via an 8-K?
I always believe in trying to give people ample opportunities to do the right thing - make it easy for them to do so - rather than back people up into a corner, even if it's a corner of their own making. Sometimes they relent ... as either their circumstances, positions or appetites change. And sometimes it was part misunderstanding.
Just seems to me that there should be a lot they could answer far short of a formal and complete 8-K disclosure ... IF they're not hiding something significant ... even if they have what they deem as legitimate legal, tax or competitive reasons for nondisclosure.
I'm less concerned about their screwing up the VIE disclosure for a few quarters.The major concern here - which they'll certainly have to answer sooner or later - is how the heck all their patents end up generating substantial income for a variety of third parties but Aware seemingly gets nothing. It sure smacks of possible secret fraudulent transactions with secret related parties...
They can't duck the questions forever. The longer they do, the worse they'll look when it all comes out.
Many requests have been made. Aware has dug its feet in. If they were ready to provide proper disclosure, there is nothing stopping them from doing so. Its beyond "asking nicely".
That said, I am pretty sure Privet would addres them at least one more time before initiating the legal process.
If management believes a shareholder suit is inevitable, they'd likely not voluntarily answer any Q&A, especially if they're hiding something wrong but even perhaps if they're not.
If management thinks a shareholder suit can be avoided, then there's a decent chance they'd voluntarily answer any reasonable Q&A they deemed prudent to answer.
So I wouldn't think it effective to belligerently ask them for written Q&A with an "or else we'll sue you" attached. If a request for written Q&A has any chance for acceptance, I suspect it should be made within the "or else". IOW, give management another chance to do the right thing. Save hostilities for actual litigation.
Again, what if management hasn't anything to hide? What if their wrongs are limited to screwing up the disclosure per the new VIE rules, and say perhaps being overly conservative in not disclosing patent assignments not yet material for what they consider to be legitmate legal, tax or competitve reasons? Yeah, we may disagree with them over this, but what if that's far short of fraud or worse? If so, they should welcome the opportunity to answer some written Q&A in a manner they deem prudent.
In a way, asking for written Q&A would be akin to "calling their bluff" if in fact they are hiding something significant.
I know that Aware showed up on Privet's radar as a result of the announced spin-off in fall of 2010. This created a special situation that they use for one of their investment screens. My guess is they would not want to tip anyone off when they initiated their purchase, given the illiquid nature of Aware's stock. The suggestion that an activist investment firm is interested or buying-in would tend to push the price up. Witness the price action of Feb 2012 when Privet first revealed their interest in Aware via the 13d release. So I think the days of the CC's were too long ago to be useful as a pulpit for Privet. Remember the CC's ended one year before Privet came public with its investment.
As I have said to the sister's who have urged me to sell my shares because of my displeasure with the management team at Aware, I bought in knowing this company was F'd up. The opportunity is to buy it while its broken. Money is made by fixing it up. When a company trades at the value of its cash holdings, it is broken. Aware has lingered here over the last 10 years. In the last year we recovered a portion of the investment into the IP via 91MM$ in patent sales. Maybe thats 1/2 of the total spent on R&D over those 10 yrs. Not a good return at all. These guys should have a lot to say to investors. I suppose if we make a clear request that says: Answer these questions or we will file an SEC complaint or a shareholder suit. That would be a good final attempt at encouraging disclosure.
The legal course is being worked on, but I am sure the preferred route would be to allow the company to prove it has done no wrong ahead of time. I believe they would not be able to show that no wrong has been done. So they are simply trying to wait us out. It is likely that one of the stooges will try to save themselves from the eventual fallout, but for now each of the insiders (and former insiders) is waiting until the last minute in hopes this all ends quietly.
What if everyone here wrote or emailed Aware asking them to do a post-earnings-release written Q&A as they did several years ago? Written responses enable managment to carefully control their answers, revealing as much and only as they deem prudent. Probably less than we'd consider ideal but better than nothing ... and much cheaper than discovery via litigation. Worth a try, yes? If Aware has nothing to hide, shouldn't they want to nip any shareholder litigation in the bud this way?
Say FD, to your knowledge, why didn't Privet ever ask any questions during the conference calls when Aware had them? Surely all of Privet's investment in Aware wasn't made after the conference calls were suspended?
Let me help you to be certain about my issues with Aware.
1) For several quarters, at least 3 but perhaps more, the company misled shareholders with inaccurate 10K and Q's about its interest in off-balance sheet entities. The company has disposed of some assets without a filing an 8K. Both of these represent failures to comply with securities laws.
2) The eventual disclosures that have been provided regarding off-balance sheet activity did not answer any important questions for shareholders to place reasonable value judgments on the impact of the arrangements. We got started on the wrong foot with this and have only increased the level of suspicion.
3) An Aware patent was the subject of a law suit against several industry giants. This suit has been settled and now closed and we have no idea of the outcome. Its possible we have been completely fleeced here. It is completely unethical to keep shareholders in the dark in this way. The asset is gone and there is a financial outcome for which we have no knowledge.
(CONTINUED ON NEXT POST)