aarickm, a few days ago you mentioned me in a post. I'm still here, agonizing over the ridiculously low stock price just like everyone else. I'm trying to figure out how ~ 16 million shares could have traded since the announcement of the $.80 offering, and yet the closing pps Friday was $.59. The market cap is below $70 million...less than the original HC purchase by Augme 15 months ago.
Every time I look at the situation, I step back and say "what am I missing"? I go back again and dig into the business to analyze first, "How did the price get here?", and second, "Does the current price reflect the value of the company?".
I can come up with a multitude of reasons for my second question, "How did we get here?". I'm sure others can add to the list below...
1. The Yahoo and AOL rulings seem to have really started the slide in earnest, but the price had already dropped from its high of $2.15 (hit within about two weeks after the SH meeting) at the time the rulings came out. Even though we had a positive "divided infringement" ruling and two positive AOL Markman rulings since, investors are now giving no value to the IP, and possibly assigning a negative value to it.
2. The failure of Arena to close an NPE deal and not have a Plan B for financing the negative cash flow drove the price lower yet.
3. Finally the #$%$ hit the fan when Arena was pushed aside for his failures, and Hussey came in and did the $6-million cash raise at $0.80 pps. Many of the offering buyers apparently sold out their shares at a slight loss and made their investment a pure warrant play, moving on with their cash to the next deal.
There is also a group of reasons which are somewhat secondary, but could be just as important as the above events in depressing the price.
4. Hussey's arrival came with the consequence of revealing more of Arena's and Augme's apparent shortcomings other than a lack of cash. The focus of the company was perceived to be wrong for focusing heavily on the IP, particularly the aggressive patent application path, and not channeling enough resources to HC. Also, the hiring of Tom DeLucca was deemed to be wrong, and cash was being spent frivolously at a time when we were short of cash (the investment in VSST, Geos patents, and other areas).
5. The price decline rendered the 4 analysts following Augme completely irrelevant. The pps has absolutely killed their credibility, and along with it the confidence of the SH they convinced to buy into Augme.
6. The existing investors became disgruntled, disillusioned, and just plain worn out. Their patience with the company and its waning stock price is now gone. Maybe some of the pervasive selling is from institutions that purchased stock in the Surfnet and Modavox days at prices below the current pps and are selling out, still at a profit. Maybe it's not at a profit, but they, and others, want to move on to other opportunities. Their persistent selling probably has dragged, and still is dragging many smaller SH with them.
"Does the current price reflect the value of the company?". I think everyone would agree that the purchase of HC was a positive event for Augme. The fact that the current market cap for Augme is below the purchase price for HC is simply not rational. The valuation multiple based on 2Q13 results is 3.2 x TTM revenue, and 2.7 x Run-Rate revenue, two numbers that are also irrational.
Augme is undervalued for the following reasons;
a) HC sales are ramping at an exponential rate. The 15-20% Q/Q growth will likely occur for the foreseeable future. Preliminary 3Q12 revenues will be announced in about 4-weeks, which should give us a good barometer.
b) Hussey is cutting costs in the area of new IP patent filings, terminating non-essential personnel, cutting management/OH costs, to name a few. He is deploying more resources on the one area he can count on for steady growth, HC.
c) The combination of HC's revenue growth and focus, along with cost cutting will bring us closer to cash flow break-even sooner rather than later.
d) I still believe that the IP has value. The market, however, doesn't seem to agree, and still it might be looking at the IP as a negative. While some say that the validity of the IP hasn't been proven, I prefer to say the opposite; it has not been proven to be invalid. It simply hasn't resulted in any revenue generation...yet. I believe that the IP will prove out to be as valuable as HC over time.
e) Augme probably now has at least $5+ million in the bank. With a decreasing burn rate due to cost cutting and exponential HC revenue growth, we should have enough cash to get us to CF break-even.
"What am I missing?". I've can't think of anything. Augme got punished for foolish missteps that were preventable. Management has changed, and with it the excesses of the past. The company is on the mend. The stock is broken, but the company is financially stronger than it has been in awhile.
Bottom line, I think that Augme is substantially undervalued today, and that it should at least be trading at 3 times, and even 4 times, the current price.
While I have been quiet on this board lately, I haven't been inactive. I have spent a fair amount of time over the past 6-weeks doing my own financial reorganization to free up some cash. Based on my thoughts expressed above, last week I purchased 308,000 shares. Since the offering, I have purchased over 383,000 shares. I more than doubled down on Augme. While I am still frustrated over the stock price, I see the fundamentals being in place for strong company growth. The stock will eventually catch up. I was wrong on timing, but ultimately I still think that I will be right on Augme trading at a substantial multiple to Friday's close. I never saw this drop coming, and I would have rather it stayed above $2.00 (I had purchased stock at the recent $2.15 peak). But now that it's here, I find no compelling reason to sell, only to buy.
Management must do whatever it takes not only to work internally to move the company forward fiscally and strategically, but also to look at ways to move the stock price higher. To that end, one of the most pressing needs is to get the story out and bring in some new investors. Also, if Management thinks that the pps is low (which they should...look at HC shareholders and Management who received stock at $3.50 and recently $2.00), then why aren't they buying shares at these prices? Show existing SH and potential new SH that you believe in your company. And I'm not looking for measly 10,000 share purchases here and there. Indeed, they should step up and buy hundreds of thousands, even millions, of shares, to demonstrate confidence to the marketplace in the company's future plans and prospects.
Sentiment: Strong Buy
And clearly, to me, the most baffling of all of this is that we know the apparent absurdity of the stock price, and mgmt does as well, yet won't step up and buy...that alone, would turn sentiment immensely
That was probably the best post in a while. Again, it represents logic based on all of the realities of the current state of the company after it has undergone some turbulent circumstances. I have been invested since it was branded Modavox and I have continued to invest based on the risk/reward and have accumulated 120,000 shares at a pretty good cost basis. I doubt that there is any significant bad news baked into the current pps and I actually agree that the current pps is reflecting irrational pessimism. Irrational investors who want big returns also want to buy shares low when the story and the news on the stock is all positive and management has the company running on all cylinders, reaping huge profits. Good luck finding that company and you might as well spend your time searching for the Holy Grail instead. The naysayers always bash and use childish gibberish and comments that are completely devoid of any supporting DD.
I find it quite satisfying to know that they will miss out on this investment and all others that offer substantial upside. They are the chaff, the boys, the average Joe, the one who caught the average size fish, the one who married the plain average girl instead of the hottie he had balls too small to approach. Yes this investment requires big balls and I don’t blame the small-balled basher for not investing. It’s not their fault they inherited their dads yellow belly and mini-balls.
Beautify huskie...I felt like I was reading a poem. These bashers have cost the average joe much of their savings. They are relentless with their waves of pessimissim that wears out an average joe's psyche. I see many of them in my investing lifetime. I have tried to warn those who listen but the dark side has more powerful on the surface. Augme has a turbulant past but a very bright future. Their technology is a leading platform and it will be proven in the courts eventually. Meanwhile I am enjoying adding at these rediculous levels and averaging down for the ultimate rebound that will come soon.
Sentiment: Strong Buy
Jason, echoing what most everyone else except the no-lifers says, bravo... great post, as always from you. And, while some thought you bailed, I never once thought that, I figured you were keeping your powder dry.
I also have contemplated what you have, as to why? And while I believe you covered it pretty well, I would like to add a few thoughts:
1) The general economy is bad and getting worse. It is no secret we are facing a fiscal cliff immediately, and even if that is worked through with a bad compromise (which I believe it will be), we have a much larger one looming right behind it, a year or 3 down the road. This certainly takes a toll on the psychology of markets. If we had a more or less 'normal' market (with a little room for error, and armageddon not bearing down), then I believe we would not be in the mire.
2) I do not believe in 'what does the market know, that we dont?'. The market has an aggregate of knowledge, and that determines much of what the price is, but it is often times irrational and wrong, more because of what it does not know, than what it does. It is made up of many people all knowing something different than what others know. I dont like the idea that there are a giant group of people out there, "the market", that know this big secret about augt that none of us on this board know, even though we discuss it day in and day out in minute nuanced detail ad naseum, yet we are in the dark about it?... non-sense. That is not to say that there are not inside people in the company that have a clearer picture than us, but that can not really move it like it has, unless it is inside information being spilled wholesale, which I doubt has happened. More likely is that, as you say, there are some influential investors/shareholders that invested heavily and have alot of sway over the price that have been burned, and are very #$%$ off. They dont care what they know or dont, they are going to act on irrational emotion and get the hell out. And, any new ones, are likely waiting cautiously, knowing why the old ones left, and not sure if there are any vestiges of the legacy of what caused the old ones to get #$%$ off and leave, still hanging around. It will take some time, and performance, to restore confidence.
Again, if everything knowable, was known, and we had infinite liquidity, then we would arrive at the true and correct price without problem.
3) I hate to admit that warn is correct in one respect. That is, tax-loss selling. The chart for this stock bears this out, looking back. The last several years, early in the year the stock is up, but then starts to decline midyear through to the end of the year, only to rebound after the first again. Check it out, and also realize that, because of this, the stock is being viewed as a somewhat speculative play in that regard, which is probably normal for micro-cap OTC stocks.
4) We have had 2 financings using PIPE transactions by Arena (the last one precipitated by his foolish #$%$), both in the later part of the year, and both have been devastating on the stock price. One just about a year ago, then one just recently again. I took the occasion to read up on why they are bad, and came to the concussion that they finance the company through a short sale conducted, or at least facilitated, by the company. I dont know about the previous one, but in the last one, at least some of the ~$6.8mm money delivered to the company came out of the #$%$ ends of shareholders. It is infuriating to me, that it would work this way, and deliver a pile of warrants to-boot.
From your post:
"...I'm trying to figure out how ~ 16 million shares could have traded since the announcement of the $.80 offering, and yet the closing pps Friday was $.59...."
They would be better of just casually selling stock as needed from their last shelf registration into the market to raise money than this crap. Or at least do it early in the year when a stronger shareprice does not really favor shorting to make the transaction work. Not real happy about it. I believe this explains much of the ~ 16 million shares.
Having said all that, I still believe in the story, the growth, the IP, and the future of the company, and every day, I think we are getting closer to a BE CF, an acquisition, or some other catalytic event that will allow investors to reap a large reward.
I'm not a big-time investor, but AUGT has has my eye for the past few months. Unfortunately I initially bought prior to the offering, but I've managed to average down several times getting me from 1.11 down to around .85
It's rough looking at this little beauty weighing down my portfolio. I'll just keep dropping my basis and hopefully we see a good bounce over the next couple months. I do enjoy the "unbiased" opinions on here. It's a real joke sometimes to read the slanted views, but I'm not going to panic. I'll keep calm and keep adding from my foxhole here in Afghanistan.
Currently sitting on 30k shares, might move to make it 50k by the end of the week.
Nice post Jason. At the end of the day Augme is a highly speculative play that trades on the OTC. It is more interesting than a lot of spec stocks, but given it was about a week away from going teats up last September that is all it is right now - highly speculative. I think anyone looking to invest here will just wait and see if the house is in order - and there are less risky ways to make money right now. We will know soon enough if Augme will become a dominant player in Mobile marketing or another "if only" story. I believe most investors will wait for the future to become a bit clearer before jumping in - I don't blame them. Time to prove it - I think we are all sick about hearing how mobile marketing/advertising is in its infancy - not anymore it isn't.
Jason, excellent post. Like you, I have also been seriously questioning what am I missing about this story. I have gone over and over what I "know" and what I have been "told" and what I "believe" and "understand" about this company and the "space". Your logical and rational thoughts and opinions are very well reasoned and most objective observers would probably agree with most of what you say. I am still very confident that Hussey is going to buy a substantial number of shares, and I HOPE that some of the folks in his rolodex will also buy some shares. I also believe that he will demonstrate that he believes in the value of the IP when we finally hear about the IP strategy going forward. It both frustrates and amuses me how some have reacted to the disappointing developments over the last number of months. But that is typical of so many people; a few disappointments and some are ready to throw the whole company out the window. There is certainly some dirty bathwater, but we still have a baby with huge potential there as well.
I am glad I own Augme. I am a holder of 11,000 shares, modest amount compared with others. I believe one of the main reasons we dropped....the failure to win any legal action. We need to eliminate the ominous name "Agme Technologies" and call it "HIPCRICKET MOBILE" since this is the winner and getting the contracts. People associate AUGT with a loosing proposition. One more thing (Like Lt. Columbo used to say) The best scenario..someone to buy us! Hang on
Sadly you remind me of cubemeister from the NIVS mb. He as well was seemingly intelligent and logical but like you he went too heavy and subsequently lost it all and filed for bankruptcy. Oddly however with all of your supposed buying it hasn't lift the stock even slightly. Why is that? And if AUGT is such a buy why is it nobody is willing to pony up a mere $0.75 cents a share? The trading session has been open for almost an hour with volume under 5k and it's barely holding $0.60 cents, yet you have a few supposed supporters in this thread but nobody is buying. In any case, best of luck cause you surely need it, considering your seemingly foolish move to go so heavy here.
Jason, if your not holding any equity in this stock then y post? Did you do your DD on the fundamentals of this stock relative to the value of HC in an open mobile advertising market? Regardless of IP value or not the price of this equity is still undervalued at its corp value. Period. I hope the stock drops another .20/.30 cents right around .25 pps. What goes down must go up & with the next Q report expected to show continued revenue of about 20% & with RH continuing to cut the waste & cash burn Arena buried us with i say it's a safe 'bet' 2013 gets us back to the low 2's on pps. I don't knw whether the longs here are really holding all the equity they say that they are but from my reading of the Board i wouldn't bet against them either.
Sentiment: Strong Buy
Johnny, let me put this so you even you can understand; Jason saw an offer he could not refuse.... shouldn't you and warn be watching Godfather 2 right now in your grandmother's Bronx basement on a VCR??..... if Jason said he bought, then he bought... I firmly believe it. he is honorablel and a gentleman.
Sentiment: Strong Buy
Thumbs up, Johnny. Jason DID NOT buy 308,000 shares last week. He's not that stupid.....and he's certainly not so stupid to actually admit it if it were even remotely true. He's just picked up Arn's mantle. Anybody with any brains knows that AUGT is going to become (if it hasn't already) a zombie stock. i.e a little 25 cent OB, nobody-cares-about-stock.
You don't pony up over $150k during tax loss season on a stock that's down 50% for the year. Sorry, Jason. You're just not that plain stupid. Please stop thinking some of the rest of us are.
Sentiment: Strong Sell
Great post Jason. I can added that No One can time the market and call the bottom or top. As such true investors buy the fundamentals in face of uncertainty. Reaching 400k shares I too have been trying to take advantage of the recent miss pricing that it will meet the fundamental of the company that we are witnessing soon enough.
Sentiment: Strong Buy