"My guess is it was even worse that that and one large fund months ago decided to short the stock to the point where it would be guaranteed to get kicked out of the Russell thereby making more shares available to aid in covering. The Russell is based purely on market cap so it is pretty easy to figure out from year to year where a company's market cap has to be to be either IN or OUT."
Very possible scenario. I was thinking the same thing. In fact, I believe that scenario happens not too infrequently out there. I also think it's possible the same scenario played out with HTCH last year, but only in reverse. HTCH was added to the Russell in June 2013, and that add-back was preceded by a significant move up from the $3ish level beginning in early May. Who knows.
Like I said, I sincerely hope you make a killing here. I've enjoyed playing this name for the past few years (beginning around June 2011 - when HTCH was previously kicked out of Russell). And (against the judgment of some buddies), I have nibbled quite a bit more here in the past few weeks. We shall see. Looking forward to the upcoming CC.
“we now know what was happening with the huge volume the last couple trading days of June”
I’m curious as to exactly what you mean by that. Like I’ve said a bunch of times, the volume spike in late June is directly related to Russell rebalancing. That is what happens. I don’t understand why you’re so surprised that the short volume has decreased since that time. It looks like a bunch of shorts simply played the Russell rebalance event -- remember, HTCH got kicked out of Russell indices, meaning index funds were forced to sell (to someone(s)).
I am not sure what you are reading into these short interest numbers. If you really do think that ridiculous earnings are on the way, then you should welcome a HIGH short interest with open arms -- shorts add fantastic fuel to the fire if/when the fundamentals turn against them.
Lastly, as to your previous comments about the $40mm debt coming due……..I think you know full well that HTCH ain’t cutting a check for the full amount (not without a nice round of dilution). That’s their entire cash balance as of March quarter.
Anyway, good luck to you. I do hope you are eventually proven correct here.
Hey dude. Thanks for the post. I agree that the hat will be improved.....but there‘s no reason to believe it won‘t be by FOUR itself. One poster here has repeatedly said that FOUR is in the process of improving the prototype. And that makes sense.
I should clarify my previous posts. I’m not saying that isoblox was “already identified” at the time of the FOUR bk. But I do believe they identified isoblox WELL before they announced its purchase (remember, the isoblox purchase was announced shortly after emergence and trading under the new symbol).
What I am saying is that, imo, Prescott’s buying in and taking control of KIDEQ was all about the NOLs - the plan being to emerge with as clean of a slate as possible while preserving the NOLs (the yugioh dispute gave them a reason to file voluntary chapter 11, which they did not need to do).
I agree with Fred that isoBlox was likely “one of some potential ideas for using the 4 Kids shell leftover ….” I also agree with previous Deek posts that this is NOT about a hat. The MLB deal, in and of itself, is not the forest - it’s the trees. Imo, this is all about the technology. And the deal with MLB is an enormous validation of the technology. Lastly, I agree with Higs that this technology is worth FAR more in the hands of bigger fish (e.g., underarmour, etc.). There are so many potential applications for this technology.
This all brings me back to my previous questions.
- how do you buy a technology for $2mm that several months later receives MLB endorsement?
- how do you get in front of MLB and get all those layers of approval in just a few short months?
- how easy is it to get into EVERY store of a major retailer?
- how does MLB agree to endorse a product pitched by a tiny company that recently emerged from BK and that reports a small cash position?
- why have NO insiders sold this stock throughout this entire process, even though we are 20X higher than the lows during bankruptcy?
I think you missed the point of my post. I am not claiming “gnostic insight” into the isoblox deal. I am not saying I saw the actual isoblox deal coming. What I am saying is that (imo) the isoblox deal was not some random or serendipitous event. What I am saying is that I am convinced there was a plan in place going back several years. And it makes complete sense to me now.
Ask yourself this: how long do you think the process takes to get something like isoblox approved by MAJOR LEAGUE BASEBALL? How many meetings, layers of approval, etc., are involved? Do you think FOUR could just purchase the technology in 2013, then decide they want to try to pitch MLB on the idea, and then get in front of MLB and get it all approved by January 2014? Of course not. The other part that I find amazingly curious is that FOUR somehow paid only $2 million for a technology that is now MLB approved and in every single store of that major retailer. $2 million. Hmm.
Deek, I think you really nailed this one.
Good luck to all.
I understand your general point about narrative bias. But I do not think your point applies to my post. And I take issue with your specific logic. Allow me to explain.
When I said I was convinced that this was planned for a long time, I was specifically referring to Prescott. That is why I began my “narrative” with when Prescott took control. Now rethink what you wrote…….for example, you reference the Lehman cash loss as a “bad” event that I somehow neglected to include in my narrative. On the contrary, the Lehman cash loss is very much relevant to the story. Remember, Prescott bought in AFTER the Lehman cash loss.
In short, it is obvious (imo) that Prescott wasn’t buying KIDEQ to turn the existing business around. Instead, the game plan here was to emerge with as clean of a slate as possible and preserve the NOLs - which they did masterfully. The point being that there was a plan in place to use the NOLs.
Just some random thoughts while I'm sitting here scouring the market:
- We still have a brick wall at $1.40. But, man, that chart looks beautiful. There is a lingering seller here, but there is no real selling pressure.
- I was just replaying the facts over the past few years, and I now believe, more than ever, that there is way more to this story than we know.............Prescott acquires control, FOUR files for voluntary Chapter 11, FOUR ultimately emerges from Chapter 11 with full equity preservation and full NOL preservation (over $100mm), FOUR then acquires the isoblox technology (which receives approval from MLB for use in MLB games), and then, despite being a seemingly tiny company with a small cash position, FOUR somehow manages to enter into an agreement with a major sporting goods retailer and somehow manages to get its products into every single one of that retailer’s stores around the country.
Getting MLB approval, and then getting into that kind of retail space, is serious business. These things are not super easy things to do. I have to believe that this was, indeed, planned for a long time, and that this is all about prepping for eventual sale.
Good luck to all.
I went back and double checked the most recent 10-Q re: the previous refi dilution. Yes, they did dilute. And when they did so, the stock price was at this same EXACT level (low $2s). It was in March 2012 - as part of the private placement, HTCH issued warrants to purchase 3,869,000 shares of common stock. The warrants were exercisable on a cashless basis for $.01 per share. Interestingly, I noticed this tidbit in the 10-Q:
"As of May 2013, all 3,869,000 warrants had been exercised and there were no warrants outstanding."
May 2013 happens to be when that nice little pump from $3 to $6.50 began. Wonder if there's any connection.
In any event, I just wanted to follow up, for purposes of completeness.
Good luck to all.
Also, as to your comment that my 2013 timing is "a bit off," I think you are missing my point, namely that these Russell events oftentimes create trading opportunities. Just ask yourself why the stock was pumped from $3 to $6.50 in May and June of 2013, shortly in advance of HTCH being ADDED back to the Russell at the end of June 2013. Remember, HTCH being ADDED back to the Russell meant that index funds had to BUY the stock in June 2013.
"There was a volume spike on the last trading day of June, 2013 - which very well could have been Russell-related."
If you don't think that the severe HTCH volume spike at the very end of June 2013 (as well as June 2011 and June 2014) was Russell-related, then I don't know what to tell you. Ask yourself why the daily chart for HTCH doesn't also show the same severe, dramatic volume spike at the end of June 2012. The answer is simple....HTCH was not a part of the Russell rebalance in 2012.
2011 - Htch deleted
2013 - Htch added
2014 - Htch deleted
If you still don't believe that it is obviously Russell-related, then all you have to do is go look up the daily charts of some of the other Russell rebalance stocks from 2014. Here are two off the top of my head: CIDM and CLCT. Take a look at their daily charts. Just like HTCH, those two stocks had ENORMOUS volume spikes on Friday. That isn't a coincidence.
The same Russell rebalance thing also happened last year which HTCH, but only in reverse. Look at the big volume spike in late June 2013. That coincides with when HTCH was ADDED back to Russell last year. Not surprisingly, the stock had a nice, steady decline afterwards. In other words, funds were forced to buy HTCH as a result of the rebalance, so the folks on the other side of the rebalance trade (i.e., the ones selling the shares to the funds) moved the stock down nicely after the rebalance. Same thing I describe above, only in reverse.
The heavy volume is simply Russell rebalancing activity. Look back three years and you will see that the exact same thing happened at the end of June 2011 (i.e., HTCH had a massive volume spike in late June 2011 when it similarly got booted from Russell indexes back then).
That being said, the rebalance presents a nice trading opportunity, imo. That's why I bought 10K more today. With these rebalances, the folks on the other side of the rebalance trade (i.e., the ones buying up the shares from the index funds that have to dump) usually do a nice short-term pump to get rid of a bunch of the acquired shares. Again, if you look back to 2011, you will see what I mean -- a quick 50% spike move after the rebalance.
Good luck to all.
"but I don't suspect any major league will wear one this year, as they don't like to mess with their rhythm."
I, too, didn't think we'd see a cap on a major leaguer this year. I'm glad we were both wrong. I just saw that a Padres reliever wore the cap during a MLB game last night. The cap really isn't very aesthetically pleasing. But oh well. Nice surprise to wake up to.
Looks like my previous post got censored for some reason. So baffling. Last week, in the wake of the generous options grants, I guessed that we might see some good news soon, including a potential distribution deal with a big name. Anyway, I imagine everyone saw today's news. If not.....FOUR announced a deal with a major Sporting Goods store that will carry the Isoblox skullcap for youth baseball/softball as well as the Isoblox protective youth shirt. Nice news. Was hoping to see a nicer bump in the stock price today. But oh well. Looks like they're not done selling at this $1.50-ish level. No idea how FOUR has the cash to manufacture all this stuff. But apparently the skullcaps will be in stores nationwide before the end of this month.
Good luck to all.
Actually, per the 10-Q that came out today, it looks as though KIDEQ sold the lehman claim for $1.6mm. Also, it looks as though they are going to need about $750k of that amount to pay off Home Focus Development (the final outstanding claim from KIDEQ's bankruptcy case).
I guess we can close the book on the Lehman chapter. Looks like KIDEQ sold their allowed claim to Banc of America Credit Products, Inc. See docket #8954.
Sure looks like KIDEQ wanted to convert that claim to cash ASAP. Interesting, given that they recently raised enough cash via the insider financing deal. Seems like something may be brewing, imo.
Good luck to all.
this is taken from their earnings release:
“As anticipated from our experience in the fourth quarter of 2013, overall military spending, specifically new orders from the U.S. Air Force under existing contracts, and the projects incorporating our precision instruments in Asia continued to be delayed,” commented Kevin Lynch, our Chairman and Chief Executive Officer. “This directly impacted our earnings for the first quarter of 2014.
“Despite this shortfall, gross margins, as a percentage of revenue, remained strong at 58%. However, margin percentages are expected to decline as our market penetration strategy with major automated manufacturing and assembly companies in China gains strength and our sales volumes improve.
“At the same time, we continue to support our customer requirements through the successful achievement of ISO 9001:2008 certification, while also focusing on cost improvements through the ongoing implementation of lean manufacturing initiatives. Future fixed costs have also been lowered through the recent extension of our building lease.
“Inventories remain low and cash is being managed judiciously. We are also pleased to report that we recently entered into a new banking relationship with Bank of America, N.A. that improves our line of credit to $1.0 million.
“We are committed to our defined market strategy to grow in the markets of precision automated manufacturing, complex machinery measurement and analysis, and the developments to support these markets with our core instruments business. As a result, we are now beginning to realize this anticipated improvement with increased project and order activity. Additionally, the initial customer response to our newest product launch, the Accumeasure D, which targets precision measurement in industrial and electronics development and manufacturing, has been very favorable.
“Despite the slow start to 2014, we look for tangible improvements during the next quarter and throughout the year....
“The only smart thing anybody on this board has said in a long time was that the options at 1.44 were pretty intriguing….”
Yep, those really stuck out like a sore thumb to me. My take on the options is that good news is coming soon. My best guess is maybe a sublicensing deal with a big name. Or maybe a distribution deal with a big name.
What makes me quite convinced of this is that we know how aware of stock price these guys are when granting out options. After all, they managed to sneak in all those options at a $0.26 strike price about a year ago.
“There was minimal risk in a Prescott led buyout under $2, I suppose, but whatever. If making over 10 times my money on most of my buys was the worst case, then I guess I am a fool.”
Deek, I’m not calling you a “fool.” As you know, I’ve also been here for quite a while. I was buying from 7 cents on up, so I can relate to being up many multiples on many/most of my purchases (admittedly, I don’t have close to the 440,000 or so shares you have). My point was simply that many things have changed since the 7-cent days. There are now far more known variables, many of which are not favorable for shareholders. For example, we KNOW that the company has taken on debt. We KNOW that the company has issued potential dilution of approximately 15%. And we KNOW that the company has not shown any indication (as of yet) of being able to turn a profit or generate cash flow. Those facts sound about as good as the facts surrounding those companies that you love to bash.
Your investment thesis here is really now no different than anyone else’s on other stocks out there. In other words, you are now just guessing about future stock price movement. You don’t know how/why the stock price movement will take place. You just guess that there will be a liquidating event of some sort (i.e., you will just cash out when Prescott does). You’ll know it when you see it, I guess.
Basically, you are now gambling on a psychology-based thesis. In other words, you believe that this whole thing was a setup from day 1 that you sniffed out (i.e., the delisting, writing down of assets, etc., were all done with a predetermined plan). And maybe that is the case.
Your final comment is telling: “The likely final result will be $3 to $10, sometime in the next 36 months. Plenty.” When you factor in all recent (and future) dilution, the difference in market cap between the low and high end of your target range of $3 to $10 is over $100 million. That is just speculation.