Thanks for taking the time to contact Kilmer. Excellent post. It has been my opinion since this rapid decline began that it was likely to be the result of institutional selling. However, like most individual investors I tend to always climb a wall of worry. Again, thanks for such a high quality and timely post.
As with many here, I've seen biotech companies go down even more sometimes in a day. But those situations were almost always the result of really bad news like a bad decision from the FDA. Here we have no news.
These folks are well aware of the need to preannounce serious misses in financial results. They are also aware that a material negative event needs to be reported immediately. We know that a miss on revenues would not cause such a dramatic drop on such heavy volume. We already knew the first quarter revenues were going to be soft. I have sent 2 emails to Kilmer expressing my concerns. Usually I receive an immediate response. One time I actually received a phone call from Arun and we talked generally about the company for nearly an hour. This time, nothing. Not a peep. The 28th cannot get here fast enough for me.
One more point on that last posting. I have been monitoring institutional activity on a quarterly basis. nearly every quarter there is at least one institution, for whatever reason, selling out a large position of up to 2 million shares. In the past, those sales were scooped up by other institutions. Net,net, every quarter for the past two years institutional exposure has grown to a new high. Even last year, when we dropped from a high of $24pps to $12.
Maybe now, for the first time, becuase of uncertainties surrounding the overall market many institutions are rebalancing or increasing their cash position. So these shares being sold are being sold into a market with less big buyers. Another poster here made that point and I believe he is right.
Sorry, but I take exception with your wife's position. It is a kind of conspiracy concept that usually proves to be not true. Again, 87% of the stock is owned by institutions. The volume has been substantial the last few business days. Very substantial. Logic would say it is primarily institutional activity with a sprinkle of shorting.
So the real question is do one or more institutions know something we don't know and are running for the exits. So I ask myself, what really bad thing can be happening that we don't know about. The only legitimate answer that comes to my mind is that the sales effort is doing very badly. It would have to be doing terribly because the price was up at $17/share at a time we were advised by the company that 1st quarter sales were expected to grow only 25%, which is very low when compared to past growth.
I remain convinced that one or more instiitutions have become disenchanted with both the company and the overall market and are selling. If Fidelity, for example, decided to reduce their position by 20%, that's about 1.6 million shares. That's a lot of selling pressure. We shall see soon enough.
1.4 million shares already traded. Not good. Down 14%. Not good. No news other then announcing 1st quarter earnings to be released early. Usually a good sign, usually. The only bad thing that could come out of the 1st quarter report is poor sales numbers. If, somehow, word on that has gotten out, would the stock drop this much? After all, the market cap on this stock has declined by $157 million in the last two days.
Mt conclusion remains that one or more institutions have become disenchanted with the market and particularly what they would define as speculative stocks. There are some very significant institutional exposures on this stock. All it would take is for some of these institutions to decide to reduce their across the board by a5% to 20% and you get the kind of train wreck we are having today. The market is down big time today.
Just a thought.
You asked if anyone can explain the last couple of days of trading. Hocum's Razor states that most often the simplest explanation is oftentimes the right explanation. Given that, i would state that much of this action, like today, has very little to do with day to day activities of the company. Instead, since the institutions own over 80% of the stock, what is going on is some institutions selling large blocks, some buying large blocks. This is a speculative stock. In uncertain times, it is the speculative stocks that have the most dramatic movements.
At times like this i remind myself of the old stock market saying......" In the stock market, money flows from the impatient to the patient."
You write that earnings came in. I do not expect earnings for the first quarter to be reported until early May.
At the same time, maybe news of a better then expected quarter of revenue growth has become known to some players. I cannot think of anything else that would explain such a strong move that was supported by solid volume.
It would be nice to see combined revenues of $8.1 million for Pinpoint and luna for the 1st quarter. That would represent a 40% increase in revenues over the 4th quarter for these products. That would certainly indicate, at least to me, improving salesmen productivity in the most important arena for this company.
just back from overseas.
Listened to the recent presentation and would agree that when Arun was speaking of
50%,25% and 25%, he was discussing the state of affairs of the old lifecell customers.
Over the too many decades i have been investing in the medical industry, I have seen so many
companies in the current situation of Novadaq. They all reached a bridge they had to cross; namely, crossing over from a medical device developer to a medical device marketeer. It is oftentimes a difficult passage, particularly for the CEO, who's background is science and not business development.
I love this company's products from every perspective. Given the current size of the sales force, I am somewhat disappointed in revenue growth.
One last point for now. I have never owned another company like this where the institutional ownership has grown to such a level, while at the same time, so has the short interest. Both at record levels for the company.
Most Institutions have now reported their exposure as of 12/31/14. The Institutions now own 87% of the stock as of that date. I have to admit, I expected institutional ownership to decline.
I do not believe the sudden ups and downs of the stock price is due to either shorting or short covering. As Institutions continue to report their 12/31/14 exposure to this company, I believe the rapid shifts in the stock price at the end of last year was primarily due to Institutional activity. For example, one of the 5 largest institutional holders sold out their entire position of 1.7 million shares in the 4th quarter. In total, there were slightly over 3 million shares involved in Institutions selling out their entire positions. Did these Institutions sell at a steady pace throughout the quarter or did circumstances require them to sell rapidly? Your guess is as good as mine. Fortunately, there were also 3 million shares bought by new institutional investors. At this point institutional exposure seems to be holding in the 83% of outstanding shares range. Fidelity has not as yet reported.
One other point. is it acceptable that a sales force of 80 experienced salesmen will do only $65 million in 2015. I hope the $65 million is a low ball target because if you assume an equipment cost of $150 thousand that's only 5 sales per year per salesman. Imho, that's soft.
I cannot help but wonder if there is a connection between the CFO suddenly resigning, the company badly missing 4th quarter revenue projections in spite of Arun projecting they would as late as mid November, and now still not announcing when 4th quarter results will be released. Just a thought.
During the month of December, short interest increased by over 800,000 shares and ended the month at 4.1 million. Trying to digest the revenue miss, especially given Arun's comments as late as mid November.
There are 3 possible reasons for the current weakness:
1) Word is getting around that 4th quarter revenues did not meet expectations.
2) One or more institutional holders are selling.
3) A bad reaction by institutions to the sudden leaving of the CFO.
Unless, they preannounce revenues, I guess we'll have to wait
until Arun's presentation on 1/13 to get a better fix. Have to admit this weakness
Yesterday, the company announced that Arun will be presenting at the JPMorgan healthcare conference on 1/13/15 at 8:30am.
On 1/14/14, the day of the 2014 JPMorgan healthcare conference, Novadaq preannounced 4th quarter and full year revenues. The preannouncement allowed Arun to discuss those revenues when he made his presentation that morning.
During the 4th quarter of this year, Arun, on more then one occasion, and as late as late November, indicated that the company would meet it's overall 2014 revenue growth rate forecast of 40%. That would require 2014 revenues of at least $49 million. Given the fact that aggregate revenue for the first three quarters of 2014 was $33.6 million, the company will have to do revenues of $15.4 million in the 4th quarter. That would represent a 50% year over year increase in the 4th quarter and a 27% increase quarter to quarter. I believe everyone here would agree that those would be great numbers. So, let's hope for a preannouncement.
Short interest increased 428,000 shares to 3.659,000 shares for the period ending 12/15.
Bear in mind that the LifeNet health distributor agreement press release happened on 12/10.
The stock rallied dramatically on that news and continued up for the next two days. On 12/15, the stock declined substantially. Imho, that was the day this substantial increase in short interest happened.
Thanks for connecting the dots. Thanks also to Flamfurter for his comments. So, Arun waited until his team officially took over the marketing of Spy-Elite to pull this rabbit out of the hat. This new agreement had to have been in some form of development even prior to the settlement being reached with Lifecell. Remarkable!!