For anyone who has never been to an annual shareholder meeting it's educational.
In addition, they added a few comments at the end of the webcast regarding Motorola branded modem initiative.
Worth a listen............
I don't necessarilly agree. I, like you, would love to see them borrow $4MM for 8 yrs at 4%, but the only companies getting cheap loans right now are investment grade, i.e. those who don't need it, but want it to refinance or lever up at current cheap rates. Anything less than investment grade, which ZMTP certainly is, can be paying upwards of 8-12%
Equity raise via rights offering will keep them from getting into a position where all the profits are going to pay either an institutional loan shark or giving heavily discounted equity to one of the many syndicates who specialize in penny offerings and drive the price in the toilet ahead of the offering.
The big tell will be how many shares the Mannings/Kramer (who own 34.5% of shares) and the other institutional holders (who hold 18% of shares) subscribe for.
There is execution risk in this Motorola deal, if there were delays in generating revenue for some reason with a loan the company could get caught in a default position. Then we have to give away the farm to get out of it.
Your concerns are legit but I'm guessing management looked at the options and felt this one is preferred as most shareholder friendly.
Remember, you can always decline the offering and/or sell your shares.
The S-1 is filed on EDGAR. Record date is 6/24. Lots of time to contemplate where things are going from here.
I see there is a provision to oversubscribe if shareholders so desire, thus if some shareholders choose not to subcribe we can buy extra shares in the offering.
Obviously offerings like this are typically done at a discount and pricing will be based on demand. That said, the offering will mark the base price for which there is significant support for the stock price.
Now back to that Prospectus........................
Ok, we know the plan......
Rights offering, 8MM shares max, which at current price is only $4MM. I like the fact that they are limiting subscriptions to prevent loss of tax carryforwards.
Obviously we need to see the prospectus, but at this point, I'm in for my allocation.
$4MM is a quite reasonable amount to be raising to provide working capital for commensing the Motorola launch. Sounds like there is only a modest amount of cap-ex/development investment, which tells me there is not that much electronics internal redesign necessary to start producing a Motorola branded product. From there it is a matter of getting DOCSIS compliance certification and filling the pipeline with desirable product to put on the shelves Jan.1.
Piece of cake, right???????????????
I stand corrected on revenue estimates, they estimated Motorola current retail sails at $50-100 million, not $50-60MM. They estimated potential ater tax margins at 8%.
If you didn't listen to the conf call live, it's only 10 minutes and well worth a listen.
This company, for all its challenges, has good management. I give them credit for taking the deal away from Arris. They will now go from being the weakest player in the business to having the most recognizable brand name, Motorola.
Whenever I thought of the Zoom name, I've always thought of 56K dial up, for which I owned a Zoom modem, those were the days..... On the other hand, I've used Motorola for DSL & Cable access since they became available. The Motorola name has massive goodwill and I think people will have little trouble accepting the new Motorola products sold by Zoom.
The more I think about the deal, the more I'm intrigued with where Zoom can go with it.
The biggest question I can see is smooth EXECUTIION of the growth, i.e. doing it in a shareholder friendly, PROFITABLE way.
Zoom already knows how to build the guts, so that is a non issue.The really great part is that ZMTP uses contract manufacturers. New product manufacturing can be ramped very quickly to have them ready to ship on Jan 1 and the distribution chanels are already in place.
Management has a lot of work to do in a short while, I look forward to hearing a progress update on 2nd qtr earnings call.
Need to relisten to the conference call, which isn't up on the web site yet, but my recollection is that they said Arris currently sells $50-60MM of retail Motorola brand cable modems. If they can maintain even half of that business this is transformational.
As far as profitability, did I hear them estimate 9% after tax profit?
Hopefully they can ramp production smoothly and finance it wisely. My guess would be institutional equity investors with far out of money warrant kicker.
Also nice to see they licensed for set top boxes, etc....
Anybody hear anything different?
Thx for info, @adamfeuerstein is tweeting his skepticism as I type, that don't help things in the short term. There is a liquidity vacuum in the aftermarket. Currently no position.
Still trying to ascertain what was in the ASCO abstract / press release that warranted a 25%+ drop. At this point the only thing I can see is an absence of upside surprise.
Grabbed a few shares at $155, was pooping my pants when I saw $146, scaled out at an average of about $167.
Dan, I read the whole TIKwrite up on your blog. That is some really excellent work. Very thorough, very impressive for someone who says he's only been doing it since 2013. You care to share your background?
I've been following TIK since it's symbol was TINE on the bulletin board (look that up for fun!) so am pretty familiar with the story.
You clearly have a longer term horizon, as witnessed by your unwillingness to invest now knowing there won't be any resolution to the lawsuit until well into 2016 or later and some good things could start happening at TIK prior to that.
I'd like to discuss TIK and potentially other small/micro cap ideas with you. I'll send you a note in the near future over on your blog so as to avoid enduring the ridicule of of the Yahoo stock board cynics who strictly want to talk their book.
I currently hold only a small position in TIK just to keep me interested in it until the time is potentially right to buy a full position.
Again, nice work. I've got your blog bookmarked.
Thanks for info, assuming RTH258 PhIII results mimic PhII, and strictly from the view of a patient, I think reducing injection frequency from 2 months to 3 months would be a really big deal, This patient population (elderly) really doesn't like to go to a doctor any more than they need to. (this topic was debated at length on this board over the last 18 months and I know there are many widely varied opinions, even those in the ophthalmology field)
As far as investing, I'm more thinking of it from a REGN short perspective longer term. If Eyelea is no longer the preferred treatment for wet AMD, etc.., then pricing would seemingly have to drop to maintain market share. REGN shares right now are priced as if the Eyelea golden goose will live on forever. I know REGN has the hypercholesterolemia drug in late stage trials, but now it looks like even that will have competition from a an oral treatment versus subcutaneous.
Shorting REGN can be a risky trade as Sanofi has big checkbook and regularly buys REGN shares in the open market. Interesting enough they've never paid over $400/share and haven't bought any shares since late last year. Evidently even Sanofi thinks REGN shares are overvalued.
=== Posology, I learned a new word!
WamdGuru are you familiar with RTH258 from Novartis/Alcon? It's just starting PhIII in wet AMD. Back on 2/27 they announced what appear to great PhII results. I'm just not hearing much about RTH258, any idea why?
Essentially they're saying they only had to inject RTH258 every three months vs Eylea every 2 months and that they achieved endpoint of non-inferiority. Are these mid stage results as good I they seem to be?? Eylea essentially upended Lucentis with it's reduced dosing frequency. Do you think RTH258 can do the same thing to Eyelea? Could they end Eylea's dominance in retinal diseases?
Here is excerpt of 2/27 P.R.
Basel, February 27, 2015 - Alcon, the global leader in eye care, presented positive results from its second Phase II clinical study of RTH258 during the 38th Annual Macula Society Meeting in Scottsdale, Arizona. This study evaluated the efficacy and safety of the compound versus aflibercept in patients with neovascular (wet) age-related macular degeneration (AMD). RTH258 (formerly known as ESBA1008) is a novel, single-chain antibody fragment developed to treat wet AMD.
The Phase II study met its primary endpoint, demonstrating promising visual acuity gains that were non-inferior to aflibercept, with numerically greater reduction and rapid improvement in abnormal retinal fluid observed in RTH258-treated patients. Patients treated every three months with RTH258 also experienced a prolonged duration-of-action, potentially leading to a reduced treatment burden. A total of 90 patients diagnosed with wet AMD participated in the prospective, randomized, double-masked multicenter, two-arm study. The primary objective was to compare the efficacy of RTH258 6mg versus aflibercept 2mg with the primary endpoint being the mean change in best corrected visual acuity (BCVA), from Baseline to Week 12. ............ more...