Currently, the story has to be that institutional investors have nearly completely moved to the sidelines on the vast majority of Russell 2,000 and micro cap stocks. What a you are seeing is only the small retail investors dropping shares in 100 share, 50 share and 40 share lots. With out institutional bids, these microcaps just hit a downside vacuum. Amazing what a whiff of deflation can do. Small stocks w/foreign exposure to the strong U.S. dollar are out of favor for sure.
My best guess at to what happens? Nothing, not near term anyway. Institutional holders, unlike Carl Icahn for example, tend to be glacial in exercising fiduciary responsibility. Proxy contests are rare. Moreover, Boards of potential acquiring companies know that about 3 out of 4 acquisitions end up as failures. They are very reticent to be tagged w/having approved a bad acquisition, incurring reputational risk that lasts for years, w/ the resultant egg very hard to remove from one's face. So they do nothing. They wait. They wait until Helix and PRCP's 3-D scanning products either: 1:demonstrate a clear and recurring path to profitability or 2. clearly evidence themselves as a competitive threat. At which point, because they have done exactly that, the stock price of the hypothetical acquisition target is 2-3 times higher, the acquiring company panics and goes out an buys it at that point at a significant market premium---and it becomes one of the 3 out of 4 acquisitions that failed because they overpaid for it. It's just human nature----- despite the real likelihood that because of cost savings from redundanices, pricing power from a competitive threat being removed, and possible market share gains---an acquisition now could perhaps be anti-dilutive in year one at the the range I would forsee. So enaa, in 3-5 years it could all work out for you one way (standalone) or another (acquisition of the company a few years down the road).
You could be right. However, I think most investors (especially the large institutions) would likely more happily take a quick $16-$18 per share that a buyout would bring rather than waiting for a "possible" multi-bagger over 3 years. Consider 1. The bull market is already in its 7th year. 2. The U.S. auto cycle has peaked and is now flattening. 3. There could be foreign potential, but much of it could be washed away by currency effects and you would also have to count on QE working in Europe like it did in the U.S., despite being accompanied by 14 different fiscal policies in different countries. As for China and Asia, well that's a total guess, but China on a macro level is as bad as it has been in 9 years and in a clear downtrend. The overarching point is that massive world-wide Central Bank-induced liquidity infusions that #$%$ for six years or more, huge and historic currency fluctuations, unbelievable commodity deflation, and bond yields going negative in some parts of the world are hardly the harbinger of a stable economic and stock market outlook. The risk of multi-decade worldwide deflation is there, whether it is 50%, 30% or even just 10%. At $16-$18, a bird in hand trumps everything when quite possibly "cash is about to be King". Of course the whole discussion is moot unless the big holders wage a proxy contest to remove the (Board) and the anti-takeover measures (e.g. poison pill). The votes are probably there though. It's the impetus that remains to be delivered.
The "home run" would have been simply to acquire PRCP. For a market cap of just $100 million, plus some premium, FARO could have gotten w/an acquisition of PRCP: $34 million cash, $50 million+ backlog, product augmentation and diversification, geographic diversification and an international distribution network, patents, customer lists, annual cost savings redundancies at the CEO, CFO, Accounting, G&A, Marketing, IR, R&D levels, economies of scale, etc. Plus they would have taken out one a very few key competitors and improved product pricing. And since I believe they may be not only a competitor but also a customer of PRCP they could have brought supply in-house. It's an easy fold-in acquisition using PRCP's own cash to finance it if they so chose. It's an acquisition just big enough to make sense (FARO $773 MM EV vs. PRCP $67 MM EV) and have an impact w/o disrupting FARO's own corporate culture while also being able to easily absorb PRCP's quarterly volatility. If they were to catch PRCP at what might be an inflection point for their business (e.g. Helix rolling out)--so much the better. Maybe they don't have a Business Development guy at FARO. Yeah, better to go ahead and spend a ton of money to develop the product yourself I suppose when one already exists. Some companies have just forgotten about how to enhance shareholder value. Not everyone can be Larry Ellison I guess. Sometimes the best way to win against smaller competitors is just to acquire them.
and remaining down for 5-10 years as part of the downside of the commodity boom/bust cycle.Saudis not only want to bankrupt the frackers (which will take a couple years), but completely discourage them from ever coming back during our lifetime.
This group of Board members is not the most proactive bunch. Take a look at their ages. Just waking up in the morning is a major success story. Most of these guys will probably take illiquid, under appreciated stock to the "Great Beyond", or leave it as a mild nuisance to their heirs. With so little time left and knowing you only live once, I for one, would want to have one major victory to be remembered by, a legacy. This company seems to be merely an avocation for them, a more interesting, more palatable alternative to shuffleboard or bingo--not much more than that.
Even w/a turnaround clearly in place, better numbers, better visibility, insider buying etc. The only thing I can guess is that there is some perceived concern (rightly or wrongly) a Republican Congress will clamp down on all Federal spending for the next four years. What is completely clear now is that this is an event-driven stock that the Board of Directors will have to take action on the create shareholder value via some transaction. Maybe the stock has just been beaten down so long the credibility is shot as a public market vehicle. Never mind, the value is still there. The BOD just needs to unlock it. Most of those guys ain't getting any younger. They won't wait too long. That's my guess anyway.
Looks like a shared grant won on the basis of a competitive application in Poland. Relates to permafix medical's new process for Tech-99 production. A little surprised they did not PR this yet. Nice catch by you gonuclear.
The company (which has no debt) has a little over $2.50 per share in working capital. The remaining assets--- three company-owned buildings, design and assembly facilities, equipment, patents, tank monitoring contracts, customer lists are likely worth a bit more than the $0.28 per share (roughly $800,000) at which the market is currently valuing them. Even as a shell company, someone could buy the working capital, the physical space, and junk or fire sale everything else if they wanted (as it consistently produces no net profit), and avoid the cost of going public for a rather minimal investment. Turn it into a wine warehouse, or amped-up tech garage for a software start-up or whatever.
If the company came through with the earnings, they would not have to participate/jawbone prospective investors in any Conferences. Who wants to hear the helix story again for the umpteenth time. Just give me some good earnings results---quarter after quarter. Stay in Plymouth, save the T&E cost, do your job and post a strong bottom line.
More than 2.8 million shares were just voted against nearly the entire Board of Directors, who barely survived the November vote. You might have to convince those holders the stock is worth hanging on to. I think some of them may be selling at every opportunity. That's a lot of stock to work through on an average daily volume of about 20,000 shares per day--even if only half of that volume is disgruntled stock trying to find an exit. This could be buried for a while longer. However, I would not rule out a coup/proxy fight to force sale of the company or removal of Board members. The votes are there to accomplish it without a lot of effort or arm-twisting of the non-voting shares from the November meeting. Stay tuned, you may not have to wait 3-5 years. Every down day will bring even more pressure to bear on both management and the Board, and more motivation to those who want to see a change made.
But the public market is only one way to value a company, and often it is not fair value. The company execs can take it private, lever up, and then run it out of the public arena and distribute the free cash flow to themselves proportionately. They can sell the company to a PE firm, larger industry player, or even a private individual given the small dollar amount involved. What you don't want to do is sit w/illiquid stock at 70 years old w/no where to go in a forced sale to deal w/legacy concerns. Of course, everyone thinks they will live forever.
Almost 3 million shares in the hands of dissatisfied investors based on that shareholder vote. That could weigh on the stock for 12-18 months. Not an easy security to get out of in the open market.
Awilco can easily pay the near the current dividend amount for the next four quarters. Whether they should is the question. I think Tom Petrie is right that unlike the last decline in oil price w/the financial collapse of 2008, this decline will last a lot longer. The Saudi's clear intent is to permanently break the back of the N.A. frackers. That will take at least two years, because many of those fracking producers have hedges in place to protect them from a severe oil price drop for 2015, and many won't even face financial jeopardy until well into 2016. Two years is also the time frame for how long a general populace will accept austerity (in Saudi Arabia), or more aptly, relative austerity as they live pretty well otherwise. Witness Greece as the analog. The populace will grit their teeth for about two years, but then you hit the breaking point where something gives. It's a game of chicken as to who blinks first, the Saudi monarchy or the Fracking companies, and it will get intense by early 2017. I think most shareholders in Awilco could live w/a 50% dividend cut to nearly $2.00 per share annually for 2-3 years. That would be what I would suggest.
Jim Cramer, while not outright dismissing it, seemed to think the forecasts of oil at $14/bbl. were not likely as "everyone would go bust". So that's something. $26-$28/bbl. seems like a more reasonable bottom IMO. Too many people are looking for oil price to hold the double bottom at $33/bbl., and markets are prone to excess, so capitulation in the mid-to-high $20s makes some sense. Too late to sell, but too early to buy in this sector. They won't ring a bell at the bottom, but the knife is still falling.
Press release contained the "V-word". The single most important word for this company given the last two years. You know the word to which I am referring.
Not sure I'd want them to have the Helix technology. The Chinese have institutions dedicated to teaching and using reverse engineering to steal technology. It's kind of their forte. Ain't going to be any patent protection in China. Wasn't it about this same exact time last year that PRCP announced a big European contract w/a premium German auto manufacturer that popped the stock $5 or so per share, only to lose all the gain and then even more when installation delays made it a moot point. The best laid plans..... From the volume today, although the share price is higher, no one is really buying this news w/size purchases of stock. Once burned.... the company will probably have to deliver actual bottom line earnings for a few quarters before credibility is earned. I'm from Missouri on the news.