Interesting timing of the Insider Monkey article as every post like this has an intended purpose. (And it probably wasn't a 7% gain today) The title is clearly misleading on purpose as I didn't read anything in the text about a "Major Shareholder Dumps Novatel Wireless Inc (MIFI) In Q3". Looking at it differently, the title could have read,"Largest Institutional Investor, Soros Fund Management, Adds to Position in Q3". But again, I don't think sharing anything positive was the intention.
Yep...As predicted, there's the news.
And I have to agree with you that this is probably a good sign as Wells Fargo probably had to do extensive due diligence to approve this "untapped" line of credit increase from $25M to $48M. And to be honest, if I were Sue and/or Michael Newman, I would spend that $25M to buy back your stock tomorrow at these levels to use the shares to complete the Feeney purchase as well as have the stock on hand for the $120M note holders.
It would be a BOLD move.
From the 10-K, because South Africa required Novatel to put the maximum consideration amount into escrow for the purchase of Digicore back on 6/18/15, the devalued South African RAND caused a $10.3M non-cash loss on the books in Q3.
"From the date of execution of the TIA through September 30, 2015, the Maximum Consideration Amount placed into escrow experienced a non-cash loss of $10.3 million due to the weakening of the South African Rand. This amount is included in “Non-cash change in acquisition-related escrow” in the unaudited condensed consolidated statement of operations. The balance of the acquisition-related escrow was $78.0 million at September 30, 2015 ."
Without it, GAAP earnings in Q3 would have been (.19) vs. (.38).
Today has little to nothing to do with short covering. You'll know when the short positions start to cover.
Today's volume is consistent with post earnings announcements as 1.67M shares traded Aug. 7th, 1M shares traded on May 6th, and 1.7M shares trade Feb. 20th which were all the day after earnings.
If 1M+ shares trade on Monday and Tuesday next week, then we can start talking about Shorts covering. And if/when that starts happening, the squeeze will be on as funds want to lock in their profits.
6.1M shares short need to cover their positions/profits and we have a long way to go before it normalizes. There aren't enough shares available for them to buy at these levels as many of the shares they've borrowed to short are holders at $5 or $5.50+ per share.
I've reached out to Michael Sklansky in the past and his email response to me was "We do not provide updates on legal matters other than in our SEC filings. Not sure what protocol was in the past, but that is what our current General Counsel prefers." - Sept 8, 2015
I'm not surprised that Sue Swenson did well on the call yesterday on all subject matter as I know she's been CEO for a week, but she has been leading the Board since 2012.
Michael Newman jumped right in when the question was asked about the $25 to $40M EBITDA targets as clearly Sue Swenson wants to distance herself from past projections. Smart move on her part.
I continue to be baffled by the patent ligation that MIFI had against Franklin and ZTE. Both have been dismissed by the courts with the assumption that a settlement has been made between the companies. (Some sort of $ amount settlement and future licensing agreement) With no mention of this on yesterday's call, does anyone really know what this means? Hopefully, ZTE is considering a purchase of the Mobile Computing business from MIFI and we can turn the chapter on this hardware non-recurring business.
Here's the latest post Nov. 4th on the dismissal with ZTE: ORDER of Dismissal (Doc. No.311 ). Pursuant to Rule 41(a)(2) and (c) of the Federal Rules of Civil Procedure and the joint motion of Plaintiffs Novatel Wireless, Inc., Novatel Wireless Solutions, Inc., and Nova Intellectual Solutions, LLC (collectively "Plaintiffs") and Defendants ZTE Corporation and ZTE (USA), Inc. (collectively "Defendants") it is hereby ORDERED that all claims and counterclaims in the above referenced actions between Plaintiffs and Defendants are hereby dismissed with prejudice, with each party to bear its own costs and fees. Signed by Judge Cathy Ann Bencivengo on 11/3/2015. (cxl)
You have to look at the actual 8-K to see the results and guidance.
I expect Sue to reset prior expectations as the guidance for Q4 has fallen short of expectations.
august....So you're saying you aren't expecting reset expectations from Sue Swenson? You believe all the prior claims are still valid projections, because Michael Newman still has his job? The list provided by sejsscarter.
august...sorry, but all prior projections lost their credibility with Alex's termination. I expect Sue Swenson to reset expectations on Thursday. If MIFI was on a path to meet Alex's projections, he wouldn't have been fired so I can't believe you are even making a reference to past projections.
If you read the SEC Filing for Sue Swenson, the options she just received will vest 25% on the 1 year anniversary which is Oct. 29, 2016 (probably intended to offset Alex Mashinsky's severance) and then the remaining 75% will vest incrementally over 36 months. And, I'm sure the holders of the $120M notes at $5.50 per share aren't very interested in this $3.41 price point.
IMO, Alex aggressively was trying to grow MIFI to a level that the original activists believed was a valuation of ~$9.00/share. Alex was good at doing deals, but wasn't very good at running the business. Looking back, I still like the deals, but as I've said before, it seems like he manipulated HC2 & the note holders to get the funds to accomplish his goals.
MIFI doesn't need any more deals as they need to grow EPS. EPS is the only metric holding MIFI from trading at levels comparable to it's peers. Q4 guidance is all that matters on Thursday with MIFI, Feeney, and Digicore now all under one roof.
At lot of speculation on Alex's firing which we will probably never know the "Real" reason, but I believe it's safe to assume that if you upset the people with the largest amount of money invested, you get fired. (Of course, there could be a legal or criminal play here as well. I.e. HR Issue, Fraud, or questionable behavior)
If we remove those speculations, the BIG MONEY belongs to HC2 and the $120M note holders. Beneficially, MIFI's stock ran up to $6.89 in late April which was one month removed from the Feeney acquisition and at the peak of negotiations of the $120M note that was finalized a month later to go after Digicore. Great timing for Alex to negotiate these 2 deals. It was also at this time that Alex was chirping about a $500M annual run rate, new product launches, new carriers, etc... so looking back do you think the BIG MONEY investors feel Alex was being honest with them or they and the stock price were being manipulated to get him what he wanted. Alex's plan derailed with the Q2 miss and when he verbally stated that the Q2 miss was a deferral of orders that would be produced in Q3, he was buying himself time and a last ditched effort to save himself by producing a beat above the $60M guidance. When the board learned that wouldn't be the case, I believe they fired him as they know Wall Street isn't kind to companies with CEO's like Alex Mashinsky. (Over promise and under deliver)
As an investor of MIFI w/ a cost basis below $3, Alex did a lot of good things for me, but not so much for HC2 & the note holders. They've acquired Feeney, received $120M at $5.50/share, acquired Digicore, and are currently undervalued at the biggest expense of HC2 & the note holders. (Not me)
I'm not expecting disappointment from Digicore with Q4 guidance as I continue to believe guidance will be $75M to $80M with higher margins and free cash flow. But, if my cost basis was $5.50 or higher, I would be just as mad as the rest of them calling for Alex's head.
I'm not so sure tomorrow will be bad with the fact that they reiterated Q3 numbers within guidance.
I think MIFI has been held back below their competitors valuations because MIFI has fallen short of several of Alex's statements over the last 1 1/2 years. As a CEO of a publicly traded company, if you go on record making claims of a $500M run rate by the end of 2016, you can't back track to $400M and then to $200M in IoT. If you're going to claim that you have 3 new products with 3 N. American carrier to launch before the end of June, you can't deliver 2. If you claim to have a product in hand among several you plan to launch in Q3 and start delivering in Q4, but fall short, no good. And, if you miss your Q2 numbers by $10M, but tell analyst that the orders are coming in Q3, but don't provide guidance that backs that up, again no bueno....
Don't get me wrong, I think MIFI has done a number of good things over the last 1 1/2 years, but Alex didn't do himself any favors and the funds that invested the $120M at $5.50 per share probably wanted Alex's head on a platter although it turns out to be a great deal for MIFI.
We'll know more tomorrow and especially more on Nov. 5th, but I truly believe that Alex Mashinsky hurt MIFI's valuation more than helped with his comments/misses and investors might be happy with the change.
I wonder if this was the result of HC2's threat of selling their stake in MIFI. HC2 had to be unhappy with Alex Mashinsky falling short of several public statements in conferences and earnings calls. The old adage that it takes a long time to build trust and trust can be lost in an instant shows that Alex Mashinsky was over his head as the CEO of MIFI.
I believe Sue Swenson carries much more credibility with Wall Street and I see this as a positive going forward.
Also, let me add that the language from the recent 10-Q on legal matters as "not having a material effect on results or financial conditions" makes me question the overall impact of these perceived settlements.
Again, I hope I'm wrong, but either way, I believe MIFI is significantly undervalued.