IMO, Alex Mashinsky was fired by Phil Falcone & Robert Pons at HC2. Remember, Alex was the one that convinced HC2 to originally invest $14.4M back in Sept. 2014 & then he sold them further to exercise their warrants for more money to acquired FW & own 25% of MIFI in the Feb/Mar time frame. Then, in late April/early May, Alex went to HC2 again & asked them to reach out to their Institutional buddies as well for the $120m in convertible notes at $5.00 a share when MIFI was still trading above $6.00 a share to acquire Digicore. This was also at a time when Alex was preaching $400m/$500m a year in revenue, $25m to $40m in EBITDA, customer wins, and high expectations for growth by the end of 2015. But soon after, Alex's world started to crash around him as Q2 was falling short and MIFI quickly began to drop down to $4.00 a share by the time the convertible note was announced on June 4th. This is why the convertible note had provisions of a $4.00 per share conversion as well as $5.00 per share based on certain future outcomes.
Alex Mashinsky, Richard Karp & Bruce Karsh were all behind the "Novatel Shareholders for Change" initiative back in April 2014 & although well intended, these guys tried to wheel & deal their way with other people's money, but never really understood how to build the business organically. So with 2 of the 5 board seats owned by HC2, Werner & Gerns having been accused by the "Novatel Shareholders of Change" for the demise of Novatel in their original letter, & Chairwoman Sue Swenson being told she would take over, I'm sure the decision to fire Alex wasn't a difficult vote.
Also, I believe a majority of the short interest today is owned by many of these same long investors as they came to learn all this non-public information & hedged themselves from significant loses on the books in 2015 & they are now waiting/hoping to cash in on both sides if MIFI can truly deliver. And, Sue knows this. They have to stop talking and deliver. Again, IMO
If you look at nothing else on the 8K filed by Novatel today regarding Financial Statements and Exhibits for the Digicore acquisition, take a look at the Statements of Profit (Loss) for the years ending 2013, 2014, & 2015.
2013 (59,350,000 R)
2014 7,795,000 R
2015 87,350,000 R
That's a fantastic improvement over the last three years as this translates to approx. $6 Million profit for the year 2015. Not Operating Profit, but bottom line Profit.
Also of note, Revenue for the last three years was:
2013 878,578,000 R
2014 891,943,000 R
2015 858,527,000 R
Remembering that Digicore cleaned up business with some bad customers which resulted in lower total revenue. The end result was higher margins, lower bad debt, and higher profits. So if Novatel/Digicore can grow revenues to 900,000,000 R to 1,000,000,000 R, Digicore's bottom line profit could grow to $10M to $15M very rapidly. More deals like the one announced this week with KLM and positive PR like the JMHC hijacking, MIFI longs will be happy. BUT.....MIFI needs to produce & officially report the results as speculation & projections are taking them no where fast.
August - Unlike you, I actually researched the topic and paid for a copy of the order on 11/4/15 which reads:
ORDER OF DISMISSAL
Judge: Hon. Cathy Ann Bencivengo
JURY TRIAL DEMANDED
[Doc. No. 311]
And the subsequent Vacated Order on 12/9/15.
I also encourage an alternate view point, but with some detail, facts, or a reference point which obviously you don't have in this case. Yet, you've made past claims of a potential cash settlement to Novatel from ZTE & Franklin at a level that could "buyout HC2 stake in MIFI or pay for the balance of the FW acquisition". You are clearly far more misleading and delusional on this board and if anyone has listened to you over the last year, they've lost A LOT of money on MIFI especially when you were pumping the company at $5 & $6 per share.
sejsscarter - You may be correct as I believe the overall strategy at MIFI is a great one for the future, but it probably will take some investment & financial backing to get there. I also noticed that Fleetmatics has dropped over 8% today on heavy volume. If a bigger company in IoT acquires MIFI for a similar share of the Global Telematics market, that would put some pressure on Fleetmatics for sure. And, if Fleetmatic's near $300M in sales, and $50M in earnings can warrant a valuation of $2B+, A $6 per share buyout could be feasible for both parties.
You're right that MIFI hasn't looked good, but Soros' increased investment to 2,375,866 shares goes against the picture your trying to paint that institutions and hedge funds know or believe MIFI drops from these levels. I don't really care about where MIFI has come from, I care about where's it's going.
And I believe that the owners of the $4 & $5 Dec call options are very interested in driving MIFI toward those levels before Dec. 18th.
August - I disagree with you on this one as the Form 4 specifically says "Non-Qualified Stock Option (right to buy)". If and when Sue actually exercises these options, they will revert to Common Stock under Table 1 of the Form 4. This is also why Sue Swenson still shows as owning only 69,708 shares per the Form 4 dated 6/9/2015.
My expectation is that the short interest of MIFI will have dropped with the 4M shares traded on these dates. The hope of a short squeeze on upward movement in MIFI's share price seems to have done the opposite as MIFI holders dumped stock at a known price point for Short covering by market makers. (Shorts had the leverage, held on for desperation, and won out) We won't know until the 1/15/16 & 1/30/16 Short Position Interest reports on 1/27 & 2/9, but this was the worst case scenario for MIFI longs.
Again, Sue started on with MIFI trading at $2,27 in late October yet we haven't heard much from her during this 50% + drop since her appointment. Very disappointing.
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.
OK, I answered my own question as I've found it on separate reports showing as part of the Russell 2000, but clearly being added to the Russell 2000 with the supposed understanding that all Index funds would have to add MIFI to their portfolio as part of the Russell 2000 hasn't brought positive exposure to MIFI as one would expect.
Just a side note, things are awfully quiet from MIFI. Very odd considering some of the recent CTrack articles and new product launches/customer wins that have been speculated for the 1st half of 2016. I'm holding hope but MIFI seems to be locked to this sub $2 range until they produce real results. Or, maybe selling the company is the strategic plan ahead and we won't know until they announce it.
august - Wow, this response from you was pleasantly surprising. We all know of your optimism for the future, but understanding the reality of the 2015 Q2 report thru Q4 guidance had it's misses and disappointments. I wish I had your optimism and I hope you're right that MIFI can come through with $100M+ rev guidance and $5M to $10M in EBITDA in Q2 as I have a lot of shares invested. But, we won't know until early May when they report Q1 so I'm unclear on what catalyst will start moving the needle to double digits sometime after the first of the year. Today's hostile takeover bid by CalAmp for LoJack is a little disappointing as well being that the offer is about 1X revenue. Pretty amazing when you consider Fleetmatics is trading around 7.5X revenue. Although, realistically LoJack is very slow growth and specific to the Anti-Theft/security segment of telematics so I still believe MIFI should garner something higher. (1.5X to 3X revenue minus debt) And, whether that is calculated based on today's Q4 guidance of $70M revenue or a future $100M per quarter in Q2016, MIFI should be trading much higher than $1.80 in my opinion.
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.
Admittedly, I would feel a little bit better about MIFI if Sue Swenson went on record to reiterate (or even better, revise guidance for Q4 higher). Now that Q4 is officially over, they must have a pretty good idea of where they will land within the guidance given. Or, now that they are focused on a subscriber base model and growth, take a look at how T-Mobile does it. They go to press with an early view of subscriber growth as soon as the company finishes the quarter and then they report official earnings weeks later. We know that MIFI started the quarter at with 510,000 total subscribers for SaaS offerings and services including approximately 155,000 fleet subscribers for DigiCore’s Ctrack SaaS solutions. It would be nice to hear that subscribers increase to 530,000 to 550,000 subs with approx. 165,000 Ctrack fleet subs. (Or something along those lines)
The way MIFI is trading, you'd think they are shrinking and headed to bankruptcy so it might be time to interject with little bits of positive future expectations.
We all understand that the DOW, NASDAQ, S&P 500, Shanghai Index & many other world markets are down with the worldwide economic slowdown, but MIFI is down 79% from its high on April 27th at $6.89, which none of those markets have lost close to 79%. This drop has far more to do with MIFI then it does with the World.
As for MIFI, the item you missed is the FW acquisition, as proven earlier this week, where MIFI management acquired FW without having the funds on hand to complete the purchase. They gambled on the stock price/dilution of shares to cover the cost when the deal was announced in March 2015. (One quarter ahead of the missed targets in Q2 which they should have known about) So, now MIFI has to generate enough cash to pay the interest of the $120M note ($6.6M/yr) over 5 yrs + the eventual $120M note and FW ($5.625M/yr) over 3 yrs including the $15M + $7.5M earnout to FW. (Thanks to FW renegotiating). That's over $12M annually for MIFI to payout + $120M in 2020 whereas they currently have ~$15 to $16M in cash when you factor in Digicore's cash on hand. This is the type of balance sheet that is being targeted by Shorts. (A Bad Balance Sheet)
So what's the answer: Can MIFI cut enough expenses to cover some of these costs? Closing Richardson, TX facility is a good start. Can MIFI grow revenue & increase gross margins to substantially grow Adj. EBITDA? Q4 results and Q1 guidance will give us our first indication with Digicore being included. Can MIFI generate positive EPS and Cash Flow to build back trust with investors and convince the shorts they need to begin covering their position? These are a few of many questions and uncertainties with MIFI and Wall Street doesn't like uncertainties. Could MIFI sell their way through this? Sure they could. Could MIFI sell the company to someone looking for revenue growth in IoT/Telematics? Absolutely! But, unlike Alex M, many aren't looking to gamble on MIFI or its share price with what they know toda
MIFI was trading at its highs in Q2 2015 ($6.89 on April 27th) so the timing and detail of this information isn't really viable with MIFI trading today at $1.84. Institutional Shares stand at 12.4M shares as of the end of Q3. (Falling by close to 1M shares owned)
Good point - Reading this from the last earnings release, I'm going to assume that MIFI has been accounting for the interest payments quarterly. Although, the FW cash payouts will need to be added and amortized over the next 3 years.
"In the third quarter of 2015, we excluded share based compensation expense of $1.3 million, restructuring charges of $1 million related to our cost containment activities and $4.1 million related to M&A activities. We also excluded a $10.5 million charge for a non-cash change in the acquisition related Escrow account for the purchase of DigiCore and a $2.1 million non-cash charge for amortization of the debt discount and debt issuance costs associated with the company’s convertible notes."
Good point on cash as I'm reading 76,259,000 R in cash and cash equivalents which represents approx. $5mm in 2015. (A 400% increase from 2014)
Growing revenue is important for MIFI's future, but turning in positive earnings results will be what increases the share price. Free Cash Flow, Positive EPS, and Top Line Revenue Growth. If MIFI can show this in the short term, they will be rewarded with a market cap similar to Fleetmatics.
Sentiment: Strong Buy
Unless I'm reading it wrong, HC2 caused this. They gave 7.76M shares of MIFI to Continental Insurance Group in lieu of the $7M in cash for the transaction. They priced MIFI at .90 cents.
"The purchase price of approximately $15 million will consist of approximately $7 million in cash, $2 million in aggregate principal amount of the Company's 11.000% Senior Secured Notes due 2019 and approximately one million shares of common stock of the Company, valued at approximately $6 million."
Like lollipop, I'm long MIFI, but tend to agree with sejsscarter that I don't expect the MIFI business to produce at levels expressed from the prior management team. I also hope, like Cobb Stadler asked on the last conference call, that the MIFI board can received a decent offer for the MIFI business and move 100% to IoT.
I appreciate your point, but for those that believe MIFI should be trading closer to $6 per share in the short term based on projected valuations, why would the board approve this for Sue Swenson? At $6 per share, on paper Sue would be looking at $8M in pay which I would deem excessive for a company like Novatel. And, being that this was board approved, were they not very confident in MIFI getting back to the April highs?
I like the idea of buying back shares, but only if MIFI knew they were going to be cash flow positive starting in Q1.