Short Interest as of 11/13/15 was 6,013,747. MIFI closed at $1.88 on 11/13.
An increase of 52,606 shares short and the first increase since 9/30/15.
Here is my latest replied comment to the Insider Monkey article posted earlier today:
"I appreciate that you have updated your error related to DG Capital Management, but I question your motives. No mention of Putnam Investment's new position of 782,600 shares (the largest single shares changed in Q3) or the fact that the largest Institutional Holder, Soros Fund Management, added 309,200 shares to increase their position to 2,375,866 shares.
To avoid being completely bias, I will mention that Novatel did see an overall reduction of ~600K shares held by Institutions in Q3, but of the 17 Institutions that "Sold Out" all but two sold less than 75K. (Smaller Funds)
The real story is about the 6 funds that added 200K or more of MIFI in Q3 as I found your prior article significantly misleading."
If you look at the post earlier today, you will see that they changed the title as it was falsely reported that a Fund called DG Capital Management sold $13.5M worth of MIFI stock in Q3. You'll notice in the comment section, I asked for clarification and received no response, but instead they changed the post to "What Hedge Funds Think of Novatel Wireless Inc (MIFI)?"
This should be investigated by the SEC.
The Top 5 Institutional Holders have reported their shares held as of 9/30/15 when MIFI was trading at $2.21.
Only Soros Fund Management bought additional shares by adding 309,200 shares to their portfolio as the largest single Institutional Fund owner of MIFI. Although, you could argue that Blackrock is the largest Institutional holder as they own MIFI in multiple funds totaling 2,456,577 shares.
Owner Name Date Shared Held Change (Shares)
SOROS FUND MANAGEMENT LLC 09/30/2015 2,375,866 309,200
BLACKROCK INSTITUTIONAL TRUST 09/30/2015 1,326,164 (264,704)
RENAISSANCE TECHNOLOGIES LLC 09/30/2015 1,170,100 (478,312)
DIMENSIONAL FUND ADVISORS LP 09/30/2015 988,231 (279,107)
BLACKROCK FUND ADVISORS 09/30/2015 981,718 (11,123)
The Largest new position was Putnam Investments with 782,660 shares.
The Largest sold out position was Gilder Gagnon Howe with (314,975) shares.
With almost 10,000 Dec Call Option contracts between $3 & $6, (the largest amounts at $4 & $5) the next 4 1/2 weeks should be telling for MIFI as Option Expiration approaches on Dec. 18th.
This is the 2nd report in a row where Short Interest has gone lower albeit by only 213,769 shares.
Short Interest has decreased by a total of 272,514 shrs since the high reported on 9/30 of 6,233,655 shares.
As of 10/30, MIFI was trading at $2.15 as compared to today's closing price of $2.09.
Digicore reported 407,827,000 RAND for the 6 months ended in June 2015 which was down from 450,700,000 for the 6 months ending last December 2014. The drop was explained that they stopped selling to customers that weren't paying them. We most likely won't hear if Digicore's revenue grew or dropped in Q3 so we'll get our first view with guidance in Q4.
For simple math and optimism, let's assume the projection for Q4 grows back to 225M RAND (Or comparable to the 450M R over 6 months they reported in Dec), my concern is that the USD keeps getting stronger and the RAND keeps dropping as the exchange rate today is .0717290. At 225M Rand * .0717290 exchange rate, that equates $16.1M USD. (The exchange rate on the date of the announced acquisition was .08168)
Mobile Computing produced $35M in Q2, $44.6M in Q1, and $47M in Q4. Not a great trend and I expect Q3 numbers to be at or near the $35M number again. So Q4 guidance will depend on how comfortable MIFI is with Mobile Computing as I expect IoT Revenue to be ~$40M in Q4. ($20M to $25M from legacy MIFI IoT & Feeney + $15M to $20M from Digicore)
If Mobile Computing is ~$35M and IoT is ~$40M, you have guidance of $75M.
Listening to Phil Falcone's HC2 earning call and seeing today's announcement of HC2 raising $50M in capital through a public stock offering, as MIFI's largest stakeholder & holding two board seats, it poses the question: Is HC2 a positive or negative for MIFI?
Phil Falcone has made enemies over the years, especially at Goldman Sachs, and we all know about his past issues with the SEC.
First drop in Short Interest since April 30th report.
10/26/15 $2.34 closing price
10/15/15 6,174,910 $2.32 closing price (58,745 lower)
9/30/15 6,233,655 $2.21 closing price
Looking up via Pace Monitor, it seems like this patent claim has been dismissed by the courts.
Friday, October 02, 2015
308 ORDER Approving Joint Motion for Dismissal with Prejudice as to Plaintiffs Novatel Wireless, Inc. and Novatel Wireless Solutions, Inc.'s Claims Against Defendant Franklin Wireless Corp. (Doc. No.307 ). Signed by Judge Cathy Ann Bencivengo on 10/2/2015. (cxl)
Before anyone asks how I came up with the $16M to $20M for Digicore in Q4. Digicore had total revenue of 450.7M RAND through Dec. 2014 and just reported annual revenue through June 2015 of 858.5M RAND. Simple math shows that revenue dropped to 407.8M RAND from Jan 2015/Jun 2015 as Digicore cleaned out some bad debt customers. 407.8M RAND at today's USD exchange rate of .0743 equates to more than $30M USD over 6 months. Being that the deal closed at the beginning of October, the July to Sept results may or may not be shared publicly, but if we assume 5% growth QoQ for Q3 & Q4, I'm projecting a minimum of $16M from Digicore in my analysis even if the dollar continues to increase.
Below is the revenue breakdown over the last 4 quarters at MIFI. Q3 2015 projections are $52M to $60M in total revenue which has favorable comps from last year & will most likely be headlined by MIFI management. As much as M2M/IoT is the focus and the future driver of MIFI, it's the mobile computing business that continues to dictate MIFI's quarterly results. Mobile Computing was blamed for the Q2 miss. MIFI management has claimed that the M2M/IoT rev. will be $25M in Q4 (not including Digicore). Due to a higher dollar, the Digicore revenue should add another $16M to $20M for a total of $41M to $45M in M2M/IoT rev. So again, the Mobile Computing business will determine if MIFI can deliver between $76M to $90M in Q4 total revenue. And to deliver on MIFI Managements comments, Q1 M2M/IoT rev. guidance will need to come in at $50M to achieve their claim of a $200M run rate heading into 2016.
Q2 2015 $54.8M total rev. $35M mobile computing rev. $19.8M M2M/IoT rev.
Q1 2015 $53.5M total rev. $44.6M MC rev. $8.9M M2M/IoT rev.
Q4 2014 $55.4M total rev. $47M MC rev. $8.4M M2M/IoT rev.
Q3 2014 $44.3M total rev. $34.8M MC rev. $9.5M M2M/IoT rev.
IOT/M2M has been heavily marketed and promoted by the likes of Cisco, Ericsson, Intel, and many of the largest communications companies in the world. The question is whether or not MIFI has the expertise or differentiation in the market place to compete with these Fortune 1000 organizations or have they lost their head start? If you read a headline today about Ericsson partnering with Intel to build a secure Internet of Things (IoT) connectivity service that supports more effective wine production, you will see that Intel is providing the LTE Modems. And Ericsson DCP is a cloud-based IoT/machine-to-machine (M2M) platform that handles connectivity management, subscription management and OSS/BSS, enabling automation of business processes between operators and enterprises.
This sounds very familiar to MIFI's End to End offering of hardware/software/services through their acquisitions of Feeney & Digicore. Can MIFI compete with the likes of Ericsson, Intel & Cisco? Do they need too or can they grow to $500M to $1B in revenue as a niche player?
The IOT market is clearly growing and MIFI's biggest challenge will be competing with the big boys who are counting on the IOT market for growth as well.
Today's closing price of $2.47.
9/30/15 - 6,233,655 Shares short, MIFI closed at $2.21
9/15/15 - 6,060,675 Shares short, MIFI closed at $2.36
With average daily share volume of 272K, 23 days to cover.
Analyst estimate for MIFI's 2016 revenue increased to $336.72M from $303M. Still well short of MIFI's management claim for 2016 revenue. Current Market Cap of $131M is .4X 2016 revenue estimate of $336.72M. At 1X 2016 revenue estimate of $336.72M, MIFI would be trading at $6.25 per share.
"It's Time To Generously Reward MIFI As An IoT Market Leader"
Full disclosure that the author of the article is Long on MIFI.
With today's move, MIFI has broken out above the 50 DMA with little resistance to $3 in the short term before heading to the 200 DMA of $4.
With 6M+ shares short (12% of total shares & 19% of the float), MIFI short covering could accelerate the share price based on a low number of sellers and low volume being traded. Expect a test of the 52 week high heading into and out of earnings when announced during the 1st week of November.
Sentiment: Strong Buy
The results, however, include adjustments that management does not expect to be reoccurring in the future. Other income mainly consists of R35,4 million profit on the sale of TPL Trakker Limited shares and a R20 million fair value gain on the revaluation of the remaining TPL Trakker Limited shares.
With the continued focus to reduce inventory balances, decrease stock days, decrease receivable days and with the proceeds from the sale of the TPL Trakker Limited shares, the group continued to generate positive cash flows ending the year on a cash-positive position of R11,4 million after paying back R30,9 million in debt and a further R9,6 million worth of overdraft facilities. This demonstrates the significant improvement in collections and the effect of controls and processes implemented when compared to the negative cash position of R30,4 million on the prior year.
Revenue dropped 4% from year ago (Yesterday's headline)
Cost of Sales dropped 18% from year ago
Gross Profit grew 5% from year ago
EBITDA grew 73% from year ago
Operating Profit grew 469% from year ago
Profit after tax grew 1,028% from year ago
Earnings per share grew 1,144% from year ago
2015’s positive performance attracted the interest of Novatel Wireless Inc. (Novatel), a company listed on the NASDAQ in the United States of America, which has subsequently resulted in Novatel’s offer to acquire all of the ordinary shares in DigiCore, other than the ordinary shares held by any subsidiaries of DigiCore and the ordinary shares held by the DigiCore Holdings Limited Share Trust for an amount of R4,40 per share, which offer became unconditional on Tuesday, 15 September 2015 to be executed on Monday, 5 October 2015.
Based on the information below published by Digicore & MIFI, we're still waiting on a SENS and Press Release...... (SENS is the equivalent of a SEC filing in the US) On or about Sept 30th & Oct 1st.
The following dates assume that the Scheme becomes unconditional and that neither court
approvals nor the review of the Scheme is required and will be confirmed in the finalisation
announcement if the Scheme becomes unconditional:
Scheme Finalisation Date expected to be on or about Wednesday, 30 September
Scheme Finalisation Date announcement expected to be released on SENS on or about Wednesday, 30 September
Scheme Finalisation Date announcement expected to be published in the South African
press on or about Thursday, 1 October
Scheme LDT expected to be on or about Friday, 9 October
Trading in DigiCore Shares on the JSE suspended from commencement of trade on or about Monday, 12 October
Scheme Consideration Record Date to be recorded in the Register in order to receive the Scheme
Consideration expected to be on or about Friday, 16 October
Scheme Implementation Date expected to be on or about Monday, 19 October
Scheme Consideration payment expected to take place on or about Monday, 19 October
Termination of listing of DigiCore Shares from the JSE at commencement of trade on or about Tuesday, 20 October
Digicore Holdings says FY revenue down 4 pct
FY profit before tax for group increased to R86,7 million compared to R8,6 million in prior period
Gross profit margin increased from 63,5% to 69%
(Revenue coming down was expected as Digicore stopped selling to credit risk and low margin customers. Profit shot up 10X higher based on the sale of stock holdings in Pakistan. Focus on profit margins is paying off at 69% GPM. All in all, a nice report and it's all about the revenue growth potential which is the reason for the Novatel buyout.