nLIGHT, Inc. (LASR)

My father read about nLIGHT shortly after its IPO and wanted to invest. I didn't let him. Here’s why it pays to do your own research…

When nLIGHT was putting together its IPO, their investment bankers put together a draft registration statement on February 16, 2018. It stated on page 1: The overall laser market was approximately $10.3 billion in 2016 according to Strategies Unlimited. The fiber laser portion of the market addressing industrial, microfabrication, and aerospace and defense sectors was approximately $1.5 billion in 2016 and is expected to grow to approximately $2.1 billion by 2021.

They amended this registration statement on March 6, 2018 to read: The overall laser market was approximately $9.5 billion in 2015 according to Strategies Unlimited. The semiconductor and fiber laser portion of the market addressing industrial, microfabrication, and aerospace and defense sectors was approximately $2.3 billion in 2015 and is expected to grow to approximately $4.2 billion by 2020.

That’s a big difference in numbers and makes it sound like the fiber laser market is far more growth-oriented than it is. Take the investment bankers to court for fraud, however, and their defense would be: We were just using numbers we believed were more accurate.

Also, on page 128: Stifel, Raymond James, Needham, Canaccord, and DA Davidson owned a combined 6 million shares at the time of the IPO. There’s not a chance in heaven these companies are ever going to write anything other than a buy recommendation until they’ve captured a healthy profit for themselves. It’ll be interesting to see what happens now that the lock-up period has ended.

For those of you who don’t know where to find a company’s filings: do a Google search for SEC Edgar. This should take you to the Edgar page where you can enter the company’s ticker into “Fast Search.”

Most of these filings are incredibly long and boring but well worth looking at before investing. Also, anytime you see an analyst’s recommendation, do a background check to determine whether they have a financial interest in the company and whether their “analysis” might be skewed.

The SEC just fined Elon Musk $20 million for misleading investors.

In investor meetings just six months ago, nLIGHT went on the road presenting a picture of strong expected sales growth with significant margin improvement. This story was backed up by its investment bankers at Raymond James, Stifel, Canaccord, Needham, and D.A. Davidson whose Analysts all published buy recommendations with $40 target prices, 30% top line growth expectations as well as pie-in-the sky valuations for the shares. These reports all failed to note the price competition in the fiber laser market in China as well as a significant expected 2H18 decline in business at nLIGHT's primary diode customers. Both of these concerns were noted by just two other Analysts.

Since then, nLIGHT has guided to a slight improvement in 2H18 sales with flat margins . Last week, Longbow in a report stated "nLIGHT is pricing below IPGP to win deals where necessary, to overcome still unproven long-term reliability questions".

So how much should nLIGHT and its investment bankers and Analysts be fined by the SEC for misleading investors?

Once again Needham and Raymond James rush to the defense of banking client nLIGHT, by reiterating their buy recommendations. Can't be anymore obvious than that can we?

FYI, nLIGHT down 27% last year and 36% so far this year.

Hello Boys, we have the SEC on line 1.

Nlight (LASR)
10/23/2018
Number
of Shares 6,000,000
Initial
Share Price $16.00
Offer
Size $96,000,000
Priced 4/26/2018