Bill,
Started looking at this one this morning.
It doesn't appear to be particularly fraudulent, but clearly the expectations are unrealistic. Goes in the same category as many other "magic battery" or "new energy source" companies. They may very well have a product. May even be able to sell some of them. But probably not enough to justify the price. (Not the same category as VLNC, who have no product.)
Biggest shareholder is First Albany. Regional broker, but as far as I can tell, not a boiler-room stock hypester. Their latest quarterly report is pretty clear:
The aggregate market value of the Firm's [FAC] investment portfolio increased by $23 million from $26.1 million at December 31, 1998, to $49.1 million at March 31, 1999, which was driven substantially by an increase in the market value of Mechanical Technology Inc. (NASDAQ: MKTY). However, the Firm accounts for Mechanical Technology Inc. under the equity method of accounting as a result of the Firm owning in excess of 20% (approximately 34%) of the shares outstanding. Under the equity method of accounting, the Firm did not recognize the increase in market value of Mechanical Technology Inc.
I'd actually be surprised if MKTY wasn't on First Albany's restricted list. Not that this would prevent their brokers from "informally" recommending it. (Just as my ex-Smith Barney broker always seemed to want me to buy TRV...) Still, doesn't really smell of fraud.
Some interesting tidbits:
Latest 401K: During fiscal 1996, First Albany Companies, Inc. ("FAC") had purchased 909,091 shares of the Company's Common Stock from the New York State Superintendent of Insurance as the court-ordered liquidator of United Community Insurance Company ("UCIC"). In connection with this purchase, FAC also acquired certain rights to an obligation ("Term Loan") due from the same finance company ("FCCC") to whom the Company was obligated under the Note Payable ... On December 27, 1996, the Company and FAC entered into an agreement under which the Company issued to FAC 1.0 million shares of Common Stock in full satisfaction of the Note Payable.
July 23, 1998 -- Mechanical Technology, Inc. (OTC Electronic Bulletin Board: MKTY) announced today that it has filed with the Securities and Exchange Commission a registration statement for a rights offering to its stockholders, tentatively scheduled to begin in August 1998. Stockholders of record on August 12, 1998 will be issued non-transferable rights based on the number of shares of the Company's stock they own on the record date.
...and just again last month:
May 18, 1999 - Mechanical Technology, Inc. (Nasdaq: MKTY) announced today that it has filed with the Securities and Exchange Commission a registration statement for a rights offering to its stockholders, tentatively scheduled to begin in June 1999. Stockholders of record on June 4, 1999 will be issued non-transferable rights based on the number of shares of the Company's stock they own on the record date.
Let's see. Biggest shareholder bought their stake of shares due to a regulator-induced fire-sale, and manages to force dilution in order to pay off related debt. Two rights offerings in as many years. Every single insider trade has been a "sell" (http://biz.yahoo.com/t/m/mkty.html). Also have sold off several "non core" businesses over the past few years.
Doesn't necessarily make it a fraud, but it doesn't appear to be a healthy company.
Got to look more closely at this one.
mg |
