mark, the fact that you have all your eggs in this one basket is risky, but that is one personal opinion. Actually, I do not follow more than about 20 stocks, and MVIS was brought to my attention by one of the people there. My call at the time (when the stock was at $16) that it will be brought to above $24/share before the end of the second half (and I was quite wrong on the timing), was based on the existence of the warrants, and the fact that Rutkovski is a "graduate" of the street (so I was told by a friend that has met him) and thus knows his way around. The way he has financed the losses so far indicated to me that indeed he is a capable financing person, thus my conclusion that he will manage to get the price where it need to be. Now that this was accomplished, he is not going to "waste" good ammunition to keep the cap at around $200 MM to $250 MM (assuming conversion and, I believe, two additional convertible debt instruments, also convertible in the low teens). Not against a background in which some of the warrants will result in stock flooding the market. If he is as experienced as I believe he is, he knows that after such conversions, more than 75% of the time, a period of digestion of the new float occurs. Furthermore, typical acquirers of convertible debt, when faced with the doubling of their investment, will often freeze such a position by selling short against the box, in this manner they keep getting their interest payment while having withdrawn all their money from being "at risk". The combination of the warrants and the two debt instrument, independently of how great or not MVIS future might be, will, IMHO, cause a decline in the stock, simply from imbalances between sellers (including shorting) and buyers. Thus my conclusions that for a short three to six months, (or shorter) MVIS might indeed be a classical short.
I doubt that $30 MM or so in government contracts (which are rarely profitable in such size) will support a capitalization of $250 MM over the next six months. Of course, I have been wrong before, and I may be wrong again (and so might you), and thus I diversify so that a single error would not sink me.
Mind you, if indeed they are to receive these contracts, their working capital will have to increase by about $10 MM just for these $30 MM in contracts, and thus the urgency of bringing more money in to support that sales growth is even more obvious.
You claim that your model put on MVIS a future capitalization of $2 to $3 billion. Could you elaborate what is that based on?
Zeev |
