Networm, no I'm not short. My history with this stock goes like this.
I first found out about the stock when Red Chip Review, a reputable small-cap newsletter put out a speculative buy on the stock based on VLNC's claims they were going to begin mass production in early 1998. I first bought in the fall of 97 at around $10.
Shortly after I bought, the stock tanked from $10 to less than $5. We later found out that the CEO left, and much later (August of '98), Lev Dawson (the former and current CEO) finally acknowledged they had to do a complete redesign of their assembly line (he got around to acknowledging this long after the fact).
While the stock was tanking, I noticed several posters on this thread (primarily FMK who has since disappeared) and including mooter, claimed they regularly spoke to management and management was assuring them production was on track for first quarter '98. Since that time, any comment attributed on these threads to management has always indicated that production was imminent. Absurd predictions of billions of dollars of revenue were made by the posters who claimed to regularly speak to management.
As a member of SI since 1996, I've seen a lot of hype on different threads, but this thread is the all-time winner, IMO. I post here to counter act the hype. And I don't have an axe to grind from losing money on the stock. After the stock tanked, I averaged down and sold during several pre-conference call spikes in 1998 and escaped intact. In the late summer of 1998 I bought when insiders were buying in the low $3s, and when VLNC isssued a PR stating they were "on the cusp" of commercial production. I sold a year ago during the last big run up for more than a 100% profit, so I've made money on the stock. I've done some brief trades since then.
I follow the company because I think it has potential, but I am also wary of anything they say that is not reflected in an SEC filing. If you listen to the last conference call as others have suggested, you will hear an analyst asking about the difference between the rosy picture that is always portrayed during the conference calls and the negative picture that is reflected in the SEC filings.
Last November, I sold because of what they did NOT say during a conference call, not because of what they did say. When Dawson was questioned about whether they had sent out production samples to OEM's, he said they could not answer that question. He also acted ignorant of the (unfavorable) terms of their floorless financing with Castle Creek. At the time, their SEC filings said they had not sent out production samples to OEMs and had no product for sale. When I pointed these facts out on this thread, I was accused of looking in rearview mirrors and was assured that major contracts were imminent. It was claimed the SEC filing statements regarding the lack of production samples meant samples had not been sent from the 3rd or 4th assembly line, but that the first two lines at least were ready to go and VLNC would soon be earning hundreds of millions of revenue. FMK (who is still revered on this thread) claimed that 6 VLNC production lines were capable of producing $3.5 billion of revenue. (During the last conference call, Dawson said they the plan is to get to $250 million of production capacity during 2001).
In short, this thread has a long history of over-hyping this stock, with much of this hype coming from those who claim to speak regularly to management. I kept a list of a sample of quarterly posts from FMK. These are typical of the hype.
Message 9132964
All of the above is the past. The question is where do we stand now? As others have suggested, I also suggest you listen to the last conference call. I would also strongly suggest you read the statements in the most recent SEC filings regarding VLNC's production capabilities.
I have always taken the SEC filings to mean exactly what they say. My more bullish friends have sometimes tried to rewrite them. So a year ago, when the filings said they had not yet sent production samples to OEMs and they had no product for sale, I took these to mean exactly that. My more bullish friends claimed those statements were referring to the 3rd or 4th assembly lines, and production was imminent. Now the filings say they have limited amounts of product for sale and that further development is required before they can produce in commercial volumes at acceptable yields. As always, I take these statements to mean exactly what they say.
Therefore, my view on the $2 million purchase order is that somebody is willing to take the "limited amount of product" they can make, but that they are still working on the problem of mass production at acceptable yields. ULBI also had a small contract for their product a few years ago, but it did not mean they had solved the problem of mass production. My view is there are still technological hurdles to overcome, as well as financial hurdles.
Additional significant purchase orders and/or substantial financing at reasonable terms will be clear evidence my view is too conservative. I'm waiting to see that evidence.
Finally, I think the price fluctuations in this stock are manipulated by the big boys who are playing with it. VLNC did a $15 million financing of floorless convertible preferred stock with Castle Creek in the summer of 1998. Floorless financing is source of financing of last resort, because it has the potential for massive dilution. Floorless financing allows the holder of the preferred shares to profit no matter what happens to the stock price. Castle Creek's preferred shares convert to common stock at a ceiling of around $6, and has no floor. Therefore, they are encouraged to short the stock at prices above $6, and to convert their preferred shares into common stock at as low of a price as possible. I believe last year's spike to $11 was engineered to give Castle Creek a profitable price to short (the spike certainly had nothing to do with the fundamentals). They have since converted many of their preferred shares at prices of about $4.50 to $4.60, earning themselves a substantial profit from the decline in the stock price. The recent rally followed massive short covering, most likely by Castle Creek, and possibly was engineered by Castle Creek, as I think they did last year. (And oh, by the way, when I pointed out a year ago that Castle Creek's interests might not be aligned with the shareholders, I was assured by our more bullish friends that "after months of due dilligence, Castle Creek is bullish on VLNC." Now Castle Creek is not held in such high esteem by this thread.)
So that's my history with this stock. I don't speak to management, but I do listen to conference calls and read the filings. Yet without any inside knowledge, my perceptions of the facts have proven to be far more correct over the years than all the predictions attributed to company management.
After reading all this, you are probably sorry you asked:-) |
