<Iomegans got screwed by Iomega>
Frank, that's one of the more interesting comments I've read in this thread. It's not the first time management has done it too, IMHO. Then again, given the company's financial position, management really had little choice. They were on the verge of going "supernova." As a foreign corporate bond analyst in Japan, my attentions were first drawn to IOMG when it issued its CB in March. The conversion premium on the bond was priced so low it was a no-brainer investment. Just as with the secondary, they gave stock away at the expense of existing shareholders. This is on top of the bungled initial secondary attempt last December!
Though without doubt, many a little guy has gotten rich off this stock (and its obvious many still like to think of it as their exclusive domain), it's pretty clear that Iomega's management knows who butters their bread: the Institutionals. I find it pretty amusing how people can manage to put a favorable spin on something that should have had them gone ballistic.
Until IOMG can finance its growth internally, it will continue to tap its equity holders for working capital. With continued dilution, it will become increasingly difficult for them to meet EPS estimates and shareholders will have to sweat-out each quarter. At the current lofty valuation, failure to impress the street will lead to a steep price drop without a doubt. And since I know my equity analyst friends don't like to be made fools of quarter after quarter, every time IOMG beats estimates, the EPS bar will be raised a little higher. Also, I suspect the deals IOMG struck with Fuji and Epson to get the Zip off the ground won't allow for the revenue pass-through that many anticipate. I have no factual basis for this last comment other than the way I see the Zip being marketed in Japan. So, it's not a question of "if", but "when" this failure will happen.
The next 2 quarters should be the pivotal turning point. I do have a pretty strong degree of confidence that IOMGs will become self-sustaining as growth constraints begin to work their magic. The other side of the internal finacing sword is that once this occurs, IOMG may start to trend towards the mean valuation for its group. No need to say what that could mean for the stock price.
As to why the stock has fallen from its May high, I can only guess momentum players want off this E-ticket ride along with seasonal factors that usually affect all techs.
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