>> IOM's main problem last year was their issue of stock at $35. <<
DS -- Thanks for another excellent post. I would just like to expand a bit on the background behind this one comment of yours.
Just getting a secondary out at any price was a major obstacle for IOMG. One of the major bear arguments the winter before was that IOMG would never be able to raise the necessary capital for expansion, and would therefore go the way of a one-trick-pony that couldn't pull its own cart.
The overwhelming demand for Zips when they were first introduced had bears howling that IOMG was in too shakey of a financial situation to handle the production expansion that would be required to sustain the growth rate. There were also a lot of arguments at the time about the limited market for removeables in general --- the 'net was just a techie toy and would never become a mainstay of the masses; hardly anyone needed a 100 meg disk; if a small company from Roy could come up with the Zip, then a really serious player would just come out with something better to crush it (ahh, the long list of much anticipated Zip Killers); etc.
Even after IOMG managed to get the secondary placed and begin the massive ramp up, the arguments of crushing debt, negative cash flow, and Zip-killers were still used by several folks still posting here to deride the company and longs.
IOMG tried to get a secondary out in January of 96, but an overwhelming bear attack cut the price in half for no better reason than that they were able to do so. Kill the company and the shorts win big. There were tons of posts about that issue over an extended period of time. IOMG had to withdraw and regroup. It was at this time that I believe that KE came to fully realize that they were facing much more than just technical and marketing problems -- a segment of the equities market itself had a vested interest in destroying the company at birth. No secondary, no expanded ramp, no need to cover your short positions.
imho, That's when KE started playing his cards a lot closer to the vest and downplaying the upside during conference calls. He also started talking more about building the long term foundation and letting the short term price go its own way. How could he do otherwise, the price for the next several Q's was clearly in the hands of those with a different agenda. Getting IOMG out of the hands of the NAZ MM's and on to the NYSE was about as far as he was willing to go.
The overall strength of the product and business/marketing plan was so strong, however, that IOMG was able to rebound from that massive bear attack. The resulting short squeeze catapulted the price way ahead of itself, AND earned IOMG the unmitigated wrath of some very powerful players who had to cover huge losses.
This is the context then, that the observations in your post about what the shorts were able to do after the secondary come into play, and the rest . . . is IOMG/IOM history. |
