Ken G, as a "value" investor, I watch this thread with great interest. I believe you have made some cogent points:
>>>What would the "unimaginable" effect be on the price of this Company stock if they really were to sell their products, as some have conceded to.<<<
One effect would be that the "market" would have the opportunity to price Copytele as an enterprise.
>>>Would it
really take that many unit sales to put this Company in the
black, even by a few cents?<<<
Say they make a penny a share, with a profit margin of 1% at $2500/unit, they need to sell 22,000 Magicoms during the quarter.
>>>With a downside reward for the bears of
less than $5, common sense would tell me that the upside risk
wouldn't be worth it for me.<<<
Here's where it gets interesting. The downside reward goes to zero, and with an unlimited float, you can short lots, and never pay taxes on the gains because you never have to close out the position. The resultant gains can be used to buy other investments. (It is important that the bulls push the price up from here because the penny stock status of this issue is annoying.) Your common sense and my common sense would part company at this point. To the present Copytele has marketed nothing. Their technology is dated, and appears irrelevent in 1997-1998. They have a demonstrated track record of non-performance. They do not have in-house engineering talent capable of matching current standards. They are unwilling to spend on R+D to catch up. Their third world strategy of engineering, manufacturing, and marketing will surely garner a third world result. Hence the upside risk appears to be quite limited. It is clear that the enterprise is headed to zero, the only question is When? Any value portfolio should contain a dollop of shorted COPY. It would be nice to be able to short this stuff at that 10-20 level on a spike. The concern is that with all the shorts having covered in anticipation of the spike, there will be no spike because no one will be around to buy. Hence the upside risk in my mind is opportunity cost. If it just sits there at current price, a short will be able to collect interest on the amount of stock he has shorted. But a big move, with the ultimate course to zero is the short investors dream. So from a value investor's point of view the key is sales. This company needs sales to allow the market to price it. Make a few cents, lose a few cents, it doesn't matter. Just price it. Let the technology be judged in the market place.
IMHO, if the bulls can mount a price drive, COPY becomes a fundamental short - a risk-free investment on the future. A sheet anchor to "irrational exuberance". It has a place in the outbox of all value investors.
Brad |
