[ QSound Labs (QSNDF) and Spatializer (SPAZ): EDITED ]
John,
I'm going to wait at least until the lawsuit with SPAZ is cleared up.
You brought up an interesting point above that led me to look into SPAZ a bit closer: I myself have treated QSound's appeal as a dead issue, particularly since lawyers I have contacted (though not specializing in patent litigation) have told me that only in special circumstances would appeals actually lead to an overturning of a prior decision.
If SPAZ does win it, I believe they might make a move to ask for compensation for the costs of litigation and so forth, which I assume QSound has sufficiently set aside reserves for when calculating estimated litigation costs.
What can I do as a QSNDF shareholder? Why, I buy SPAZ as a hedge, and that's exactly what I did a few days ago at $1.00 after I noticed the extremely low risk/downside characteristics for the issue. It appears that the possibility of SPAZ losing on the appeal has been priced into the issue, and if the same reasoning is applied for QSNDF's case, you can see that there is a case of "double counting" going on here.
Scenario #1:
If somebody wins (and somebody has to), then one of the two issues that priced in (on the stock price) the anticipated loss on the appeal will stay down, while the other will move up. If both stocks were priced such that both expected to lose, then somebody who is holding both is going to win with one or the other.
Scenario #2:
SPAZ wins: SPAZ goes up and through its downtrend line. QSNDF gets sued for further damages, and QSNDF goes down assuming they insufficiently set aside enough reserves for this development. Downside risk for QSNDF: $2.50, my entry point. I win.
Scenario #3:
QSNDF wins: QSNDF goes up and breaks out of its short term downtrend. SPAZ, already at very strong support at $1.00 and already pricing the appeal into its price, goes back down to $1.00, my entry point. I win again.
Regardless of the appeal, SPAZ in itself actually deserves some attention as a potential trade/speculation:
While the FA is in the range of "not-super-attractive-to-decent," It will survive in the near term to let me pull off my trade:
messages.yahoo.com.
And I guess I better include this:
biz.yahoo.com
Short interest also shrank, so it looks like maybe even the shorters don't think there's much downside risk anymore:
Date...#Shrt...AvgVol..Ratio
----------------------------
04/98..8,084...103,103.0.08
03/98..37,120..69,420..0.53
02/98..4,746...32,084..0.15
01/98..100.....39,572..0.00
Strong support exists at $1.00; the price has based at this level for over 2 weeks now, and with the downtrend line approaching, any upward move (like today's) will cause a breakout on the charts. And it did just that with today's close. The target is a little over $1.60 if the chart behaves as anticipated.
Some other key indicators look favorable for the near term, and so it looks like it's not a bad idea to both speculate on SPAZ and to use it as a hedge.
Oh yes, there's a Bollinger Squeeze on SPAZ that might make the near term price breakout interesting. Plus, my new indicator just gave a buy signal as well. More chances for real-time testing, it seems.
Regards,
Rainier |
