No, I have not read the patents.
Even if I did, I do not have the intellectual property expertise to make an independent judgement.
The term "too long this stock" (The phrase is not originally from me) doesn't refer to profits or necessarily to amount of funds in a stock. It means that the position has crossed over from an objective look at risk/reward and into the realm of emotion, where hope is the dominant driver of decisions. Someone can also be "too short this stock," when their decisions are based on hoping a stock will decline, instead of deciding that the odds favor such a play.
Receivables are often a key measure for short sellers as it can be a leading indicator that a company's business is declining. Often they "stuff" the channel to prop up the current quarter's revenue, and later must take a charge as they must take returned merchandise. Given SRCM's business, I doubt this measure really applies, hence it might very well be something they discuss. But, it is worth at least looking at, as receivables were such an unusually large percentage of revenues in Q1. It is all part of due diligence and I would not have asked you if I did not think you were a knowledgeable investor in the company.
Most bad companies will hide negative news in their government filings. In SRCM's case these filings were the first time it was revealed that the Colorado Springs rollout of the Interactive Channel had been canceled, and that their CFO had departed.
I commend you on your excellent purchase of SRCM at $4.75, you have certainly made a much higher return on the stock than I have at this point.
But, here is an area where you can help us all. I was not aware of the conversion provision for the warrant holders. I must admit to wondering why the company seemed to be trying to pump the stock price with all these conference calls. I was also surprised that Prudential kept a buy on a stock that was well above their target price, and had come in low on their revenue estimate. That may explain it.
So, would you please post all you know about the warrant conversion provision. Especially the timing and mechanics of the conversion. And, does this provision expire after a certain amount of time?
Thanks in Advance,
Archer |
