DocStone, you posted "Don't you find it interesting that not a single response to me has been to offer substantive
facts or analyses for the short case against ZITL? "
Now you got Warren's attention ... here's my case for going short ... will wait for your reply, point by point:
1. Zitel has declining revenues, earnings ... a pathetic balance sheet ... and without Matridigm, would be a $5 stock (before split)
2. With Matridigm, Zitel is worth $42 per share more or on 7.8 million shares outstanding, is worth $328 million more ... Now, this represents a 33% equity in Matridigm, which would imply a $993 million or close to $1 billion valuation
3. As we speak, Matridigm has 0 revenues ... 0 earnings ... and based on the employment ads that you've diligently researched, is STILL IN THE PROCESS of creating the infrastructure that would support its business
4. Zitel has 10 million shares authorized ... this provides further dilution on Zitel's equity position on Matridigm ...
5. Zitel originally had a 37% stake in Matridigm ... then 35% and now 33% ... this is proof that further dilution on Zitel's equity position in Matridigm is very likely ...
6. Zitel 'allowed' its stake to diminish by at least 3%, which, in the light of Matridigm's current valuation represent a $30 million giveaway ... this for a company that barely makes $30 million in revenues ...
7. Zitel 'allowed' this diminished stake to be valued only at 1 to 2 million ... which is just fair, considering Zitel only paid $3.5 million for its original stake ... somewhere beneath all these transactions, is the FAIR VALUE of Matridigm ...
8. Matridigm's solution is not the only solution available
9. Matridigm has at most 4 years to perform ... then it has to generate at least $1 billion in earnings during this period to break even with its current valuation ... at an average 15% operating profit, this translates to $6.67 billion 4-year revenue or at least $1.6 billion average per year ...
10. In 4 years time, Matridigm's technology is useless, the company has 0 value
11. Matridigm may come up with something else before it becomes obsolete ... yet they couldn't even come up with beta test results in time
12. Matridigm's earnings, if there's any, will likely peak after 2 years ... the street gives a forward PE of 8 for flat earnings ... on this assumption, what kind of PE should be given for its current fiscal year ... 150, 100, 50, or more realistically 25 ...
13. Matridigm's technology is not cutting edge ... if it is, why couldn't they publish any white papers ... I can give a serious discussion of their technology if it is warranted ...
14. If Matridigm was a biotech company who's cure will only be effective for 4 years, I'm sure a doctor of your stature will not consider it a wise investment ...
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