ABTE is Asensio's latest target.
I used to follow the stock when they did a discounted convert Dec.
96, but as a short it wasn't very successful, since the convertibles
didn't flip right away, and the company's operations improved
significantly. I paste below Asensio's report followed by an excerpt
from the 10Q describing the discounted convertibles, which finished
flipping this spring.
Asensio, as usual, gives you a vitriolic report with a certain spin,
and certain statements that are either exaggerations or outright
false.
Exaggeration:
Asensio's report has a subtitle that says ABTE has a 'dire financial
condition'. He exaggerates things, as ABTE has positive cash
flow from operations. It doesn't have much cash, but that shouldn't
matter too much with the positive cash flow and the credit line.
False statement:
Asensio claims the discounted convertible benefited insiders. In
fact, the convertibles were sold to Credit Suisse First Boston and to
Silverton International Limited, which is a Bermuda offshore fund.
Arithmetic error:
Asensio got his numbers wrong re. the private placement. He said
it netted $630 k, when it actually raised $3 M according to the S-3
filed in Feb. 97.
The main point of his news release regards a recent acquisition, and I have no info to share on that, since it occured after I quit following the stock.
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Asensio & Co. Inc. Strong Sell & Short Sell Recommendation on Shares of Able Telcom Holding Corp. Common Stock Citing the Company's Gross Overvaluation
Able's Dire Financial Condition Begins to Unfold
NEW YORK, July 16 /PRNewswire/ -- Asensio & Company, Inc. issued the following statement today:
Investors may be buying Able Telcom Holding Corp. (Nasdaq: ABTE) shares believing that its recently acquired NIFS Network Technologies, Inc. subsidiary ("NT") possesses some value significantly in excess of Able's purchase cost. There is no reasonable or factual basis to support this belief. In fact, the opposite is true. NT owns unprofitable operations in a capital intensive, low margin, highly competitive construction contract business. NT possesses no valuable proprietary product or technology. After failing to find a more suitable buyer for NT, WorldCom Inc. (Nasdaq: WCOM) agreed to sell NT to Able for just $10 million in excess of its book value. Despite the low purchase price, Able failed to obtain the funds necessary for closing. Finally, Able bought NT for a small cash payment of approximately 15% of the purchase price and a note for the balance. WorldCom's willingness to risk handing over control of NT's assets and customers despite Able's lack of funding clearly demonstrates the seller's strong interest in removing NT's losses and obligations from its books and the lack of interested buyers even at the low offering price. The NT acquisition added over $200 million to Able's already inflated market value. This equals over twice the purchase price. If anything, NT has lost value since Able's purchase, due to the resignations of key NT management and Able's reputation. We see no possible outcome that can yield positive results for Able's stockholders. As a result, we believe Able shares will soon trade well below $3 per share.
Able began its stock promotion operations with a public sale of 935,410 units consisting of shares and warrants for $382,625 ($0.41 per share) through Amerimutual Corporation a defunct, fraudulent Boca Raton underwriter. Able management's most successful stock promotion involved a Venezuelan service contract obtained through the questionable issuance of 1.4 million free shares, and the sale of a convertible preferred for $630,000 that allowed insiders to obtain over 1.5 million shares at an average price of $3.46 during a period when Able's stock was trading between $7.50 and a high of $15.87 per share. We believe that Able's management has purposely failed to disclose material negative information concerning its NT acquisition in order to defraud investors. Able has not disclosed any information on NT's historical operating results, capital requirements or balance sheet information. Able has refused to disclose basic information concerning its NT acquisition, including the consequences of default, and the amount paid and terms of the purchase notes. Able has failed to disclose that the issuance of the NT purchase notes could violate total debt covenants contained in its senior subordinated notes. In fact, investors have no information concerning Able's capital structure after the NT acquisition, or any way of calculating the number of shares that will be outstanding after the conversion of the $20 million preferred. Any information to the contrary is necessarily false and misleading.
Asensio & Company is a New York based institutional investment bank specializing in corporate valuations and equity research. The firm has borrowed and sold Able shares short. Asensio & Company specializes in investigating fraudulent stock promotions and publishing research on grossly overvalued companies. Asensio & Company's published research reports, including a copy of our report on Able Telcom Holding Corp. and a complete record of our previous Strong Sell reports, are available on Asensio & Company's interact home page located at asensio.com.
SOURCE Asensio & Company, Inc.
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here's the 10Q excerpt re. the convertibles:
STOCK Effective December 20, 1996 the Company completed a private placement
transaction of 1,000 shares of $.10 par value, Series A Convertible Preferred
Stock (the "Preferred Stock") and warrants to purchase 200,000 shares of the
Company's common stock at $9.82 per share. Proceeds from the offering totaled
$6.0 million. Each share of Preferred Stock was convertible into shares of the
Company's common stock after April 30, 1997 at the lesser of $9.82 per share or
at a discount (increasing to a maximum of 20% for conversions after December
20, 1997) of the average closing bid price of a share of common stock for three
days preceeding the date of conversion. This accretion adjustment, which also
represents the amount needed to accrete to the redemption value of the
Preferred Stock for the period ended April 30, 1998, was recorded as a charge
to accumulated deficit and accompanying credit to the Preferred Stock. The
Preferred Stock accrued dividends at an annual rate of 5% and was payable
quarterly in arrears in cash or through a dividend of additional shares of
Preferred Stock. The warrants are exercisable during the four year period
commencing on the first anniversary of the private placement, provided that for
each share of Preferred Stock which is converted prior to the one year
anniversary of the placement, warrants to purchase 200 shares of common stock
are forfeited. 8
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)4. PREFERRED STOCK--(CONTINUED)
During the quarter and six months ended April 30, 1998, 442 and 995,
respectively, shares of Preferred Stock were converted into an aggregate of
421,645 and 920,946 shares, respectively, of common stock. As of April 30,
1998, all of the shares of preferred stock have been converted to common stock.
During the quarter and six months ended April 30, 1998, 106,800 warrants
were forfeited and 92,200 warrants remain outstanding. |
