Why do I think the stock will continue to fall?
Share price continues its steady decline without ANY recent uptick or rebound. There is no sign of immediate recovery at all in recent trading.
Management asked for authorization to issue up to 255 million shares total. Using the same method as has been used for 11 years (issuing stock at a discount), money will be used to fund more losses and acquisitions. However, the acquisition of manufacturing capability in and of itself does not create additional value.
An operations-oriented management must be able to use its resources to create value by generating return on investment. However, this concept is foreign to the current management that is TOTALLY oriented toward financing activities.
Especially if it succeeds in acquiring manufacturing capability, the plants must be tooled with significant additional investment, all of which will occur at shareholder's expense, to introduce new and innovative products.
About delisting, Parrella knows that it will occur. Therefore, he places the best face upon it so that shareholders will not shed their holdings en masse. That is why he says that it will not matter and that the share price "will not miss a beat." However, to believe this is to ignore the obvious: Nasdaq shares trade at a premium because of their liquidity.
Significance of the new turbo chip? The company has a long history of abortive efforts in multiple industries, markets, segments, etc., such as:
Noise cancellation headsets for pilots, consumers, industrial users, first-class cabins, MRI patients, telephone operators, internet telephony, etc.
Feeder bowl noise cancellation
HVAC noise cancellation
Closed circuit communications
Microphones
Engineering services
on and on and on
A better vertically integrated competitor will probably acquire or duplicate the technology and turn a dime. Meanwhile, once NCT uses its new baby to obtain new financing, it will turn to the next hot technology and keep doing so as long as it survives.
Most companies do not operate debt-free, like NCT. While debtors would never expect to obtain outrageous returns on their investment (i.e. more than 18% per annum), they would definitely not put up with the dilution. Debt-free status has kept the doors open at NCT all these years. They keep paying their debts with new equity--even their rent! However, if the acquisition targets have debt, then NCT would somehow have to convert it all to equity (i.e. dilution). Debtors would refuse!!! There is a tough negotiation. |
