An interpretation of the S3. This is what apparently triggered the selloff.
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VALENCE TECHNOLOGY INC
Form: S-3 Filing Date: 12/21/98
The new S-3 dated 12/21/98 states:
"We [VLNC] have delivered the first automated assembly lines to the Northern Ireland facility.... We expect this line to complete safety testing in the first quarter of calendar 1999 but there is a risk as to the timing or even the success of this safety-testing process."
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What occurred to me it that the extended financing with Castle Creek was to purchase the second high-speed Italian line (3rd NI line), and these statements were to describe the purpose of the loan. If you compare this to a family that already owns two cars and seeks a loan for a third car, the description of the property and purpose of the loan applies to the third car, as the additional $7.5 million likely applies to the 3rd production line in Northern Ireland. After that, the attorney added boilerplate disclaimers and worst-case estimates to assure that no one expected results anytime soon and there would therefore be no possible grounds for a lawsuit.
As was mentioned earlier, the attorneys were just doing their job. Their job was to file a required SEC document and to add disclaimers to minimize nuisance lawsuits. Their purpose was not to present a status update. I suspect much of the document was written before the Dec 3 analyst. To illustrate my point, here are some examples from the “Company Description” section of the S3.
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As of March 30, 1997, the Company held 144 United States patents and had 71 patent applications pending in the United States. The Company was preparing 100 additional patent applications for filing in the United States. The Company also actively pursues foreign patent protection in countries of interest to the Company. As of March 30, 1997, the Company had been granted 15 foreign patents and had 85 patent applications pending in foreign countries.
The executive officers of the Company and their ages as of March 30, 1997, are as follows: Name Age Position --------------------------------------------------------------------------------------------------- Calvin L. Reed 54 Chairman of the Board, President, Chief Executive OfficerWilliam J. Masuda 48 Executive Vice President, Worldwide OperationsDavid P. Archibald 56 Vice President and Chief Financial OfficerRalph J. Brodd 68 Vice President, MarketingRobert J. Horning 54 Vice President, EngineeringTibor Kalnoki-Kis 56 Vice President and Chief Technical OfficerJames T. Larkin 48 Vice President, U.S. OperationsBradley A. Perkins 39 Vice President, General Counsel and Secretary
There can be no assurance that any products can be developed or manufactured at an acceptable cost and with appropriate performance characteristics, or that such products will be successfully marketed or achieve market acceptance.
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As we know, the number of patents is now well over 200 and Cal Reed, together with several of the Officers listed above are long gone. Lev Dawson is now CEO!
The information is obviously not up to date, but because the document was filed on December 21, 1998 investors incorrectly concluded that all information presented was current as of December 21, panicked, and triggered the selloff.
I regret that I was busy with an engineering project and getting ready for holiday travel. I therefore didn't have time to thoroughly read the S3. I did receive a phone call from someone who had and I posted his comments. My post was answered by someone who reportedly talked with Warren Buffet and Peter Lynch who had agreed with me, so it appeared my post was not considered relevant.
So Merry Christmas folks. I am as angry and frustrated as anyone about this. Was it manipulation? Maybe, but more likely Lev was just too busy lately to proofread the attorneys work and that the S3 was not intended as an accurate portrayal of the company's progress and state of affairs anyway. Before the days of the internet, this S3 would have been kept in perspective and not presented to shareholders in such a way.
All I can say is that to the best of my knowledge, all the reasons for paying $11 per share, except for the present price at $6.50, are still intact. In fact, I am confident progress has been made since then and that status is better than ever!
It's a Christmas bonus for anyone with some buying power at today's prices. Unfortunately, most of us didn't see this one coming and like myself, have few chips available to take advantage of the situation. I expect that thousands of samples from both lines 1 and 2 have been in customers hands for testing, with line 1 samples earliest. I also expect that many more thousands of batteries have been inventoried and tested to be ready as first shipments under terms of upcoming contracts. |
