All FWIW and IMO:
A lot has been written concerning this company and its "lessons". On reflection, for me, the most important lesson was that I did not give due weight to the A/R numbers.
After q4 1997, I carefully reviewed the A/R and inventory numbers and concluded that MRVC had a problem that was worsening and that was inflating their gross revenue. However, the very high A/R could be rationalized by their history (back then, the other shoe had never dropped), and their sales in Europe. Also, it was difficult to determine whether the problem was discounted in the price. The later acquisition "buried" the underlying deterioration and weakness of the numbers, although at the time whether the acquisition was designed to obscure the numbers also wasn't clear.
The mistake. When I saw the red flags, if I was keeping the stock, I should have protected my position with puts. I actually had concluded to do so, but did not. Instead, I rode this one down to 17, selling nearly my entire position at a considerable loss (hoping the company would be bought out along the way or that there was good reason for the numbers and the subsequent acquisition; or that GE sales would ramp up.)
As I stated previously, I called the company a few times regarding "factored" receivables, and how they were accounted for in the quarterly statements. I do not think that the factored receivables are subtracted from the A/R number reported in the statement, but I never did get an answer from the company. The lack of an answer, after promises I would get one, and the joke of a IR (at that time, which had gone from Danny, to Stapleton, to some ignorant newcomer) caused me to sell when the long term support, around 18, was broken (my line in the sand). It was a tough call all the way with many ambiguities.
This was my lesson on this one. Beware of "investing" in a stock with runaway A/R, and low inventory turns. The shoe WILL drop.
Good luck to all. Sincerely,
J. Conley
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