EXTRA EXTRA READ ALL ABOUT IT; "The ParkerVision Party"
The ParkerVision Party
pathfinder.com
Bethany McLean
ParkerVision, a ten-year-old company based in Jacksonville, Florida, is a stock-market phenomenon. This company has never made a penny (in fact, it has lost over $20 million in the last five-and-a-half years) and, unlike most Internet companies, is not growing what little business it has (its revenues reached a height of just $10.8 million back in 1997). Yet ParkerVision, which went public in November of 1993, has increased its market capitalization from just over $40 million to over $300 million today -- a multiple of 30 times revenues -- and its stock has doubled from around $15 in mid-1998 to $30 today.
ParkerVision claims to have developed a "truly incredible breakthrough" in radio technology -- a microchip receiver that converts radio waves into data, called Direct2Data or D2D. But ParkerVision has been talking about it for awhile, and there's been little evidence that big companies are scrambling to get their hands on it. A much-heralded 1997 agreement with IBM was terminated by IBM in early 1998. A well-known short-seller, Manuel Asensio, says that engineering studies show that ParkerVision "possesses no valuable technology." (ParkerVision did not return repeated calls for comment.) Asensio isn't alone in his disbelief: As of mid-September, 1.6 million shares, or 13 times ParkerVision's average daily volume, were sold short.
But there's a lot more to this story than a classic tale of management versus short-sellers. An interesting cast of characters has been supporting ParkerVision, including a New York micro-cap brokerage firm named Whale Securities (which has paid hundreds of thousands of dollars in fines to the NASD for various transgressions), a Swiss bank called Banca del Gottardo, and a money manager at one of the nation's blue-chip investment firms, Neuberger & Berman (which went public on October 7). To top it off, FORTUNE has learned that that money manager has just been suspended for possible improprieties relating to ParkerVision and other small-cap stocks, and that Neuberger is conducting an internal investigation into his activities.
The story begins with Whale Securities, which took ParkerVision public, and in 1996 signed an agreement be its financial advisor (for which it received 200,000 warrants). Whale analyst Cary Retlin wrote in a November 1998 report that ParkerVision should sell for $90 to $100 in two to three years.
In 1996 and 1997, Banca del Gottardo arranged two overseas private placements for ParkerVision totaling over $28 million. (Skeptics point out that few companies with groundbreaking technology have to resort to raising capital that way.) In spring 1999, the bank's deputy chairman of the board, Francesco Bolgiani, who personally owns over 100,000 shares of ParkerVision, joined its board.
The most surprising member of this ParkerVision party is a money manager in Neuberger Berman's high-end private asset management business named Jack Ferraro. Ferraro has been at Neuberger for some 20 years; post-IPO, his stock in the firm is worth over $6 million. But he has also owned stock in decidedly less august enterprises. ParkerVision filings show that for "acting on behalf" of ParkerVision in those Banca del Gottardo placements, Ferraro, not Neuberger, personally received a "purchase option" for 125,000 Parkervision shares in 1996 and a warrant to purchase 180,000 ParkerVision shares in 1997, both at below market prices. Ferraro has also publically supported ParkerVision -- but without mentioning his personal stake. "It's a nascent technology, but I think it can do what they say it can do. The potential should be extraordinary," he was quoted as saying in mid-1998 in a small magazine called Florida Trend. Oddly enough, throughout 1999, much of the activity in ParkerVision stock can be traced to Neuberger Berman: According to data from Bloomberg, Neuberger Berman has been one of the top market makers, controlling an average of around 15% of the volume.
This isn't the first time that Ferraro, Whale and Banca del Gottardo have been involved in the same company. Take Showscan Entertainment, which claimed to have a special high definition film-making process. Whale took it public in 1987; in September 1995, Banco del Gottardo arranged a $7 million private placement for it; at the same time, Ferraro signed a "consulting agreement" with Showscan and received a warrant to purchase 100,000 shares. Showscan sold for over $7 in 1996, but in the fall of 1998, it was delisted by Nasdaq, and now trades on the OTC Bulletin Board for about $0.10 a share.
And there are additional instances involving less than prestigious brokerage firms, penny stocks, Banca del Gottardo and Neuberger's Jack Ferraro. Consider Ferrara Foods and Vasomedical. Banca del Gottardo arranged millions of dollars in financing for Ferrara Food -- an importer of specialty foods -- and Vasomedical -- which under its previous name, Future Medical Products, was supposed to make an external, wearable device that mitigated the symptoms of a drug addict undergoing detox. Ferrara went public by merging into a blind pool that had been underwritten by the infamous securities firm Stratton Oakmont, which was expelled from membership in the NASD in early 1997. Vasomedical was taken public in 1988 by a firm called Individual's Securities, which was expelled from membership in the NASD in 1989. Banco del Gottardo's Francesco Bolgiani has been a director of both Vasomedical and Ferrara, and Ferraro has been a shareholder of both. After a string of disasters that included misstated financial results, what was left of Ferrara was sold in mid-1996 for a grand total of about $1.6 million (versus its market value of over $20 million in mid-1995). Vasomedical now sells for just over $1.
As for ParkerVision, it just announced a licensing agreement with Symbol Technologies, a Long-Island based provider of wireless area network solutions, but Asensio calls it a "bogus deal," saying that the "Symbol announcement is not the first time that ParkerVision has issued false claims." The jury is still out as to whether Asensio is right about ParkerVision's technology, but if you judge a stock by the company it keeps, then none of this looks good.
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