Paul, I have spent the past few days pondering the concerns of the bulls. Certainly, there has been selling since the SEC announced settlement. Some is due to a good number of share holder concerns about company, officer credibility. In addition, it has not been favorable to the stock pricing that the company has taken a position to not provide what we all desire......that being additional needed confirming disclosure, regarding details surrounding the existing and new ventures with Fuji, Heidelberg and others.
It is only normal reaction that the average investor is worried whether or not the company really can deliver the goods and if Presstek is still regarded as being worthy of their investment and their trust in management.
Questions are being asked if other alliances and technology agreements with other printing manufacturers are in the works and soon to be announced. Will those talks be fruitful and substantially increase the revenue to this company? Has the credibility of the company management been affected to such a large degree that it is now a material concern? Some believe that Howard and Verrando deliberately concealed "material" information by not correcting all of the analyst's report 3 years ago, which projected higher earnings than the companies internal projections. All of this has led to shareholder doubt, regarding the present position of the company and their stock.
Primarily, it apears that the credibility issue looms as the primary concern to many now. The question now is, what would be required to ignite the fuse that would reverse this stock correction and propel the stock price back to a positive trend? What would tend to
provide renewed confidence in the company and the officers? A new announcement that Presstek is expecting record income from their new ventures? A substantial Presstek buyback of company shares and a press release of insider accumulation at these low prices? All of us know that the short position has certainly increased. Obviously, there is a nice profit made if they decide to cover at these prices. So what spark would charge the recovery..........and the resulting stampede to cover and accumulate the shares?
Let's re-examine the issues.
First, the SEC settlement. This was an actual victory for Presstek and it's officers. If you examine the shareholder suit and note the seriousness of all of the bogus preliminary accusations made against the company and the officers, and then compare them to the actual SEC findings, there is very little of substance remaining in the shareholder suit.
I look at it this way.....if the all of the old accusations of wrongdoing that Presstek was accused of were true, the SEC would have certainly used them in their case and never allowed Presstek to reach a negotiated settlement, simply finding fault with non-disclosure issues as their primary complaint.
I am sure the SEC spent substantial sums of money investigating all of the many charges. Presstek needed to get this complete process behind them and move on. It seems that Howard and Verrando made a personal sacrifice in their courageous decision to accept all liability for the good of the company and it's shareholders. So, two individuals,
knowing that the 1996 decrease in kit orders from 20 to 15 monthly was due primarily to repairable modifications in their technology.....that during this delay in production, the Heidelberg company was preparing their facilities to substantially increase production of QMDI's from 15 a month to what peaked at 80 monthly, and that earnings would
certainly continue to increase at record pace, and that Heidelberg would pay to Presstek the equivalent cost of lost plate revenue of $7 million to offset the decrease from 20 kitsto 15. It seems to me, at that time, Presstek management fully expected that the highly
successful QMDI production numbers would soon increase the bottom line to Presstek and provide shareholders with continued earnings in record numbers. (And so they did!)
During the period that production was decreased.....earnings increased 100% with 15 kits per month production! Also, the "engineering fees" ($7 million) was no longer a factor after Dec 1996. This $7 million payment to Presstek ended in January. So, how did 1997 resulting income increase so dramatically over 1996? Was it from the results of the sale of plates and Heidelberg income from new kits and installs? It had to come from somewhere! In 1997, Presstek completely made up the discontinuance of the $7 million. They bypassed the 1996 year growth revenue and are expected to reach another near 100% increase in earnings when 1997 Q-4 numbers are released.
I am amazed that the lost value in plate revenue to Presstek was valued at $7 million, by agreement between Presstek and Heidelberg, when Presstek was requested to cut production from 20 to 15 kits monthly for 1996. No royalty or kit sale income was included in the $7 million. (As reported in the SEC documents) As this is correct, 60
Quickmaster presses were delayed. Obviously none of them were able to use the plates all year due to staggered install periods, equated out to be an average of $116,666 loss in "plate revenue" for each press! This type of negotiating expertise by Presstek is superb and warrants my investment dollars!
My thoughts on the positive end result of the SEC settlement to Presstek:
1. Any stigma surrounding the accusations with the SEC officially ends.
2. The short position loses their last remaining ace in the hole.
3. The SEC saves face and recovers their investigation costs.
4. The shareholders are protected, as well as the Presstek company from future deterioration of earnings, caused by fines and the long standing legal costs associated with defending the SEC allegations.
5. The shareholder suit has very little substance remaining.
6. Mutual Funds and Money Managers that may be waiting for the bottom of this correction, are now free to buy at bargain basement prices.
7. Companies that would like to associate with Presstek for their expertise and contract for their technology, now know that their desire to affiliate with the company, will allow them to complete any started business transactions as Presstek will remain quite viable,
profitable, a producer of new technology, and free to negotiate and fulfill their business commitments, with guarantees to their partners of their continued success.
8. Presstek should now be free from further positive disclosure restraints that could have been a fear of the Company due to being under the microscope of the SEC. This should allow them to divulge more forward information, not less!
Let's all remember, this firm was a small company in New Hampshire that developed technology through Robert Howard, who has compiled some of the greatest engineers and scientists in the industry. His results have been remarkable. Presstek did what the giants in this industry were unable to do. They went first to market with unique patented
products that have placed tiny Presstek as the one single firm that has been most responsible in leading the print industry to the first revolutionary change in more than 20 years. The shift to a completely new and different solution in the way print will be made, has placed Presstek in the front drivers seat, with new technology patents being approved quite regularly.
In response to my questioning the non-disclosure notification Presstek recently announced, the bears and now even some of the uneasy bulls that have chosen to sell shares, have interpreted this announced decision to not disclose details in a negative way. They interpret it to mean Presstek simply does not want to provide us any "early notification" regarding the "for sure gloom and doom" Presstek is bound to be facing, due to the Heidelberg cutback and their guess that the Fuji alignment must be smoke and mirrors, concocted by unreliable and crooked management, that truly belong in a cell!
The bears claim that Presstek is all washed up, that 80% of their income from Heidelberg is "being fazed out" that the "viability of Presstek's product line is fading away" as competition from others is replacing it.
Think about it. Do you actually believe that Presstek would make the glaring error of not providing any meaningful disclosure if the Heidelberg cutback would have, in any way, substantially or materialy decrease company revenues and affect the shareholders investment?
Presstek had no choice but to disclose if this were true. My bet is they would have or would now be facing a repeat of the just completed SEC sanctions. Even though Presstek received $7 million for a 25% temporary decrease in production in 1996, management were censored for not reporting it. A 25% decrease today would equate to a drop from 80 to 60 kits. Would you not think that Presstek knows what they are doing and will not take risks to place them in jeopardy again?
The latest press release was quite clear and has not received
much attention: Bears read closely and study real hard......an English lesson soon follows......
"The Company reiterated its previously announced statement that its business relationship with Heidelberg is SOUND, and includes not only CONTINUING MANUFACTURING EFFORTS, but NEW PRODUCT DEVELOPMENT PROJECTS which will carry the ALLIANCE well into the next century. Presstek expects to SHIP ITS 1,000TH QUICKMASTER DI IMAGING SYSTEM in early 1998." To all....Did we all forget how to read between the lines.......it is quite clear.......English 101:
1. The Heidelberg Relationship Is "Sound". (means complete, whole, healthy, well, vigorous, reliable, dependable, stable, safe, valid, profound, unbroken, undisturbed!)
2. "Continuing" Manufacturing Efforts. (means ongoing, sustaining, maintaining, progressive, enduring, persisting)
3. "New" Product Development. (means additional, different, recent, extra, unique, original, of late, anew)
4. New (Heidelberg) Product Development "Projects" (means more than one, plans, designs, intentions, undertakings, business activities, arrangements)
5. Carry "Alliance" Into Next Century. (means affiliation, partnership, coalition, connection, association, union.)
Presstek shareholders: did it ever occur to you that the bears that have shorted this stock, know Damm Well that Presstek is set to explode upward in share price in the very near future? I am positive that with over 5 million shares hanging short and on the edge, representing in excess of $125 million short, the bears have their own research people that are much more competent than the Barrons crowd.
They also KNOW what I have learned about this company and the importance of the latest agreements to the companies bottom line. It sickens me to see them having the ability to influence, manipulate and drive this stock price down, using any means necessary to snap up your shares to cover their short position, at the lowest price possible.
You can be sure that when the covering soon begins, they will turn their doomsday tune around to praise this company, it's remarkable technology and future earnings projections in a positive way. You can be sure that they intend to be long....not just cover their short
position, but own shares of the company for the huge profit they see, based on the increase in pricing that is definitely coming, based on the companies upcoming growth. Meanwhile, it is the amateur investor that is always left hanging as loser, the one that gets scared out and sells at the low and then turns right back around and buys again,
when the stock rebounds to it's annual highs. It's just human nature and the professionals have your number!
In regards to the Company not releasing any material details in the Fuji announcement, I believe their reasoning is exactly what they claim. Competition is so fierce now, that tipping off other companies on what projects are upcoming could be quite a detriment to achieving any exclusiveness on new technology in the marketplace and achieving a head start.
It is so glaringly apparent the absence of a confirming press release on the Fuji website or on a press release certainly confirms this. Also, the lack of any disclosure regarding ANY detail of this alliance, seems based around the secrecy that must be surrounding the projects and the agreements between these two companies.
I have placed numerous calls to the companies and have asked very pointed questions regarding plates and new imaging technology, based on the research and digging that Tom and I have done in recently approved patents, etc. Very long silences follow with answers like "this is not public information" and "I am sorry, but presently we are unable to comment....we will soon but cannot now."
When I questioned "Are these agreements important enough to be
substantially material to both companies future earnings?" Answers I have received have been everything.....from "no comment" to "If I were to tell you how big this is, I would lose my position here" Indirect confirmation tells me with certainty that this is a very big time alliance to both companies and much, much more than just a OEM agreement. It appears there is a very long term relationship developing and I cannot fault Presstek or FUJI from commenting anything additioal about it.
Honestly, when people from these companies get mad at me on the phone or ask how I learned about a patent etc., it concerns me that I may know too much, therefore, I become very hesitant in posting all my thoughts or in what direction I am researching. Any information that is not yet released that I should stumble on and may post, even though I am just guessing, could possibly interfere in some way with the proper process in the development of the technology.
Think of this, Presstek, without releasing any real details of the FUJI agreements and the recent Heidelberg NEW technology agreements have possibly done all they can to inform their shareholders that good things are here now. Why else would they place a basically non-descriptive news item on the wires? I am sure when the time is right and when FUJI confirms all of this and new products are announced, this stock will skyrocket......Remember, it will only take a spark to ignite the fuse.
Those of you short, take heed.....this company will surely surprise you when you least expect it. It has happened before, and it will certainly happen again. Don't be shocked if momentum funds and the investors that follow their leads don't soon jump on this stock. I
recall when 20th Century Ultra purchased 744,000 shares and subsequently made a killing on this stock. Don't believe for a minute that the story behind the Presstek stock growth is not still very much intact. It would not surprise me to see the value of shares purchased now to increase in multiples within the next year.
Neil |
