Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Bill Wexler's Profits of DOOM -- Ignore unavailable to you. Want to Upgrade?

To: Bill Wexler who wrote (1194)	6/25/1998 1:54:00 AM
From: Bill Wexler	Read Replies (3) \| Respond to of 4634

TO EVERYONE: Re: TAVA - my fraud detectors have now kicked in. Most who follow this thread know that I am particularly interested in companies that may be engaged in a scam, are fraudulently promoting their stock, or both. Fraudulent stock promotion means that management will resort to the use of ambiguous or misleading press releases, post hype on the internet, or pass misleading "teaser" information to investors and analysts which then leads to rampant speculation. For excellent examples of this type of stock promotion, study ZITL and CCSI. Another BIG red flag is when companies publicly denounce short-sellers and proclaim that they have the little investor's best interest at heart, usually - and ironically - a brief time before they collapse. Check out the press releases KRY, ERGB and CCSI issued immediately after Manuel Asensio (NY hedge fund manager and aggressive short-seller) published reports outlining details of their respective frauds. When I added TAVA in the DOOM INDEX today, I pointed out that the company's financial condition was precarious, and I found it odd that a company with a market capitalization approaching a quarter of a billion dollars would need to float a floorless convertible for $6 million. I was trying to demonstrate the incongruity of the lender holding his nose and converting stock as fast as he could, and the small investor who is paying an enormous price for an enterprise with a pathetic track record. One of my favorite pet indicators is the "insult index". In other words, if investors posting on internet chat forums start berating me for daring to short the stock - without offering any rational justification for buying/holding the stock. I found that I was a very lonely contrary voice on the TAVA thread. Some called my opinions "childish" and "worthless", and I got lots of "dare you to short more" talk. A great sign to say the least!! :^D Along the lines of the "insult index", I like to see angry email. However, I was surprised to receive my first hate mail only about an hour or two after I put TAVA on the index. I responded to the mail, pointing out TAVA's unusual financing, and lo and behold - a few hours later I get a response from TAVA's investor relations!!!! The reason I mentioned that my "fraud detectors" have now kicked in is because this email exchange suggests that TAVA investor relations may be a little...ahhh...overenthusiastic and perhaps a bit paranoid. I'll leave it up to the reader to decide. In the next few posts, I will first post a copy of the original email sent to me (ostensibly from a private investor in TAVA), I will post my reply, next I will post the reply-back with the comments from TAVA investor relations and finally, my comments regarding the investor relations communique. Enjoy!

To: Bill Wexler who wrote (1194)	6/25/1998 2:00:00 AM
From: Bill Wexler	Respond to of 4634

TAVA POST #1 - The email I received today. Note, this email was unsigned and was delivered from a mail alias on AOL. I assumed that it was an individual investor in TAVA. ------------------------------------ Bill I have read many negative posts by you regarding TAVA. On this one my "short" friend you are dead wrong. I have spent 25 years in the electronic test industry and I can tell you the problem is real. Had lunch with John Jenkins CEO of TAVA at RedChip in Scottsdale on May 8th. This guy is jazzed about his company and its business potential. TAVA has landed a very impressive list of Fortune 500 clients. The wild cards are the Utility industry, Jenkins told me the RW Beck alliance was starting to bear fruit, and CD sales. The Strategic Partners Solutions program has signed up more than a dozen foreign companies which further leverages TAVA's products and services. TAVA will grow the SI business internally, from Y2K cash flow, and through acquisitions. Jenkins told me this at the luncheon. If you have shorted this stock you have made a serious mistake. You have lumped this company in with all the "garden variety" Y2K providers. The DDIM's, Zitel's etc. This is no IT company. Its specialized within a niche industry with little competition and a very significant advantage or barrier to competiton - its 15,000 (and growing) database and methodology. If you research it- you will cover - bet on it.

To: Bill Wexler who wrote (1194)	6/25/1998 2:03:00 AM
From: Bill Wexler	Respond to of 4634

TAVA POST #2 - My reply. Care to speculate about why the company pledged 100% of its assets for a $6,000,000 loan - and why do you think the lender converted (at $1.50) and dumped so quickly if the future is so bright? Now here's something to ponder. You are now paying a quarter of a billion dollars for a company which had to go to the equivalent of a loan shark for quick cash. I can assure you that I will eventually cover my TAVA short. Best of luck, Bill

To: Bill Wexler who wrote (1194)	6/25/1998 2:10:00 AM
From: Bill Wexler	Read Replies (1) \| Respond to of 4634

TAVA POST #3 - Investor relations chimes in!!! The mysterious AOL Tavazoid sends back this reply: No I'm not going to speculate - don't have to. Here is the companies (Investor Relations) official word on the loan you reference. Geez Bill if this is the best (negative) you have on TAVA stop being so lazy and do some real DD. ============================================================= From: Scott Liolios; TAVA Investor Relations Thank you for the heads up on the SI thread. I have received several emails regarding the Tandem loan, and although I do not believe some individuals in the thread deserve to be addressed, I am sensitive to the investor concerns. Therefore, I will try to clear the air on the Tandem Loan and other issues. First, many have asked for the total TAVA head count. At the end of March, TAVA had 387 employees (263 technical). At the end of April, they had 397 (272 Technical). At the end of May, the company had 440 (306 Technical). And from 6/1/98 to 6/15/98 TAVA hired an additional 33 people to bring the total head count to 473 people. As you can see, they are well on there way to reaching head count goals. As far as the Tandem loan let me clarify: 1) Prior closing the Tandem Loan, TAVA had all its assets pledged to various bank facilities as well as the Renaissance debentures. Closing the Tandem loan, allowed the company to pay off all short term debt, (important for administration consolidation efforts), improve the working capital position, (by moving short term debt to long term) and raise additional cash proceeds of approximately $2 million. Since all the company's assets were pledged to other debt, the company accomplished the above without giving up any "new collateral"; i.e. all the company's assets were already pledged. Further, the TANDEM loan does not have any principal payments required for three years and has limited debt covenants. 2) Lending institutions don't lend money based on market cap. or collateral value ( a common misperception). Traditional bank lenders look at historical earnings and cash flow to support bank credit. Due to TAVA's roll out of its Plant Y2K One software, the banks wanted to see several quarters of earnings prior to extending credit. The company continues to have discussions with banks about replacing TANDEM with a more traditional bank facility. 3) The Tandem loan does not have any prepayment penalties. We can repay the debt at any time which extinguishes their collateral position 4) Tandem was interested in extending the company additional credit. TAVA was not interested since Tandems fees were based on the size of the facility. Tandem remains interested in lending TAVA additional funds. 5) At 3/31/98, TAVA was in violation of the covenants on the Renaissance Debenture, not the Tandem loan. The covenant violated was the Times Interest Earned ratio, which is a ratio designed to measure earnings to interest expense. TAVA was in violation of the covenant due to losses. These covenants were set when the Renaissance Debenture was closed, in 1996. Finally, the company is looking at the Tandem loan as a debt facility which: 1) Is possible to increase, 2) Provides time to prove the Y2K Product viability through earnings and thus will allow the company to arrange traditional bank financing, 3) provided consolidation of existing debt on favorable terms (i.e. principal payments ) and less restrictive covenants and 4) Provided net new funds of approximately $2million. TAVA obtained the above benefits without changing the collateral position of the lenders. Closing of the Tandem loan was hardly a "desperation" loan. Closing this loan was a part of well developed plan to continue to increase the financial strength and balance sheet of TAVA through an appropriate balance of equity and properly structure debt financing. I hope this will clarify the transaction and illustrate you should challenge some of the people who misinform the SI board. As far as Emerald Research is concerned, I met with the analyst for approximately 3 hours last monday. If they are dropping coverage it would be complete shock to me. I hope all this helps. J. Scott Liolios