Hello, all.
I followed this one since the good old conference held at Roayl York a couple of years ago. Yes, I've lost money by being a greedy bugger but just like most of you, I am trying to hit one that will return multiples.
Finally, I am using this occassion to offer my impressions not only on the company but this thread as well. The number of replies has risen exponentially. Unfortunately, it is mostly attributable to quantity and not quality. We should stop cluttering the cyberspace with mudslinging.
Trenzich, you made a good call and stated your case well early on, but now you are slipping. I admire your courage to short this play since as you know theoretically when one goes short, profits are limited but not the losses. This being a stock that has not seen $4 for any longer period of time makes your move even bolder.
While you made some good points at the beginning there were just as many good arguments why you could have been wrong. In the stock markets over the past two years, when it comes to small-caps, you can forget about historical ratios and book values. The market averages have been at historical highs; however, if you take the whole market, there is totally a different picture.
To try to answer some of your questions as an outsider:
1. I as well thought that the requirements to publicize the year-end figures is 90 days (as opposed to 60 days for each of the first three quarters). This puzzles me somewhat as well. As far as the figures go, I don't think there are too many of us holding out for profits. The company has been marginally profitable over the last few years but this is likely to be wiped out by significantly higher R&D and G&A costs such as money spent on investor relations, efforts spent in negotiating agreements, etc. So, expect losses but this is not why we are all in.
2. You questioned the valuation of the patent. Alhough I am not privy to this information, I would venture to say that it is according to GAAP. The fact that the company does not use one of the big firms as auditors does not concern me too much. I don't know if you are aware of the process to become a CA, but I assure you that it is a gruelling process and nobody that has two braincells would risk losing their designation for life and possibly be held liable for millions of dollars for one client (I guess the question what is the braincell count is more appropriate now - I don't have the answer). When it comes to GAAP, there is a lot of room for manouvering, Accounting 101 : there is no such thing as black or white.
Given my preamble, I would like to say that the valuation of the patent is only relevant is you are basing your analysis on book-value. I will show you smallcaps which trade at a fraction of their book-value and I'll show you those which trade at 10 times their book-value. However, I would not dare make a recommendation whether to go long or short on any of these either because book-value by itself means something only in case of bankruptcy (and then you'll quickly find out what the real book-value is).
3. If the management holds tens of millions of shares, who cares if they sold tens of thousands. If you started up a company and had options whose exercise price was in pennies, after a decade or so of hard work, wouldn't it be nice to reward yourself and sell some shares at $2.00+? Not a concern unless you start talking about liquidating a substantial % of your holding. Unfortunately people still cannot dig up these figures but I don't think there was enough volume for this.
4. There is really no need to bash IR. I've been burnt by many before and at this point you have to realize their role. They put out what TVL management gives them. Are they experts on the technology? No. Would you expect them to be experts on the technology? No. How many times have you seen reputable firms putting out projections for growths in some technologies only to see how far off they are couple of years down the road? But, they keep on putting out stuff without losing any skin of their nose. Realize the role of the IR and their constraints and make your judgments
accordingly.
5. I believe that TVL management believes in what they have and are not trying to mask anything. If they pull of a Bre-X with respect to expectations, they will also fool themselves except there will be a difference in timing (they will know it before we do). I don't think this is going to happen for a while since nobody hit the marketplace with this product. And how can it when encoding is taking such a long time.
I'll have to admit, the delay in implementation by the FCC was a cold shower for the TVL shareholders. It gives an opportunity for the TV manufacturers to develop their own technologies. There is no doubt that it weighs negatively on TVL, but is it really as bad as the share price reflects at the time of all the uncertainty in the marketplace that has not even hit the infancy stage?
If all the information that you are looking for was out in public, then your return would be risk-free rate + risk-premium; basically wouldn't make this a worthwhile speculative investment. You are better-off buying an index fund. Losing is not fun, but at this point people are sitting on the sidelines waiting for tangible information i.e. encoding, some indication as to level of interest once the product hits the market, agreements, etc. Until that happens, there is no point of watching this thing go down $0.10 and saying "I told you so.". It means nothing, majority of the people are now jittery and waiting for clear direction. Miss a little profit, but gain some extra sleep. Just like many other companies there was this company called Newbridge which had a great product, went public worth a few bucks a share, rose to $13, dropped down to just about $3, people cursed, people bailed, but the employees had no choice. This was back in late 80's early 90's. Now, even after dropping to 33% of its lows, after stock-splits it is still about $150. I am sure you know a lot of such examples. We'll this happen to TVL, probably not in our lifetime even if everything goes well; however, a bump in the road is something that every firm will encounter. This may be a downslope leading to a ditch or it may be a take-off ramp. We'll see, but to management's credit, they did deliver on fairly timely basis on things that they could control. Don't forget, we can cry about a couple of thousand of dollars, but to them it is millions. I am willing to bet that they'll work pretty hard to make this thing as successful as possible.
Although in a roundabout way, I am trying to say that cluttering the cyberspace with accusations, insults, etc. based on no new information is counter-productive for everyone. Let's evaluate this and any other investment as information seeps out and share opinions as to what that may mean. A few recent posts by Graham et al. is a good start.
Regards to all,
Matchbox |
