Top Stories: As Its Stock Remains Halted,
Coyote Raises Question of Third-Party
Lessor
By Kambiz Foroohar and Kevin Petrie
Staff Reporters
12/10/98 3:34 PM ET
The Nasdaq Stock Market halted trading in Coyote Network
(CYOE:Nasdaq) stock this morning in the wake of stories
published yesterday in TheStreet.com and following a press
release about the stories from Coyote.
In its press release, Coyote said that the TSC stories are
"potentially misleading." The company, however, did not clarify
questions raised about its largest customer, Crescent
Communications Inc. Even though it owns 20% of Crescent,
Coyote referred to a research report when describing the
location of the company as Long Beach, Calif. The company
also explained how its arrangement with Crescent works, citing
Comdisco (CDO:NYSE) as the unnamed third party mentioned
in a description of its business relationship with Crescent in a
recent Securities and Exchange Commission filing.
Coyote shares dropped 6 7/16, or 45%, yesterday, finishing at 7
13/16. The stock has not traded today.
Today TSC reached Gene Curcio, the head of Crescent. TSC
wrote yesterday that it was having a hard time tracking Curcio
down. Exhaustive research, including a trip to the Long Beach
location cited by Coyote, came up empty. Incorporation
documents were found in Nevada, but messages left at a
number affiliated with Crescent weren't returned. Coyote, after
assuring TSC on Friday that it would most definitely get us in
touch with its largest customer, declined to return calls and
offered no further guidance concerning Crescent and Curcio.
In its press release today, Coyote referred to a "Kaufman
Brothers Intraday Note" that said Crescent was based in Long
Beach. Yesterday, Kaufman Brothers analyst Vik Grover, who
rates Coyote a buy, told the Los Angeles Times that Crescent
was based in Mexico. A copy of a Kaufman intraday note
obtained by TSC and dated Dec. 9 says: "Let us set the record
straight: Crescent Communications is indeed incorporated in
Nevada but is based in Long Beach. Crescent is actually a
Mexico-based switchless reseller doing business under the
name 'Crescent Communications SA de CV'."
Curcio said that since his firm is private, he didn't feel a need to
make it known where he works and operates. He explained
certain discrepancies in corporate filings and incorporation
statements in an interview, but the conversation raised still
more questions than it answered. Moreover, Curcio said names
listed on various filings related to Crescent referred to
dismissed employees and wrong addresses in the filings were
typos. (For details of the Curcio interview and for more on
Crescent, please see our related story.)
Also, this morning the California Franchise Tax Board said that
in 1995 it had suspended the business license of the only
Crescent Communications Inc. in its database, because it did
not file income tax returns. The board monitors and administers
only income taxes. It is not known if this is the same Crescent
Communications that Curcio heads.
The Coyote press release focused on the arrangement of the
dealings between Comdisco, Coyote and Crescent.
Prior to its press release, issued this morning, Coyote said it
sold roughly $11 million of product to Crescent
Communications. A quarterly SEC filing said, "In September
1998, the Company [Coyote] sold approximately $13,000,000 of
equipment to Crescent Communications, Inc. ("Crescent")
through a third party leasing arrangement." (The company said it
deferred recognition of about $2.5 million.) In its filing, Coyote
had made no mention of Comdisco.
In a press release dated Sept. 24, Coyote had indicated that
Comdisco had "agreed to provide lease financing for the initial
portion of the equipment order." Coyote also has said it
acquired a 20% stake in Crescent.
A spokeswoman for Comdisco confirmed today that her
company has bought $12 million of equipment from Coyote
Network and has in turn leased that equipment, made by Coyote
and other companies, to Crescent Communications. "At this
point that's all the information I have." She said she is trying to
get additional details concerning the companies' relationship.
Comdisco leases, sells and refurbishes computer equipment.
The spokeswoman had told TSC yesterday and also when first
contacted more than a week ago that she was not aware that
her company did business with Crescent. Yesterday she also
cited a company policy of not commenting on a customer
without that customer's permission.
The press release does not include a quote from Comdisco or
Crescent.
Finally, Coyote states that its "'insiders' and 'affiliates' can not
and will not 'short sell' Coyote stock." TSC reported earlier that in
SEC filings, Coyote noted that listed stockholders might decide
to short their own company's stock. By selling shares short, a
person aims to profit from a fall in the share price.
Comdisco might choose to sell about 193,000 Coyote shares if
a registration filed Dec. 3 with the SEC becomes effective.
Between March and September, Comdisco bought warrants for
more than 190,000 shares in Coyote, with exercise prices
ranging from $3.81 to $8.33 per share |
