Shares of VUZI have fallen precipitously since the company announced raising $30,000,000 via a share offering in January. After trading as high as $11.40 inter-day on January 24th (as per Yahoo Finance) the PPS has tumbled all the way down to $5.90 as of this writing, a loss of $5.50 per share or 48% from that peak.
Here's the chart:
The company filed its 10K on March 16th and the results, while probably expected, were far from stellar. The loss attributable to common stockholders came in at $21,348,436 for the year ended December 31st 2017. That was worse than 2016 when the loss was reported at $20,870,130 or in 2015 when it was $14,941,559 or 2014 at $7,868,858
Readers can verify those numbers at the following link, page 31 or just do a CTRL+F search "loss attributable to common stockholders".
Back last year in a release dated March 23rd 2017 the company wrote about a move "towards profiability". Its the last bullet point, you can check the linked PR.
I don't think you require an MBA to realize that losing more money than the previous year, over and over and over again, that is not moving toward profitability. Quite the opposite in fact.
Compounding the dilution and losses was a bearish write up that came from a site called "Mox Reports" on March 16th, about the same time as the 10K. It forecast an expected PPS of $0.50 and eventual delisting.
Also included were allegations that Vuzix engaged in an undisclosed stock promotion to inflate the share price and raise $30 million. You can read that report here.
And that wasn't the end. Next was a number of law firms issuing PRs about investigations into the claims made in the Mox Report and inviting those who've purchased shares to contact them. Here are links to some of those PRs
That's a lot of bad news to absorb in a short period of time. Dilution, losses and lawyers....OH MY!
On March 21st the company responded by issuing a business activity update:
On top of that bullish sounding news bulls were buoyed by some insider buying:
Three purchases by insiders totaling 11,252 shares between February 6th and March 26th.
The purchases totaled over $73,000 according to my calculator. As per Morningstar the CEO and CFO each earned in excess of $500,000 in 2016, down from the over $800,000 they earned in 2015. Numbers are not yet available enumerating executive compensation for 2017. The 10K filing says those numbers will be forthcoming within 120 days of Dec 31st 2017.
Given that Vuzix is not a profitable company, having relied on the selling of shares to finance operations, the buys were a good move in my opinion.
Salaries are not paid out of profits because there are none. If Vuzix continues losing money, and the 10K discloses that they may not achieve profitability in the future, then continuing as a going concern will require the raising of more capital.
I know that many bulls are dreaming of a short squeeze, however longs should realize that if the company never achieves profitability and eventually gets delisted, then shorts would not be required to cover the shares they borrowed.
It wouldn't be the first time that a company with what seemed like great potential failed to succeed, back in the dot bomb tech era it happened all the time, and many shareholders rode stocks all the way down to nothing.
How bad is it? Pretty bad to my eyes, which is why I own put options.
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