CUI Global, Inc. (OTC BB: CUGI.OB)
CUI recently announced a 30 for 1 reverse split
which was done concurrently with an uplisting to the
Nasdaq Capital Markets and the completion of a $10
million equity raise managed by Merriman Capital.
By the way, the uplisting resulted in a new stock
symbol: CUI. The raise, the uplisitng and the reverse
all represent milestones that the Company has been
working to achieve (and assured investors they
would) for some time now. Investors should be
encouraged by the milestones themselves as well as
by the fact that the Company followed through on
what it said it intended to do.
More importantly, we think the raise may tell us a
thing or two about the Company’s path. First and
foremost, the capital will help to further reduce their
debt, bolstering the balance sheet and enhancing
cash flow, as well as providing some working capital
to advance their new projects. However, the bigger
picture harkens back to our original thesis on the
Company. They have built a considerable core
business and have positioned themselves to leverage
that business by adding new and innovative
technologies either by license or acquisition. They
have managed to advance the core business to the
point of profitability, and they should be able to
continue growing that piece moving forward
However, the greater opportunity lies in rolling out
the new technologies they have added over the past
year or so. We believe the equity raise (or perhaps
the due diligence process that supported it) may
validate some of our views of the potential of the
new products. That may be especially true, at least
initially, of the new Vergence™ GasPT2 product.
Recall, the gas measuring device is set to be rolled
out in Europe initially. Our understanding is that a
good portion of the equity raise was done in Europe
as well, and while we may be making broad
assumptions here, we suspect that at least some of
the European investors may have some
understanding of the GasPT2 opportunity. Again,
we may be stretching a bit, but that is our sense.
Either way, we think the raise is a highly positive
sign on multiple fronts, even though it may create
some loose stock for a short time. Frankly, that may
provide new buyers an opportunity in here.
Moreover, the uplisting should provide a variety of
benefits, and we also believe the reverse will
ultimately prove positive as well.
The balance sheet and corresponding liquidity are
clearly improving, which also speaks to a lower risk
profile. As a result, we are becoming more
comfortable that there is an emerging opportunity
that could reach beyond our current target of $12.00,
especially if they begin to demonstrate the kind of
traction they ultimately believe they will achieve in
the new product lines. Analyst: Dave Lavigne
(Accredited Members owns CUGI shares).
