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trust, your model lacks the debt burden to give it legs.
JD, agreed "fair" bit was a little bit of a reach, but Solms has a solid resume, and we are not talking just weeks, but several months. The guys resume has a lot of turnaround specialist written into it, turnaround specialists need to be able to come to reasonable rapid assessments, not foolishly hasty, but reasonably rapid. He's had monthss, not years, but months. The perfect blend of insider AND outsider. Knows enough, but hasn't been to too many family BBQs.
Snackman, some confusion,
Boards don't have CEOs, boards have Chairman (CoB)(Bagalay, at least that is what the co website says), but it is difficult to see SKS remaining as Chairman after such a no confidence vote.
Companies are run by an executive team, at the top is the Chief Executive Officer.
In this case it looks like the BoD sacked the CEO. Given that SKS is one of five Board members, and the sacking was by majority, it seems inescapable that at least 3 of the 4 board members not named Sprague called for his ouster. This is being done at a time when the company is in dire cash circumstances all while staring SKS' golden parachute in the face.
Again, removing SKS costs at least a million, I can't remember the specifics of the golden parachute. Given current cash flow, it seems like a drastic measure.
As noted elswhere, a recent deal to manage TPMs at a 18,000 person company was recently awarded to Dell/Credant. The erosion of Dell licensing (and the loss of the DDPA bundling arrangement) may well undercut investor (private placement folks) confidence.
Such drastic actions (to me) have only a limited number of explanations:
1. health
2. gross malfeasance (that recent 8k smelled very bad)
3. collapse of investor confidence (failed PIPE)
4. collapse in employee confidence (for a company that size)
5. buyout
It is possible that thy have secured additional funding, and have taken this opportunity (post funding) to shake things up. That seems unlikely.
Expect a train wreck for the Q3 report (but it may still well have the silver lining of increased breadth that alea has been pointing out and SKS somewhat later acknowledged).
As Solms is an insider (he's been with the company for a fair bit) he will no doubt have opinions about who to keep, and who not as Wave consolidates, focuses, and seeks to turn the ship around. I wouldn't be surprised to see a lot of heads roll, and conversely see bonuses and/or raises to those who survive.
Its about a month till the Q3 report, that should be interesting. It might actually wander into an area I might consider a buying opportunity (after the dust settles).
A few other random things,
I wonder if Solms values Michael Sprague as much as SKS does ...
I read elsewhere "buyout coming?", interesting idea ...
Wave has always survived because (largely) of one thing: they do private placements and the investors in those placements have always done well ... not so the last couple of times, a well can dry up pretty fast, and when the well dries up even the BoD can wakeup
mig, the next PIPE and the Annual report (when the auditors have to sign off on the 8k) may well shed some light on what this looks like to me.
Speaking of Nixon,
I'm wondering if that recent 8-k finally came across the BoD desk in a periodic review and something under the covers looks rather, uh, well, "lose SKS or I resign".
OK, so maybe the Singular presentation was the "best I've seen for years" and all the other high five stuff.
But the purpose of the presentation was to assemble a private placement.
Perhaps the presentation was the absolute train-wreck that it struck me as. Just maybe the folks at Singular came back with "not a dime with that guy as the front man".
Putting in an acting is something you do because you MUST, and as they MUST raise capital, it is hard to imagine the two are not linked.
seriously, the presentation went something like 'garage doors keep the wifey happy so you should manage SEDS in the cloud' geez.
different strokes,
SKS' presentations invariably make me somewhat ill. he wandered off on grage door openers and spousal harmony ... I don't know, in the absence of more or less full knowledge of his pitch it struck me as almost incoherant.
he did manage to hit some bullet points more or less clearly (the sort of thing a 3x5 handout could accomplish without the concomitant cringe inducing rest) ... but tha tis obviously a me thing as it seems like no matter what he says folks are falling off their chair in a chorus of
"best presentation ever"
being well steeped in the relationship between presentations and anything material, I really had to kill the audio, its not that he completely creeps me out, but it is a little like reality t.v., I just really really would rather not be exposed.
but hey, there is a theme (first noted by alea) that some breadth in sales may be emerging, indeed, SKS sounded like alea to the point of almost reading alea's content (on that point only),
so I patiently await the next 10q, and I won't even do the math, I will read the math of others.
alea, to me (and as indicated by you)
Wave's last paddle through the unsafe harbor had them heralding imminent CFBE, and I see this as a clear indication that they are nowhere close to that.
waveduke, yes
unseen future inflection points, asteroid impacts, etc yield results one cannot reasonably foresee. meanwhile WAVX has taking to funding software development through direct share transfer as opposed to through printing their own shares, sellling them, and delivering cash. the later method would have avoided the 8k as the ATM is already in place. and obviously the 8k is not a flattering one, it basically tells the world they are paying for work to be done by printing shares which broadcasts a cash flow issue or a poor view of the near term value of those shares ....
so, who would accept shares in lieu of cash? did Wave "lay-off" a scrambles developer, but actually keep the developer and just pay them in shares. whoever took shares instead of cash must be somewhat in the koolaid camp, or at least perhaps that the services were worth 500k but since the unregistered shares are illiquid the third party required a considerable cushion.
considering that Wave's mutliple pilots, consultaitons, legacy sleuthing, and platform verification spanning over a year was worth a whopping $1m in cash (ERAS-WEM-DoD), it seems rather likely that Wave is paying a ton in the way of shares for a modest amount of development.
it is the way companies get fleeced when their backs are against the wall.
presumably Michael would have to disclose if he was the recipient of this deal ... but the condominium rental agreement didn't come out until an annual report. I suspect the annual report to provide more clarity on this equity funding of development costs as I suspect that KMPG is going to take a look at it and not sign without more disclosure.
blue, I disagree with the no connection, i think TPM success is necessary for Wave success as currently formulated, so there is a definite "connection". Necessary, but automatically sufficient.
sammiP, Wave is so decorated with poison pill thingys that most of what your are talking about is simply moot.
so one can still shred paper documents, just not electronic ones. fancy that.
*alea, on sub major upgrades ...
you know, the bank. There was a time that by my math that 'large southern bank' that was supposedly huge but doing things at a sub8k incremental fashion simply was noy buying anything. nobody was, backing things out was leaving zero or less (less of course an error in assignment on my part) but the whole slice had gone completely dead.
so, it could be as simple as the bank and maybe one of the regional govs coming back online, or some NHS activity?
* but as the 8k threshold for me is 10% of q revs in a single deal (or about 700k, and obviously they are not bound by this) then coming up with 1.5 does require splitting it at least a few ways.
Were the number to reach 2 or 3 over the next couple Qs, it becomes increasingly difficult to explain it as anything other than breadth (in the absence of a corresponding 8k)
alea, if that is the case may I suggest some names for the BoD?
yea, I thought it was pretty freaky when I first read it. I always knew you were sprague, but that was based on entirely different evidence. I was stunned when you/sprague mentioned parking the keys in wikileaksland e.g. to keep them out of the hands of the nsa. I understand how this can be uncomfortable for you, it was tough for me when barge outed me as janicen (I had mentioned something about a Scottish choir in Edinburgh that tipped him off).
In any event your idea is an interesting one, there has long been the numbered swiss bank account, perhaps those banks will double as key repositories who presumably would be stingy with nsa requests.
blue, fair enough
First, I've got no business defining what you hate or love, it's not my providence, my bad.
Second, we largely agree on the notion that other things play into this and among those things are impressions of management skill, integrity and so on.
Finally, I interpreted your content (some the post in particular, perhaps much just a history of posts) as invalidating an observation afforded by bean counting and bean parsing.
In the end you said what I said, something to the effect of it's not time to pop any champagne etc. and lets see what Qs 3 and 4 say about the notion of a trend-line coming out on breadth of sales. In is no secret that I currently have effectively no exposure to WAVX, and the sad fact is SP would have to migrate to $3 - $6 before revisiting the preponderance of my exit points.
Few have belabored (before during and after) fiscal mismanagement more than I to the point of crafting the whole doughnut hole metaphor to describe the obvious trendiness of the time.
But I've been here before, exited, watched, the Dell thingy improved, dilution stopped, and the whole GM and friends played out (a period of positive cash flow that I benefited from investing in).
Alea seems to have sniffed out something that may return WAVX to an acceptable speculative investment.
And again, I apologize for wandering into the land of claiming to know what you love or hate, that was pretty poor form.
i am growing increasingly uncomfortable with my
two to four thousand words being met with 2 or 3 in response.
The suggestion is I may well have accomplished what I was saying with considerably less bandwidth.
But in the end it is only that. A good point. And who knows.
I'm thinking (actualy I am not thinking at all, I am hoping in a tkc'esque fashion that the new guy (the VP guy) is saying something like "cool, really cool, super cool that mega pipeline thing you just said, so bring me three sets of 20 seats TODAY to pay for your parking space ... love ya"
alea, i don't mean to replace string push pull with pure push. but a bunny may nibble and if nobody seeks to monetize that nibble that demand goes unrealized. so i am willing to submit that while demand is necessary, it is not sufficient if met with an uncaring unhelpful sales staff only being measured in terms of whale sales. there may have been more demand for some time and desperation has forced wave to capitulate and meet the demand they thought they were too cool and too big for.
alea, fwiw, I thought I saw such a trendline a couple of years ago over a q2-q3 interval, and saw it go up in smoke. but lets be fair, any fool should know that I am a wannabe bean counter. i certainly saw what I was looking for vanish, asked the company, and they said plainly they had abandoned those efforts, ... it was too much work, and they stuck with swinging for the fences. Hopefully they have been beaten up enough (deferred guaranteed bonuses are still hard to sell on the home front, deferred is DEFERRED) that they have actually (and thru a modicum of new blood, a turnaround specialist I might add) are starting to take the hard work part seriously and close every 20 seat deal they can get their hands on. that sort of work might make something of this tech. but a 2Q trendline is pretty thin regardless of how robust that trendline may appear.
blue, you are positively correct.
The sum of the beans shows what you say it shows, and shows so durably.
Nevertheless, the investing world is full of companies, many who have never made a dime, and investing dialogues are full of looking at those beans and dividing them into groups, or 'slices'.
A company could post a sudden transition to cash-flow positive after years of not doing so and a sum of all beans approach would say its time to get in. That company was at one time Wave Systems, but you were (sensibly) looking at more than the sum of the cash flow beans.
Similarly a company can demonstrate significant increases in profitability (EPS), and some jump on, while others parse the beans and see much was a consequence of one time sale of assets. You, it seems by your posturing, would call the sale of the money engine a triumph, bean counters that put beans into slices might see something different.
I certainly do not dispute your approach, the notion that it is only one plate that counts ... but you are on that positively wrong. It is functional in a sort of juvenile way for fully mature industries (e.g Altria) but the notion that your only one plate counts can reasonable report value in pretty much any company I have followed is just plain fully measurably no doubt about it bunk.
Attaching youself so willingly to such a flawed premise ignores everything, it ignores AMZN, it ignores WMT, it ignore BA, it ignores ... well it ignores everything, it ignores where DELL and RIMM have been going, I mean, it is almost impossible to find a company where your one plate approach leads to anything other than poor advice.
If what you said was true all equities would trade at a multiple to earnings (one plate) and only at one multiple (one plate) and companies without earnings (one plate) would not trade at all.
I appreciate your hatred of Wave. Fair enough. But don't pretend for a second that your one plate moronism substitutes for considered thought just because the company you happen to hate has performed so poorly.
Everybody, EVERYBODY parses beans into revenue, recurring revenue, one time revenue, segments, growing segments, expenses, paper expenses, real expenses, recurring expenses ...and so on .... and you actually sit there and pronounce that such notions are bollocks and that investing is all about just kinda looking at one plate like a dumb cat and knowing everything.
Howz the portfolio?
blue, it seems you are ignoring alea's stated interest and methodology.
Wave reported 6.7m ... agreed. Alea has stated that when backing out larger orders, bundling, etc, that Q4>Q1>Q2 has shown growth and that that SLICe is what (s)he is looking at as an indicator of increased demand .... 'breadth'.
Had wave just reported 7.7m instead of 6.7m, but at the beginning of the Q they had landed a $10m GM like contract (recorded over a year) then 2.5m of the 7.7 would have been large orders, and the growth alea refers to would have evaporated. I lamented this evaporation some time ago amid a period of high-fives over large orders as I feared large orders were too much like asteroids, and while not couching it as eloquently in terms of breadth of demand, definitely wanted to see robust, stable QtoQ small order growth. I believe the consequences of that growth observably evaporating some time ago has now well played out, over the long term it has been devastating in terms of dilution, stability, and market penetration. Everybody told me to chill (alea too as memory serves) and that enterprise orders was what was going to grow this company. we've seen how that played out.
The point is this:
Most would say that 7.7 vs 6.7 would have been better for Q2. Alea's method (while (s)he would likely welcome a $10m order) would score breadth of demand WORSE had 7.7 been booked as a consequence of a $10m order as when backed out it would show contraction of breadth of demand .... something I recall observing a long time ago with considerable concern.
What is material in this method is whether the sample is adequate for robust conclusions. Certainly the QtoQ growth of this small segment of Wave revs has been robust over the frame to which alea refers (better than 40% per Q) so what remains to be sen is whether Qs 3 and 4 can show a continuation in that slice. What metric a person chooses to value in a company that is losing money but hoping stop doing so is their choice. While looking at gross numbers has been fun at times, the punctate nature of the occasional large order and the focus of the company away from less immediately fruitful SMBs has been taken its toll. tck may refer to this as just bad management, failure to hold SMB sales to account, failing to drive SMB sales, and hiding behind supply excuses for large orders. If the modest shakeup in sales teams, cutting staff, hiring a new VP and so on is starting to precipitate growth in this neglected slice of Wave sales (recovery of breadth of SMB sales) then it is noteworthy. alea's method indicates it may be occurring. that would not be insignificant.
alea/tkc I'm not seeing it, likely owing to the fact that I haven't looked. That brings up an earlier post by alea, rather than 'let them eat cake' alea backs off to a much simpler 'let them see'.
nevertheless, my very quick and dirty was flat sales, rebound in OEM(although it may be wise to look at OEM as an early indicator of direction, one must sell modern machines to sell modern stuff to run on same) and something like 12 cents in the treasury edn of Q. So yes, there has been some equity sales since then, and they are clearly using the ATM as much as the market will allow, but I still see another 3m in equity paper just looking for ink.
And I have no vision with DDPA, which may have been covered in the CC but I doubt it.
I liked the mitre thing a bit ago, a certainly a bottom looks better than a continuing slope .. but what am I missing?
woohoo
so if they report 6.5-7 you are sticking with 26-30 fy?
this place is driping with guts.
the tidbit I enjoy is I do recall you sensing a bottom in the whole rev landscape Q1, and while this is just a Q, and if one compares the SFND vs Bundle vs WaveDirect or whatever one wants to call SMB, then is is a little worse than flat. SFND coughed up another extra 0.1 (wow, that purchase really is starting to look like a boo boo) and OEM was up but it looks like SMB was down. But all in all (except for OEM) it looks much more like a trough than a cliff, more like a settled bum than log degeneration.
The news flash is:
WAVX crushes analysts estimates. Leading analysts Dig Space, Too Blue (Blue simply extending error bars around the 'where there is a doughnut, there is a hole DS', and JerNotWaltMart gave estimates of 5.1, 4.8-5.3 and 4 respectively. Mean estimate 4.7, and Wave crushes it with a 6.7 err 6.74
One of the three analysts will likely wake up with a slightly different opinion tomorrow based on this new evidence.
I was just figuring that they have expenses that are met through revs and equity, and there hasn't been enough equity for sales to be zero. The amount of equity brackets how low sales may have been.
past guidance certainly has a record.
I am fully expecting about $5.1m, but that may be low based on how much equity funding they have done.
They might see what they feel is significant growth in SMB sales against a 20% decline in OEM bundling as a backdrop, ignore the bundling numbers, and talk about all the growth.
yup, on the $7m notion
should Wave report $7m in revs then surprise would indeed be the word for the day.
It would seem that the only real issue on the q report and the CC is a fair progress report on DDPA. The last two reports have clearly indicated this rev source (about 50% of gross revs) is in jeopardy. Things cannot get more material than that and it is approaching the window into which Wave should have better guidance on the fate of that arrangement.
honestly no idea.
blue, yes, they fund this idea, this idea of Wave succeeding, fat and trimmings for friends and family and megabillions from DoD... they fund it by selling shares. To succeed they feel they need to sell shares. So they lie to you. They believe it will sell shares. They need to sell shares. They are trying to make Wave successful. I said nothing of current shareholders. If explaining misses sells shares, then so be it. There m.o. has been to express unbridled optimism about their pipeline and their position. The purpose of their communication is to sell shares. It seems they believe unbridled optimism sells more shares than explaining misses. I think they think that at some point they will be successful .... as long as they can sell enough shares to get there .... which says nothing of current shareholders.
alea, me too. It is at least looks like a deliberate piece of laxative for the DoD pipeline perhaps in the necessary but not sufficient column.
blue, while I like others have somewhat tired of your broken record mantra in a what's in it for me level, I can also see how its reiteration serves a purpose from the perspective of plurality.
People need to know these things, the nepotism etc. And were you to say it only once and make your point (or a hundred times --- lets be real ... or a thousand times) it would scroll off the thread, and that story would be gone.
That is a critical part of the story, but obviously tedious and boring as heck to me, and hence I rarely actually get thru your content. But your content needs to be there. It is a part of the truth that needs to be known, and you make sure of it, morning and evening, every day. Bless you. I think there are people out there you are "saving" with this. No kidding.
That all said, I differ with you (and side more with alea) on this:
"if SKS was sincere in the least bit, he would pare the relatives, drunks, horse-nannies and others from the gaggle of parasites that weaken Wave and blacken its reputation even more"
actually, I think he can be entirely sincere about Wave success and do nothing about the above. Indeed, it is what most of us do most of the time, we ignore flaws, even gross costly ones, in the name of expediency, family and friendship. Nothing about the fact that people do this precludes sincerity in other matters even if they completely overlap.
I believe that he (SKS) is busting his butt for Wave to succeed. I question his skills to the point of not being willing to maintain meaningful exposure to the equity, and share your disdain for [insert any blue post here], but I simply reject that such reasonably reports on sincerity.
Some people want it all, they want their company to succeed, and they want to provide fat and coattails to their family and friends. You argue quite plainly that one precludes the other. Rubbish. The fact is not that SKS is as malevolent as you suggest, he's just a bit dim in some areas. There are matters of relationships, kinetics, and notions of causality he just doesn't get. And the corporate structure is that he and some clones stand alone and wallow in it. That is a separate matter from sincerity.
So what's the over/under on revs under $5m? Give good enough odds and it is a bet I would make.
Obviously 4-7 is the window, 5-6 owns the first guess, but under 5 is definitely within the second guess.
mig, yes,
but when evaluating anything history is what you have. Using your athlete metaphor, a history of frequent injuries, drug abuse, and problems with the law would weigh on valuing the athlete.
Wave's history of abuse of the unsafe harbor, clear and present nepotism, and dwindling revenue - dwindling sales and eroding bundling weigh on valuing Wave.
Sure, one doesn't know tomorrow. An asteroid could obliterate, a plague could decimate, Wave could book a billion with DoD.
I don't think anybody is ruling these things out, but as far as investing goes ... the aptitude, proclivities and performance of the current management team as judged by what they have been able to do weighs on this investment.
Some think the current team is awesome, and generally invoke the language of yoga to tout the triumphs ..."position" being the favorite word.
Others look at sales, sales momentum, revenue, revenue momentum, direction of both ... sales going north or south? and expenses and so on, and of course, DILUTION, as that is the denominator that determines whether any investment will have value the day that the asteroid strikes, the plague unleashes, or Wave bags a billion from DoD.
It is really hard to imagine holding a meaningful amount of WAVX and not selling into this rally.
returns,
you are trying to determine a price notion that only pertains to some shares and in the end pertains to none ... nevertheless, in the event that one owns shares purchased prior to any splits in WAVX then one can determine comparative value of those shares by a factor of 12.
What really underpins investing and returns is "basis" and the basis didn't change, the basis is just spread across a fewer number of shares (12x fewer for shares purchased prior to any split in WAVX).
In the case of short sellers the debt in shares owed goes through the same conversion multiple. So, on a fraction of the number of shares shares sold short when WAVX was added to the Russel 2000 at around 3.5 (e.g.) need be paid back to cover. Had one shorted 4000 shares at 3.5 at that time they need only return 1000 shares now (at 1.3). were one seeking to interpret that in terms of SP then one could use the multiplier aqainst the short entry point (e.g. $15.0) which only goes to illustrate that folks' obsession with "shorts" in WAVX is far removed from reality.
WAVX only has about 5% short interest (a number that has been steadily declining and is a rather modest number at that) at if one looks at short interest over time one could speculate that the entry for those shares likely averages values in the double digits .... this is not the stuff that squeezes are made of.
The truth is what has been happening to WAVX over the years is long squeezes (margin-based capitulation).
Long and short of it is, yes, for shares minted and owned prior to any split in WAVX the factor to make them comparable to today is 12. One might add that those shares are likely in the minority.
The shares that are going to be printed as soon as Wave can find subscribers to a placement will never have seen a day pre-split, applying these historical artifacts to them is as valuable as saying I am a fish because life started in the sea.
correct wavetrain,
but for whatever reason it has been some tome since a million share day rally portended something in WAVX, it seems the threshold of somethings up would be more like a million now (4 million then).
I don't think I have ever used the word "portended" it sounds and feels funny.
historically these rallies
with modest volume and little substantial news,
rallies largely even the loyal can't explain with anything other than:
"maybe a big deal is coming out of the pipeline"
... historically these rallies have proven to be good short opportunities.
one never knows what tomorrow brings, but if I were a gambler, I could see shorting.
WAVX currently (contrary to the constant comments elsewhere) has a rather modest level of short interest (under 5%, and generally declining over time) so the notion of a mega squeeze simply lacks the rocket fuel.
just sayin.
And all that said, it is nice to see Wave and its followers get a little breathing space here and hopefully it can sustain. Anything resembling compliant share price stability at this point directly impacts the ability of Wave and its products to succeed.
alea, nice post
determine what IS, go from there.
tkc, players points are solid,
solid enough that blogs on Del law on shareholder requirements for SA for splits are a full space ... Del law by using the word "may" in more or less the preamble portion of 242 created murkiness.
The debate when I looked at it some time ago on various law-blogs centered around whether there was a requirement for SA in the case of FS with all more-or-less saying that an RS required it in any event.
The fact is, IMO, 242 does not discriminate between FS and RS ... what is ok for one is ok for another.
Player is correct that in the first cases I cited it was a circumstance where the courts stepped in to invalidate RSs ... but in those cases SA was obtained(!), the courts stepped in to say that even though the rules were followed, the purpose was to disenfranchise minority interests and they pulled some sort of fairness or fair value angle to invalidate the RS.
It is important to me to emphasize that even in those cases the majority holder(s) walked through the process detailed in 242(b): recommendation from the board, vote by shareholders (something drove them to do these kangaroo proceedings). The court more or less ruled minority rights cannot be vacated through an RS.
Regarding your example of CMN and the FS, it seems were anybody to sue, and demonstrate standing (that they were harmed) they would stand a good chance of prevailing as per the cases cited. Harm in this case (few object to FSs) would presumable come from changes in the relationship between OS and AuthLimit, and CMN took AuthLimit to the shareholders seemingly, to me, removing any potential for a reasonable argument to be made for harm (standing).
But, rather obviously, I am not a lawyer, but I just can't find Del law RSs without SA. To me it becomes a 'pigs can fly' argument. One can say pigs can fly. Most (every blog or advisory site in this case) says that pigs can't fly, I have never seen a pig fly, but I cannot prove a pig cannot fly. At this point it becomes a "show me", show me a pig fly, show me a Del RS w/o SA.