Tue: Don't crow too soon
Top Image Systems is a small-cap share I like, but CEO Ido Schechter still has a lot to prove.
Shlomo Greenberg
It seems that the more obscure the future of the market becomes, the more attempts there are to repeat the Pointer Telocation Systems Ltd. (Nasdaq:PNTR) story. After starting the session on November 10 at $5.2, Pointer reached $23.2 by November 27 (after climbing to $25 a day earlier), a handsome gain that came as a surprise even, so he claimed, to the company chairman Yossi Ben Shalom.
During the eight trading days from November 10 through 21, when the stock started to climb, 13,900 Pointer shares changed hands on Nasdaq, a rate of 1,740 shares a day. From November 22 up to the end of last week, more than 10 million shares changed hands in seven trading days, meaning a rate of 1.5 million shares a day, around 90 times the previous rate. Is there any logic to this? I can understand those people who bought the stock when it was at $5 but why people also bought it when it was priced at $23 or $25 on the basis of the same facts that everyone knew about when it was still at $5 is beyond me.
It may well be that Pointer’s announcement of its listing on the Tel Aviv Stock Exchange (TASE) contributed to all this. It has nothing to do with economic values, but a dual listing always goes down well. The reports about Pointer on the Bellwether and Thesubway.com news sites (the latter belongs to The Wall Street Journal and reports on small companies), could also have triggered additional waves of buyers, but as the old timers used to say, “When ignorance drives a stock, keep well away.” Either way, the rush for stocks will soon begin, once a way has been found (and it always is) to make it routine.
What does this mean? If one stock can be catapulted 500% and higher within 15 trading days, why can’t the same thing apply to others too? Of course it can, you only to have find a way. This was tried last week with Top Image Systems Ltd. (Nasdaq: TISA; TASE:TISA), one of the small-cap stocks I like more, because of the tremendous potential of the niche that it operates in. Top Image published its third quarter report at the beginning of November, and once again it posted good results that show the company’s continuing positive development. Last week, Top Image announced that it would be listed on the TASE. This amounted to much bigger news than its third quarter results, and the stock soared in response.
I cannot understand at all why such gains are triggered every time an Israeli company listed overseas announces that it will be also listed on the TASE. Are there that many investors who believe that Tel Aviv has the ability to lift shares? Note that on the day it announced its dual listing, Top Image’s volume increased almost 30 times to nearly one million shares, compared with 57,000 only on the day it unveiled its third quarter results. Does this mean that investors believe that a listing on the TASE will give the stock the extra magic that other investors felt it lacked? Last Thursday, the company announced that it would be holding a conference for customers in Berlin, its third so far, and the number of participants has increased with every conference. Is this not more important than a mere listing on the TASE? Of course it is.
In the interviews he gave yesterday, Top Image CEO Ido Schechter was quite rightly full of excitement about the customer conference in Berlin. But I have one word of advice to him. Don’t crow too soon. Having annual sales of $100 million is a worthy goal, but it is a really tough challenge for a company whose sales currently stand at $20 million. I most certainly believe that with a bit of luck and its current management team, Top Image will reach a lot more than $100 million, but it would do well to learn from the likes of NICE Systems chairman Haim Shani or (outgoing) Teva Pharmaceutical Industries CEO Israel Makov - get there first, and make your promises afterwards.
Published by Globes [online], Israel business news - www.globes.co.il - on December 5, 2006
