The Trading Floor

[Arctec]

News last week on a couple of our Techs.

1) Bioscrypt (BYT.T $0.79) has been weak with everyone else but they closed their acquisition of A4Vision and added big names as institutional investors in a private placement. These include Motorola, Tako Ventures (owned by Larry Ellison - billionaire CEO of Oracle), Logitech (the leading computer peripherals manufacturer), NTT Leasing (financial subsidiary of Japan’s NTT Group), and Singapore Technologies (a leading technology- based multinational conglomerate). - on a fully diluted basis, this group will own approx. 32% of the company. www.bioscrypt.com

2) NStein (EIN.V $0.85) released financials and they continue to report strong growth. Q4 revenue is up 162% over last year and 38% over the previous quarter. Almost $4 million in revenue with marginal loss so this continues to be a strong tech speculation for us (along with Bioscrypt). www.nstein.com



Plug Power (PLUG/NASDAQ $3.00)
www.plugpower.com
Hydrogen Fuel Cells

PLUG was introduced last month near $3.70 and was well on its way through $4 before the recent market correction let the wind out of our sails. Now I also believe the selling pressure was coming from those who knew the company was about to invest U.S. $45 million in B.C. based Cellex Power (announced Thursday). Plug Power is flush with cash and even after accounting for this acquisition, should have almost $220 million in the bank. However, this was a big cash outflow even for PLUG, and a big gamble.

Cellex just completed important field trials with Wal- Mart (electric lift trucks in one of their large distribution centers) and Plug is saying Cellex is the leader in fuel cell power solutions for industrial vehicles. This is a huge global market and when combined with Plug's proven fuel cell technologies, there may be strong growth opportunities here. Spending $45 million is a risk none-the-less.

We'll continue to follow PLUG because Bush has given this industry a huge boost and the company is still flush with cash. Valuation though is tough. Friday it traded $5 million worth of stock and likely tested its low last week. With one of the wealthiest Russians owning a large chunk of the company, there is still strong potential over the mid to long term.



Reverse Splits - A Huge Red Flag (GOPG)
GlobalOptions Group (GOPG $9.45 was GLOI)
www.globaloptions.com

This is a perfect example of why some people (who have the best intentions) should not run microcap companies. In this case, their decision (a stupid one) to execute an 8:1 reverse split did nothing but burn their small shareholders. They took what could have been a great speculation, and turned it into a mess - in the blink of an eye

I introduced this company mid February at $1.45 (post- split equivalent $11.60) and a week later the stock was at $1.90 (post-split equivalent $15.20) as they tried to push this higher on impending reverse split news. Even with the quick run, our timing was terrible. Had we known about this split, I wouldn't have touched this with a ten foot pole.

We're dropping coverage and its unfortunate, as fundamentally this remains an excellent company. With revenue approaching $100 million and one of the top security companies in the industry, it was a strong microcap speculation and even Canaccord had a $5 target on them (at least before the split was announced).

I sent a note to our paid subscribers on Feb 22nd while the stock was at $1.90 (post-split equivalent $15.20). Unfortunately I was not able to update free subscribers the following week as the share price fell to $1.40 in subsequent days (the point at which we first started following them). Tight liquidity would have made the situation worse as my negative outlook would have added fuel to the fire.

For a microcap newsletter, a $16 stock is not exactly something that fits our mandate. Why they feel they needed such a big split is beyond me. The higher price obviously makes it much easier for large institutional ownership and listing on a major stock exchange, but they could have also done this with a 3:1

Frequently stocks fall after a reverse split and management should have known this. Its easier getting a stock of this nature from $1.50 to $3.00 than it is $16 to $32. The company may expect to attract new institutional money, but they better treat them better than they have their existing shareholders.




Danny Deadlock
Microcap.com

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