From Sparky: Wednesday 04/21/04 8:00 am cdt
Sparky's Assessment:
TIGR
A Steal @ 42 Cents!
For the past six months, Sparky has observed and analyzed the trading behavior of TIGR shares more closely than he's ever monitored anything.
That being said, over the past 20 sessions, Sparky has seen and tracked some very strange forces at work in the TIGR arena, forces that have driven share prices down sharply from a 59-cent close on 03/22/04 to 41-cent close yesterday (Tuesday).
By strange forces, Sparky's referring to the many mysterious trades before and after hours, all the big-block sales deliberately timed to wreak havoc, all the delayed executions, all the tiny trades right at bid, and a slew of similar tape-painting events.
It seems quite apparent that over the past 20 sessions these forces have succeeded in systematically reducing TIGR share prices by 18 cents. What's not so obvious, however, is/are the underlying reason/reasons. But Sparky can think of at least 3 that are worth sharing:
1) Takeover Posturing - Let's say a company had read all Sparky's TIGR write-ups and rightfully saw tons of longer term profit potential in TIGR shares. In such an example, rather than run the risk of waiting until Gizmondo units are actually being produced, until Gizmondo has received far more publicity, and until TIGR shares have appreciated in value; wouldn't it make far more sense for the suitor company to make its takeover move before all this happened?
If an acquiring firm did make such a move, the establishment of some sort of Investment banking relationship would probably be the next step. Knowing that the market value of the shares of the company being acquired will be the starting point of related acquisition negotiations, and wanting to get its acquiring-firm client the lowest price it can, the investment banking firm in this example would then have a financial incentive to lower TIGR share prices.
By far the most effective way to accomplish this contrarian task would be the aggressive selling of long shares, which is exactly what's been happening lately.
2) Share Conversions - Like many small cash-strapped companies that have yet to show a profit, Tiger Telematics has issued restricted TIGR shares to pay for many of the goods and services it has required thus far.
And because restricted shares cannot usually be sold for at least one year, and sometimes even longer, when they are received in lieu of cash, they're typically priced at a deep discount to prevailing market value. Also, in cases like TIGR, where less than six months ago its shares were trading below a nickel, sizable quantities of restricted shares are often issued, frequently in exchange for services that really didn't involve much value - but now the related shares do.
Bearing the above in mind, let's say that a group of individuals who hold a bunch TIGR shares long, let's say 2 million shares, really and truly believe that TIGR shares have significant potential (which they would if they had read all Sparky's write ups).
Now let's say that this same group becomes aware of another group that holds let's say 6 million restricted shares. In this example, provided that restricted shares can be bought at a deep discount to market, it would make much sense for the group holding long shares to try and convert those shares into a far greater number of restricted shares.
So to raise the funds needed to buy the restricted shares, the group in this example that holds TIGR shares long would first sell them. And to reduce the cost of the restricted shares being bought, which would be priced at some agreed-upon discount to market, the long group would simply liquidate their long shares aggressively, which would then knock down the share price to which the restricted share cost is tied.
3) Aggressive Short Selling - Back in late February, TIGR share prices reached an intraday peak of 67 cents on record volume of 3.8 million shares. During the previous 7 sessions, TIGR shares had seen daily volume over a million shares (over 2 million on 3 of the 7 days) and the price had soared from 25 cents to 45 cents.
Now because TIGR shares had risen so rapidly, Sparky initially attributed the subsequent sell off in early March to profit taking. But now that he's witnessed what's happened over the past 20 sessions, Sparky finds himself seriously wondering if we didn't see some aggressive short selling back in late February, short selling that's now created an incentive for shorters to drive prices down even further in their attempts to lock in sizable spreads.
Looking back at Time & Sales data during the last week of February and the first week of March, Sparky now believes as many as 3 or 4 million shares may have been shorted. In support of this observation, it appears that as many as another million shares were shorted between March 18th and March 22nd, a period where intraday share prices hit 61 cents each day, but a close above 60 cents never happened.
And since what appeared to be a second round of shorting happened, we've had 20 unusual sessions and in 18 of the 20 sessions, TIGR shares closed below their weighted average price, which Sparky thinks smells like tape painting.
Sparky has no way of knowing which one of the three possibilities above explains why TIGR shares have plunged 18 cents. In fact, the explanation could even involve a combination of two or more.
What Sparky is sure about, however, is that strange forces are at work here, forces that have temporarily stripped the market of all its desired efficiency. Specifically, regardless of why these forces want to depress TIGR shares prices, the fact is that they have so far succeeded; and in doing so these forces have significantly and artificially deflated the market's valuation of TIGR shares.
For this reason, Sparky highly recommends that investors seeking significant near-term growth immediately and aggressively accumulate TIGR shares.
And for a far more in-depth discussion of why TIGR shares are such a bargain anywhere near levels, readers are urged to check out Sparky's latest TIGR write up, which can be found at the link below.
Sincerely,
Sparky
