What’s going on? As other market participants claimed on the iHub Forum, we also believe that there is war inside the company. In April 2016, Stephen M. Chu acquired 8.23% of the total outstanding shares of the company. He noted that his behavior as shareholder was going to be “passive.” However, in the following months, the market could see that he is behaving more like an activist. On April 19, 2017, the Board of Directors noted that a new Shareholders Meeting was going to be celebrated on May 31, 2017. The meeting was announced for several purposes, but the most significant proposal that was going to be voted was: “Giving grant discretionary authority to the Company’s board of directors to execute 1-for-2 up to 1-for-1,000 (the “Reverse Stock Split”)” Source On May 31, 2017, the company released that the annual meeting of shareholders had been adjourned until June 15, 2017. It was actually that day that we decided to follow the company. When shareholders meeting is postponed in this way, it usually means that shareholders are negotiating something and more time is needed. Furthermore, on June 15, 2017, another filing was released highlighting that the annual meeting of shareholders had been adjourned until June 23, 2017. Again, we believed that some shareholders were trying to convince other holders and more time was needed. On June 23, 2017, we could read that the annual meeting had been adjourned until July 14, 2017. Finally, on July 14, 2017, it was noted that the reverse stock split had not been approved: “At the Annual Meeting, the proposal related to the approval of discretionary authority to the Company’s board of directors to amend the Company’s Articles of Incorporation to effect a reverse stock split, which was set forth in more detail in the Notice of Annual Meeting of Shareholders and the Company’s Proxy Statement sent to shareholders on or around April 21, 2017, was not approved.” Source What’s our take? We believe that Stephen M. Chu pushed shareholders to vote against the reverse stock split proposal. We appreciate his actions, as, in our opinion, a reverse stock split would hurt shareholder value. We believe that the company needs to work on other type of activities to create value in the long term. Focusing on the business and letting the market push up the share price is the right way to proceed. Conclusion Currently trading with a market cap of $0.36 million, TEUFF is an exciting story among small caps. With $2.8 million in assets and $2.6 million in total liabilities, we believe that the company will need new financing soon. In our opinion, the accumulated expertise of the CEO will help raise capital, thus it will not be a problem. We appreciate that Stephen M. Chu is advocating for shareholder’s interests. He seems to be defending small shareholders, which will be good for future value creation. We believe that the worst is behind TEUFF and better days are ahead.
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