Disclosure: The author has a short position in one or more of the shares mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
As I have pointed out before with Quindell (QPP) there seems to be a strong correlation with the underlying quality of a company and the unblinking loyalty of its hardcore shareholder base. In the case of Quindell this spilled over into unbelievable hatred and invective at anyone who had the temerity to question the company’s obviously questionable practices.
Since I wrote about CloudTag (CTAG) last week, I have had even worse abuse, this time on Twitter, a huge and welcome red flag for a company already festooned with them. (It seems I am part of some sort of peadophile-shorting conspiracy bent on wreaking havoc on the portfolios of diligent and honest investors)
It’s not even as if I wrote anything particularly controversial. I simply pointed out the silliness of “launching” a product at a trade fair which is unavailable to buy more than nine months later. It has also been pointed out that a firm $5.2million order for 2016 from a Blackpool based distributor named Second Chance Ltd announced in January now appears, by CloudTag’s own admission to be anything but firm.
The investment case seems extremely flimsy for a share that has risen fivefold this year and seems based largely (like Quindell and Gulf Keystone) on an almost cult like devotion to and respect for the CEO.
The thinking appears to be that Amit Ben-Haim, who along with his brother, serial entrepreneur Shlomo, flogged a medical devices company named Biosense that they founded to Johnson and Johnson for $400 million are not the sort of guys to be involved in a flop. There must be a plan to sell out down the line to one of the big players (Apple perhaps. Fitbit would do nicely) Such thinking, in my experience, often ends in tears and recriminations.
One thing I concede is that the company is very good at issuing shares. Since flotation in 2013 the number of shares in issue has more than doubled with around 210 million issued at regular intervals both to new shareholders and to shadowy and, for the most part unnamed, third party “advisors” in lieu of fees.
It’s difficult to know where all this money goes. Perhaps the next tranche will be used to manufacture the product in order to make good on that $5.2 million distribution deal earmarked for 2016. Otherwise this is a show that will not stay on the road much longer. There is no borrow currently but the shares remain a stand out short if any becomes available.
This article first appeared on the Nifty Fifty website which Lucian Miers runs with Tom Winnifrith & Steve Moore. To access the website ahead of the next share tip from Tom & Steve and ahead of a new shorting idea from Lucian GO HERE
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