By Lucian Miers | Saturday 12 August 2017
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.
I promised last week to go in to the numerous inconsistencies in the numbers presented by Purplebricks (PURP) but that is going to have to wait as this week’s story has got to be Telit (TCM).
The analysts at Cannaccord, RBC Capital Markets, Berenberg and Morgan Stanley must be hopping mad. It can’t be often that they are soft- soaped by a smooth-talking CEO into calling the bottom of a 40% share plunge only to get another one the following day when it turns out he is wanted by US plod for a clinical and brazen fraud which involved forgery of documents and deceit of the highest order. (If readers can’t wait for the salacious details which Telit’s appointed solicitors will shortly divulge (or should) they are all in the public domain at www.ShareProphets.com )
The implication in Wednesday’s statement from its luckless two-day old NOMAD Finncap is that it was all a long time ago and therefore somehow irrelevant. This is extremely lame. Uzi Katz IS Telit whose financial statements have screamed fraud ever since March 2007 when it received €16 million from a state sponsored Italian Electrical firm named BAMES for a 10% stake in its subsidiary Telit Wireless. (what happened to that money?)
Whether or not Finncap resigns, as they certainly should, I predict that Telit is going the way of Globo before Christmas and almost certainly much sooner. Instead of swooning at the phrases like “ Internet of Things” and “ Deal with Tesla” like the bozos at the above-named firms the guys at Finncap should do some due diligence on Telit.
If they are too bashful to pick up the phone to Cantor and beg Kevin Ashton to walk them through how to research Software Companies, here free of charge, are some hints:
Look at the quality of the ballooning receivables
Look at the rationale behind the dilutive acquisitions
Look at the vendors of the companies acquired
Try putting the capitalised development costs through the P&L and see if it makes much difference.
Ask yourselves how much the company has raised in debt and equity over the last eleven years, subtract the current cash balance and paltry sums paid out in dividends and figure out where the remaining money went.
Find out who at Telit negotiated the bank loan from HSBC and seek assurances that the bank is not getting jumpy.
Hire an Italian speaker to research the background to the high- profile bankruptcy of Italian electronic manufacturer BAMES-Sem and Telit’s role in it.
Are investigations by the Italian authorities into Mr Cats’ (soon to be Katz’s) role in this sorry affair still ongoing or not?
Finally ask yourselves this? Is your fee from Telit, and a little short term embarrassment of resigning now, not worth trading for the extremely high chance of being hit by a huge juggernaut that is coming down the road at you right now with gathering speed and beginning to lose control? I would say not but what do I know?
This article first appeared on the Nifty Fifty website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tip from Tom & Steve shortly and a new shorting piece from Lucian next week click HERE
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