Remember the Bizarro world episode of TV show Seinfeld, where the gang met three men who looked remarkably similar to Jerry, George and Kramer, but acted exactly the opposite? That's what's going on right now with Wall Street. You see the same things but the behavior is completely different.
We'll start today's column with the Bizarro Israeli shares. Everyone's known for a while now that we hold a very high opinion of Mind CTI (Nasdaq: MNDO) president and CEO Monica Eisinger, who manages the Yokneam-based business. And boy, does she manage. That's why the company's moving back to profitability. That's the whole secret. Good management.
Essentially, if you ask us, Mind CTI's situation is just slightly better than Amdocs (NYSE: DOX) because Mind CTI, according to what we see and hear, has already hunkered down and prepared for the economic downturn, in the full sense of the word, while Amdocs is in the process of preparing. And yet, with all due respect to meeting deadlines, etc., how did the share manage to rise 26% at a time like this? If that isn't Bizarro behavior, then what is?
Mind CTI has a market cap of $21 million, which in our opinion is a truly ridiculous price for this kind of company, but there are ridiculous prices aplenty out there. So what's so Bizarro? Mind CTI rose 26% while ECtel (Nasdaq: ECTX) continued its fall yesterday, dropping over 7% on miniscule volume of 60,000 shares.
Why did ECtel fall? After all, there was no announcement, no profit warning - and if none has been issued to date, then apparently there won't be one - so the only conclusion we can reach is that ECtel is falling because of TTI Team Telecom International (Nasdaq: TTIL). TTI continued falling and reached $5.15 yesterday, representing a $60 million market cap. You hear me: $60 million and still going down. Really, ladies and gentlemen, there should be a limit to this insanity.
After all, any one who follows Mind CTI and knows even a little about Monica Eisinger's work will tell you that she will guide the company back to stability and weather this recession successfully. So the Bizarro element isn't that Mind CTI rose yesterday. It's the mad rush to buy. After all, the buyers know full well that if the market continues acting the way it has been up to now, they'll be able to get the share at under a dollar. And we sincerely hope that we're wrong.
These are trying times for companies, and time to consider buying back shares, delisting and going public again on the next go-round.
Take Mind CTI for example. As far as we know, the company has about $40 million in cash (according to the last financial report, it has $9 million in cash and another $30 million in bank deposits). It has 20.6 million outstanding shares, and a share float of only 4.8 million, while options to employees are almost certainly so out of the money that they wouldn't have any problem canceling them and promising some sort of gift in exchange.
Pay attention. Let's say that Eisinger offers $1.5 per share in a buy offer. Respectable, no? How about 50% over the current price, which just went up 26%? No one could say that's unfair. All they need is 90% of the 4.8 million shares. Wait for a bad day and make the offer. And then? In two years, issue shares again at a value of $100 million or $200 million, and you've done the deal of a lifetime. It's the same thing that GM did with EDS, in its day.
So, here are a few companies that would find it worthwhile to do this sort of thing: Given Imaging (Nasdaq: GIVN) for sure. Maybe they should wait until the share falls to $3 first, or take their accountant or lawyer aside and suggest they quit.
Look how that worked for Bio-Technology General (Nasdaq: BTGC). The new accountant quits, after having barely been on the job, and the share falls 30%. And not just any accountant, but KPMG, which replaced Andersen and completed the financial reports that Andersen had started. So why not tell shareholders what happened? Clearly KPMG didn't leave for nothing, especially after overseeing a difficult merger. But if there is some sort of trickery here, in advance of some sort of acquisition announcement, then it's a very original one (we hope you're not taking us seriously here). For $100 million you could have your own private company, Mr. Fass, so go on and cancel the Rosemont Pharmaceuticals acquisition. Who needs this headache?
Published by Globes [online] - www.globes.co.il - on 08 October 2002