FalconStor Software, Inc. (NASDAQ:FALC) Is A Prime Turnaround Opportunity
Momentum & Growth

FalconStor Software, Inc. (NASDAQ:FALC) Is A Prime Turnaround Opportunity

Today, we need to assess a new profile that landed on the OTC Markets Exchange from the NASDAQ on September 25, 2017. It is called FalconStor Software, Inc. (NASDAQ:FALC).

Logo of FalconStor Software, Inc. NASDAQ:FALC

Company Logo

In such cases, the market participants usually tend to sell the stock rapidly creating a major share price collapse. We appreciate checking these events, as sometimes the market pushes down the share price to complete illogical levels.

Have a look at the share price reaction after September 25, 2017. The share price went down to almost $0.20 and almost 4 million shares changed hands.

One month stock chart for FalconStor Software, Inc. NASDAQ:FALC

1 month chart for FALC

Is the share price collapse justified?

This is what we will be assessing in this article.

Business

FALC is a Delaware Corporation focusing on providing converged data services software platform, which is hardware agnostic. FALC’s operations are explained in the following way in the company materials:

“The Company develops, manufactures and sells data migration, business continuity, disaster recovery, optimized backup and de-duplication solutions and provides the related maintenance, implementation and engineering services.” Source

FalconStor Software, Inc. also owns twenty-seven patents and numerous pending patent applications. Additionally, as of December 31, 2016, 166 full-time employees were working for the company. Clients noted on the company’s website include Stadtwerke Saarbrücken, Yonex, Imptech, Sunrise Communications Group, Telefonica, and Egenera, which was founded in March 2000 by the CTO of Goldman Sachs.

Recent Developments

On August 17, 2017, the company announced the election of a new CEO, Todd Brooks, and a new CFO, Patrick McClain. Additionally, it was noted that Todd Oseth, former FalconStor President and Chief Executive Officer, was going to take a strategic industry advisor role to support the company’s reorganization efforts. Finally, we also got to know that Dan Murale, former FalconStor Chief Financial Officer, had resigned to pursue other opportunities.

In our opinion, the market should have appreciated the changes, as they show that the company was really trying to change the company’s direction. Additionally, the fact that the company noted its reorganization efforts should have also been liked. Finally, the words of the new CEO in which the shareholders were mentioned and the term asset maximization are also very significant:

“To maximize these assets, the Company’s commercial and operational fundamentals must be refocused.  I am excited to lead these efforts and position FalconStor for long-term success delivering differentiated value to our customers and shareholders.” Source

On September 22, 2017, the company announced that the shares were not going to be traded anymore in the NASDAQ exchange. From September 25, 2017, the stock is trading on the OTC Markets exchange.

The following are the company assets. Please note that there is some cash and the company owns intangible assets and goodwill (patents).

Period Ending 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Current Assets
Cash And Cash Equivalents 1,647.695 3,431.763 3,391.528 5,643.61
Short Term Investments 500.04
Net Receivables 2,986.927 3,525.036 5,003.972 3,786.846
Inventory 6.181 6.181 6.181 6.181
Other Current Assets 875.598 1,237.323 1,245.085 1,357.254
Total Current Assets 5,516.401 8,200.303 9,646.766 11,293.931
Long Term Investments
Property Plant and Equipment 858.978 989.719 1,174.942 1,129.565
Goodwill 4,150.339 4,150.339 4,150.339 4,150.339
Intangible Assets 570.83 667.168 757.014 864.682
Accumulated Amortization
Other Assets 1,010.247 1,026.401 973.949 1,037.763
Deferred Long Term Asset Charges 580.395 580.419 577.735 128.99
Total Assets 12,687.19 15,614.349 17,280.745 18,605.27

Source

The following are the liabilities:

Accounts Payable 4,468.765 4,512.1 4,890.887 5,875.457
Short/Current Long Term Debt
Other Current Liabilities 13,998.843 15,809.374 15,236.123 14,589.751
Total Current Liabilities 18,467.608 20,321.474 20,127.01 20,465.208
Long Term Debt
Other Liabilities 1,217.275 1,159.992 1,170.844 1,008.067
Deferred Long Term Liability Charges 7,539.783 7,901.655 8,685.468 8,933.953
Minority Interest
Negative Goodwill
Total Liabilities 27,224.666 29,383.121 29,983.322 30,407.228

Source

There are market participants who owned shares recently. Have a look:

Holder Shares Date Reported % Out Value
Nantahala Capital Management, LLC 2,841,368 Jun 29, 2017 6.38% 767,169
Vanguard Group, Inc. (The) 1,382,941 Jun 29, 2017 3.10% 373,394
Blackrock Inc. 950,216 Jun 29, 2017 2.13% 256,558
Teton Advisors, Inc 745,000 Jun 29, 2017 1.67% 201,150
Virtu KCG Holdings LLC 408,350 Jun 29, 2017 0.92% 110,254
Herald Investment Management Ltd 400,000 Jun 29, 2017 0.90% 108,000
Gabelli Funds, LLC 380,000 Jun 29, 2017 0.85% 102,600

Source

Additionally, insiders bought shares in the month of August:

Insider Transaction Type Value Date Shares

ESW CAPITAL, LLC

Purchase at $0.39 per share. Direct 136,476 Aug 22, 2017 349,941

ESW CAPITAL, LLC

Purchase at $0.36 per share. Direct 371,859 Aug 21, 2017 1,032,943

ESW CAPITAL, LLC

Statement of Ownership Direct Aug 20, 2017 5,016,477

HALE MARTIN M JR

Acquisition (Non Open Market) at $0 per share. Direct May 7, 2017 22,821

Source

Conclusion

Currently trading with a market cap of $11 million, FALC is a turnaround situation for opportunistic investors. This one-time NASDAQ darling could be an OTC gem. Investors should expect some selling thou as funds liquidate due to not being allowed to own OTC stocks. Once the dust settles, FALC could be a runner again. Furthermore, if the turnaround and new management gain traction, look for the company to re-apply for its NASDAQ listing.

We will be updating our subscribers as soon as we know more. For the latest updates on FALC, sign up below!

Image courtesy of Flickr

Disclosure: We have no position in FALC and have not been compensated for this article.

GET NOTIFIED
Sign up for our next MicroCap Runner ahead of the crowd!
We hate spam. No Hidden Fees. Unsubscribe Anytime.
FalconStor Software, Inc. (NASDAQ:FALC) Is A Prime Turnaround Opportunity
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

To Top