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).
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.
Is the share price collapse justified?
This is what we will be assessing in this article.
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.
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).
|Cash And Cash Equivalents||1,647.695||3,431.763||3,391.528||5,643.61|
|Short Term Investments||–||–||–||500.04|
|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|
|Deferred Long Term Asset Charges||580.395||580.419||577.735||128.99|
The following are the liabilities:
|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||–||–||–||–|
|Deferred Long Term Liability Charges||7,539.783||7,901.655||8,685.468||8,933.953|
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|
Additionally, insiders bought shares in the month of August:
|Purchase at $0.39 per share.||Direct||136,476||Aug 22, 2017||349,941|
|Purchase at $0.36 per share.||Direct||371,859||Aug 21, 2017||1,032,943|
|Statement of Ownership||Direct||Aug 20, 2017||5,016,477|
|Acquisition (Non Open Market) at $0 per share.||Direct||May 7, 2017||22,821|
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.
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Image courtesy of Flickr
Disclosure: We have no position in FALC and have not been compensated for this article.