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). Company LogoIn 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. 1 month chart for FALCIs the share price collapse justified?This is what we will be assessing in this article.BusinessFALC 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 DevelopmentsOn 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 Ending6/30/20173/31/201712/31/20169/30/2016Current AssetsCash And Cash Equivalents1,647.6953,431.7633,391.5285,643.61Short Term Investments---500.04Net Receivables2,986.9273,525.0365,003.9723,786.846Inventory6.1816.1816.1816.181Other Current Assets875.5981,237.3231,245.0851,357.254Total Current Assets5,516.4018,200.3039,646.76611,293.931Long Term Investments----Property Plant and Equipment858.978989.7191,174.9421,129.565Goodwill4,150.3394,150.3394,150.3394,150.339Intangible Assets570.83667.168757.014864.682Accumulated Amortization----Other Assets1,010.2471,026.401973.9491,037.763Deferred Long Term Asset Charges580.395580.419577.735128.99Total Assets12,687.1915,614.34917,280.74518,605.27SourceThe following are the liabilities:Accounts Payable4,468.7654,512.14,890.8875,875.457Short/Current Long Term Debt----Other Current Liabilities13,998.84315,809.37415,236.12314,589.751Total Current Liabilities18,467.60820,321.47420,127.0120,465.208Long Term Debt----Other Liabilities1,217.2751,159.9921,170.8441,008.067Deferred Long Term Liability Charges7,539.7837,901.6558,685.4688,933.953Minority Interest----Negative Goodwill----Total Liabilities27,224.66629,383.12129,983.32230,407.228SourceThere are market participants who owned shares recently. Have a look:HolderSharesDate Reported% OutValueNantahala Capital Management, LLC2,841,368Jun 29, 20176.38%767,169Vanguard Group, Inc. (The)1,382,941Jun 29, 20173.10%373,394Blackrock Inc.950,216Jun 29, 20172.13%256,558Teton Advisors, Inc745,000Jun 29, 20171.67%201,150Virtu KCG Holdings LLC408,350Jun 29, 20170.92%110,254Herald Investment Management Ltd400,000Jun 29, 20170.90%108,000Gabelli Funds, LLC380,000Jun 29, 20170.85%102,600SourceAdditionally, insiders bought shares in the month of August:InsiderTransactionTypeValueDateShares
Purchase at $0.39 per share.Direct136,476Aug 22, 2017349,941
Purchase at $0.36 per share.Direct371,859Aug 21, 20171,032,943
Statement of OwnershipDirectAug 20, 20175,016,477
Acquisition (Non Open Market) at $0 per share.DirectMay 7, 201722,821SourceConclusionCurrently 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 FlickrDisclosure: We have no position in FALC and have not been compensated for this article.
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