Going LIVE Thursday @ 1:00PM (SMSI, GAIA, HEAR, MDXG & All Your Q&A)!

Stock Research 2 Minutes

This Thursday at 1:00PM ET, I’ll host a LIVE update on SMSI, GAIA, HEAR, and MDXG. Then, I’ll answer all your Q&A!

Details…

As usual, we need enough people (40) to make it worthwhile, so spread the word and tune in!

If you miss the live broadcast, be sure to check it out later. Cheers!

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I am not a financial advisor. Nor am I providing any recommendations, price targets, or opinions about valuation regarding the companies discussed herein. Any disclosures regarding my holdings are true as of the time this article is written, but subject change without notice. I frequently trade my positions, often on an intraday basis. Thus, it is possible that I might be buying and/or selling the securities mentioned herein and/or its derivative at any time, regardless of (and possibly contrary to) the content of this article.

I undertake no responsibility to update my disclosures and they may therefore be inaccurate thereafter.  Likewise, any opinions are as of the date of publication, and are subject to change without notice and may not be updated. I believe that the sources of information I use are accurate but there can be no assurance that they are. All investments carry the risk of loss and the securities mentioned herein may entail a high level of risk. Investors considering an investment should perform their own research and consult with a qualified investment professional.

I wrote this article myself, and it expresses my own opinions. I am receiving no compensation for it, nor do I have a business relationship with any company whose stock is mentioned in this article. The information in this article is for informational purposes only and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

The primary purpose of this blog/forum is to attract new contacts with professional industry expertise to share research and receive feedback (confirmation / refutation) regarding my investment theses.

Published by Mark Gomes

Mark Gomes is an Information Technology expert with over 20 years of experience. During his career, Gomes led the investment research efforts at numerous IT consulting organizations, including International Data Corporation (1994-1998), and AMR Research (1998-2004), which was later acquired Gartner Group. In 2004, Mr. Gomes founded Pipeline Data, LLC where he provided investment consulting to many of America's most well-respected mutual fund and hedge fund managers. In 2008, Mr. Gomes semi-retired and began donating his research to Seeking Alpha. He quickly built a reputation for accurately identifying inflection points and M&A candidates. Outside of the investment world, Gomes is a Masters Track & Field World Champion and multi-time world record holder. In 2012, he published "Faster Than Forty", which detailed his diet, lifestyle, and training techniques. Today, he serves as a volunteer track coach to children and adults in the Miami Beach community.

Published

104 thoughts on “Going LIVE Thursday @ 1:00PM (SMSI, GAIA, HEAR, MDXG & All Your Q&A)!”

  2. Mark, are you scheduled to speak to the CFO today? Not sure he can disclose much if there is a pending agreement with another T1.. But would be nice to hear what he does have to say about the offering since they didn’t need the cash

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  3. I just hope the funds are not used to take out Bill Smith’s debt, it wouldn’t be a good sign of his faith in the company and if he needed the money it could have been done cheaper and without the warrants

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    1. Taking out the debt was one of the stated reasons, but they raised $7.5M, far in excess of the company’s debt to Bill. If you do the math, doing this deal cost him more than the amount of the debt.

      Cleaning up the balance sheet will improve the income statement. I wouldn’t have done it at this price, but if a tier-1 wants a clean balance sheet, it’s worth it to get the contract.

      It worked great in the case of Sprint last year…

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      1. Looking forward to your video Mark! I was just thinking about this yesterday how they should have raised when the stock was a lot higher, but I suppose there really should be a bigger news behind this. Hope you had some juicy info with your talk with mgnt.

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  4. I believe the tier-1s have a number in mind as to subs maybe 400,000 or 500,000 or some number before they pull the trigger. The good news is that new customers are out running legacy. The balance could have been clean up by Bill just converting the debt to stock and showing conviction and no warrants. Looking forward to you getting more information from management

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  5. Hey Mark;
    Just listened to the call – thanks for all the great info., as always! Couldn’t hear it live due to other commitments.
    Have a great day!

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  6. Mark;
    Ques: Since SMSI seems to be in the”wait time” phase, if the mrkt. has a MAJOR correction (say, 30%), what kind of a hit would a small cap stock like SMSI take ( ballpark range )?????
    Thanks for your opinion!

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    1. I disagree about SMSI being in wait time. Revenues are growing, Sprint is ramping, and they’ve turned profitable.

      While it is true that we are “waiting” for the next big thing, they already have something good going on to validate its valuation.

      So I would probably gold mine with several weight time goodies upstairs first

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  7. Mark, I think you’ve done an awesome job outlining the bullish case for SMSI. What about the bearish reasons for using this cash? Maybe S wants to share in some marketing costs? Some additional engineering required for their products? What are your thoughts on this?

    Also, if it turns out to be an aquisition, doesn’t this make Smith MORE risky? I guess it’s too early to tell, but so far it seems like the investment thesis for SMSI has changed – at least until we get more clarity and info from the company.

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    1. To be honest, this is the rare case when I have to disagree with you completely, Andrei.

      Did you watch my video yesterday? I addressed every issue you just raised (except Sprint… but that issue was addressed long ago — by contract, SMSI is not / can not be responsible for that. If anything, it’s actually a potential source of added revs).

      I’d simply watch (or rewatch) the video, my friend. 💯👍🏼

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  8. That’s no problem, Mark 🙂 sometimes disagreement brings value to a discussion. What I was pointing out was that on this forum, we seem to be long biased regarding SMSI, which is understandable. I do watch all your videos, and I feel like exploring the bearish scenarios deserve a little bit more attention, if anything just to have a balanced point of view and maybe set a floor as to the downside of this particular stock. If I would completely disagree with you, I would put my money where my mouth is and take the other side of your trade, like I’ve done in the past sometimes.

    FYI we are on the same side here, so I hope you’re ‘right’ and I’m ‘wrong’.

    What I mean by investment thesis is the series of my personal reasons for holding a long position, which are:

    1) I understand the company, it’s products, management’s vision and I can follow the execution of this vision quarter by quarter and through our common channel checks. I have a good grip on what’s going on.

    2) I especially like the S&F product and believe it has huge potential. I would like to see them focus on this product before going after anything else (don’t bite more than you can chew, especially when you’re a company of this size).

    3) At my buy price (roughly the same as yours), there’s more reward than there is risk, I have a very good uderstanding of that (upside and downside), and I feel comfortable abot it. Plus, I’ve already made good money, so part of it is ‘house money’ at this point.

    4) It’s a very good diversifier in my portfolio, since it has little correlation with the overall market.

    I think we can both agree that management’s communication has been less than optimal here. This lack of clarity begins to take away from point 1, 2 (and even 3) of my reasoning above. I hope it’s for a good reason. We probably aren’t going to get anything done by chatting on a message board at this point until we know what that raise was all about, but letting off some steam is better than nothing, right?

    Cheers! 🙌🏻

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    1. GREAT post… and I certainly wasn’t stifling the idea of playing devils advocate. In fact, within my closest circles we play devils advocate with each other all the time! 👍🏼👍🏼👍🏼

      All I was saying is that your specific arguments aren’t things we believe can go wrong. Not getting T-Mobile, LL customers not accepting SMSI’s update… things like that are all valid arguments and I’m happy to explore them. 💯

      It’s a ALWAYS a great idea to do that. Can’t understand the risk half of the risk/reward equation without that.

      And yes, I do agree with you that mgt’s communication / strategic transparency has been less than optimal here. In fact, that was a major point I hammered home on the call (and I’ve been told by the CFO that the message has been relayed to Mr. Smith and members of the board).

      Cheers brother 👍🏼

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    2. Andrei, if you are not part of the Story Trading WhatsApp group for SMSI I’d like to invite you to try it out. You’d be a great addition. It’s free and we collaborate with other investors to share info, conduct research, and share our theses/thoughts/concerns. I learned about it thru Mark’s blog a couple months ago. Here’s a link to the site: http://www.storytrading.com.

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    1. I have no way of knowing, so we’ll see! Either way, SMSI made it clear that they’re developing the Sprint app into the central dashboard for all IoT activity and said that the next release will basically make the Location Labs sunset a no brainer. They have multiple paths to generating 40 extra cents of EPS with an enterprise value of about $1.75

      There are risks, but I always weigh them against the potential rewards when making my moves.

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  12. Hindsight, do you think the pretty drastic fade before the offering was technical or really insiders selling to preserve gains and reenter lower?

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    1. I know you were asking Mark and I’m guessing he will answer. I’m guessing it was the hedging activity he’s mentioned in the past before converting warrants. Unless Mark offers better insight, I think that’s the only thing that can explain both the price action AND the volume.

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      1. Life gave a great and viable answer, but the math tells me that hedging wasn’t the primary issue.

        If you understand the relationship between delta and options (a cousin to warrants) you’ll know that SOME additional hedging will be liable to take place at higher levels (I often discuss how I hold an extra large number of shares, but sell call options at strategic times / prices to hedge the excess position). However, the incremental hedging dictated by delta is not that great as the stock goes up (that’s also common sense, since a stock/warrant/option holder doesn’t want to exert downward pressure on the stock).

        Now, I usually don’t have a ton of visibility into what makes a stock move, but in this case, I do (after all, I collected ownership data from investors representing 25% of the outstanding shares… and still receive unsolicited updates and insight from many of them). Based on that, and the knowledge that there’s a decent chunk of SMSI investors using technicals to trade the stock, it’s very clear to me what knocked the stock down:

        1. Investors who bet on a post-earnings bounce. We correctly expected a strong beat vs. the Street estimate. Unfortunately, that became a very crowded trade, so when they delivered, the bet-makers sought to exit their bet (sell the news). This caused #2…

        2. The stock started breaking day trading support levels, which triggered more selling… and that triggered more technical selling until it got to major support in the 2.30 area.

        3. At that point, we can only hypothesize, but I’ve watched the stock long enough to strongly believe there’s a pre-raise leak somewhere. I do NOT condone conspiracy theories, but the stock’s foresight into raises has been too coincidental to be called coincidence… and neither arbs nor people with insider info care about “major support” (btw, don’t confuse both as being bad people – only the latter are evil in my opinion).

        4. Major support broke and more technical traders sold out, along with whoever might have had foresight into the raise (might being the key word, because there’s no way to know for sure).

        5. SMSI is part of the Russell Microcap index and endures some selling pressure when ETFs like IWC fall (and they’ve fallen a LOT of late).

        The good news is that we’re now at levels where investors with a longer-term horizon are now scooping up shares. Those who don’t care about technicals or trading (who incidentally make the most money over time, ala Warren Buffett) know that any ONE major win by SMSI (including a LL sunset) will likely justify an instantaneous triple-digit move in the stock.

        They also know that the odds of such an event seems VERY (and increasingly) likely between now and the next few months. Many are buying and saying, “I’m closing my eyes for the next 6 months and feel great about what I’m gonna have when I open them”.

        In other words, there’s a LOT going on (which is why only a TINY % of investors can make more by trading the stock than simply buying and closing their eyes). In fact, I still have old picks that are FINALLY reaching crazy levels compared to when I first discussed them MANY years ago (ATTU, QADA, DZSI, etc).

        I have a lot more patience than chart watching investors (which is a good part of the reason why I perform better) but I STILL didn’t hold ANY of those stocks long enough. This is where the Buffetts win and we lose.

        Will be interesting to see how the stock trades from here. If this was Mr. Spock’s planet, it would be much higher in price and rise gradually from there. However, we’re on Earth and people like to game what other people will do next. So, I’m sure many investors will wake up one day to news that will make them regret being out of the stock at that particular time.

        After all, one of my mentors correctly taught me that “90% of gains happen in 10% of the time”. If you understand what that means, you also understand why chart-oriented traders don’t outperform their Buffett-like peers.

        But this is the era of trading, so the game will go on !

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        1. The art of patience is something one has to learn through years of experience IMO. Luckily I met people (including Mark) early and I’m already beginning to learn from my mistakes already. I do believe this is probably the best time to buy due to a variety of reasons. I have some time on my hand this morning so i’m just going to list out my thoughts here:

          Reasons to be very bullish:
          – Q4 call indicated t1 signing in 1st half of 2019 (This was conservative as they claimed as well)
          – Q4 call announced a t1t signup for IOT (releasing very soon, q1!)
          – Q4 call reaffirmed that Sunset will be happening soon.

          but more so then the above reasons, i’m looking more towards the offering and why it was done. That’s still the biggest question here.

          If management knows all the above is happening soon and they were not strapped for cash, why would they raise? Bill himself owns 5 million shares so hes diluting himself here (and his own potential).

          Normally I hate to see offerings but this one is definitely different then most I’ve seen as the company was running pretty smoothly without it. So why all of a sudden? Must be some kind of game changing event (whether negative or positive).

          So now there’s a few theories about the offering:

          1) Offering was done to pay off debt/clean up balance sheet (a possibility, but why now?)
          – Buy out? (just putting this in there but imo prob unlikely)
          – t1 forcing them to clean up balance sheet before signing (just something i heard)
          – Management just felt like this is a good time to do it? (doubt it)
          2) Smith gearing up for an acquisition again (another possibility but I’m not sure Bill would risk it at this moment unless its something that’s for sure amazing)
          3) Smith really gearing up for some sort of new expenses coming their way.
          – Could be just gearing up for the new IOT product?
          – Another t1 signing up that will require more manpower?
          4) They actually are strapped for cash or believe they can’t raise in the future?
          – I don’t believe this is the case.

          Anyone else have any additional theories regarding the offering? Personally out of these I believe #1 and #3 are the most likely scenarios. But if it is #1 there must be good reason for them to be doing that out the blue (the t1 deal). I believe management almost hinted at #3 so this is my pick here — in which case should be the most bullish scenario here!

          Anyone else have any other thoughts regarding the theories behind the offering?

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          1. Check out the quote from the PR about the offering:

            “I am pleased with the financing that we announced today,” said William W. Smith, Jr., President and CEO of Smith Micro Software. “This capital raise significantly enhances our balance sheet, giving us maximum flexibility to execute quickly on strategic initiatives, while simultaneously paying off short and long-term debts.”

            Note how Bill states that it enhances the balance sheet — which would allow them to executive quickly on strategic initiatives. Seems like pointing to #1 and the idea that it was done so that a t1 would sign…

            just my hunch.

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          2. Great post.

            For the record, I think it’s a combination of factors. That’s what CFO Tim implied and he’s been very honest / reliable.

            p.s. you forgot about the Spanish version coming this quarter, which matches up with the SMSI salesperson’s LinkedIn profile which says he’s assigned to Sprint, T-Mobile, & Latin American carriers… 🤔

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          4. That LinkedIn profile , he sure seems to have a healthy opinion of himself if he was that good at sales wouldn’t have more than one client?

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          7. Check out this passage from the ALLT call. I passed on investing in them (for now), but like speaking with the CEO.

            They, like SMSI, are going after CSPs (carriers) with third-party apps, but they don’t have competing products. ALLT is more cyber security oriented, which is actually complementary to SMSI’s IoT efforts.

            Take note of the activity levels they are seeing. Then, check out their stock chart. Fundamentally, SMSI should be following suit, but got knocked back due to their raise (despite it being of the bullish “want”-based variety).

            Here you go….

            As I mentioned in the previous calls, we see a growing number of CSPs who see the value and providing secure broadband services at a premium and understand that this is a potentially very large new source of revenue for them and also, key to their customer satisfaction. This interest is across the breadth of the Allot secure product family, including NetworkSecure, IoT secure, HomeSecure, DDoS secure, and the combination with our partners endpoint secure.

            I would like to remind you all that Allot’s ability to provide protection at several locations in the network, while seamlessly providing the same service across customer locations and platforms is one of Allot’s key advantages.

            It is important to note that we are responding to several RFPs that combine two or even three different products of the Allot secure family. This is a strong testament that our strategy of enabling operators with the capability to provide “anywhere, any device, any threat” protection to the consumer and SMB market is gaining acceptance with operators.

            Our HomeSecure product, which we acquired in Netonomy acquisition is in technical trials with several operators, and we expect to have first deal for this product in the coming months. In Vodafone, our largest security customer, penetration rates and the number of paying subscribers continues to grow. Telefonica, while slow to launch the security service, now plans to launch it in the next few months in Spain, and several countries in Latin America.

            I remind you that both Vodafone and Telefonica deals were based on sales of perpetual licenses per subscriber. We are striving to change this model with future customers and are offering OpEx or recurring revenue based deals. We are encouraged to see that more and more operators are open to such a model, and that this offering is meeting a positive response in most cases.

            For example, we recently announced a deal with Swiftel of Australia to provide DDoS protection to other ISPs. This deal is based on sharing the monthly revenues from those subscribing to the service between Swiftel and Allot.

            I believe we will see more recurring revenue based deals close in the coming months — in the coming few months. Deals like this contribute little to bookings and revenues in the short term. So, security bookings and revenues may appear not to grow enough. However, it is these deals that ensure potential long-term revenue growth and success for the business overall.

            Our goal is to build a substantial base of CSPs with whom we have OpEx or revenue share securities deals and then work with them to grow the number of end customers subscribing to the security service, thereby, generating a significant amount of recurring revenues.

            This is all very encouraging and gives me confidence that we are heading in the right direction. Unfortunately, as you know, working with CSPs takes time, with sales cycles typically exceeding 12 months.

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  13. Mark, thinking through this whole offering situation after the initial shock and disappointment, it seems this is actually very bullish for the long term. The main reason I say that about this offering is the warranty conversion to equity. Chardan now has a huge equity stake in SMSI, probably around an average of $2.20. They have more info than any of us. They are presumably not playing this game for a move to $2.50 or $2.80. This does NOT compare in any way to HMNY/Canaccord/Maxim (I’ve heard several people understandably reference HMNY). C/M were selling shares to the public. They were not taking an equity position in private placements in HMNY. Chardan is not just selling shares to a pipe-dreaming following. Nor are they lending money to SMSI. They, inevitably having access to info we don’t have, are taking a HUGE equity position in SMSI. They are evidently very bullish at the $2.20 range. This should bode well for us long term. Any thoughts on this line of thinking, Mark? As always, I appreciate the FREE lessons you give us and for interacting with us. I’ve learned a lot from you.

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  14. Lifebearingwilderness, I thought Chardan was acting as a broker and selling the private placement to investors or other institutions. Are you sure they took this stake themselves. If they did that would be very bullish but they did not take a stake in the prior placements and only acted as a broker I believed.

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    1. Eric, it appears you are correct—thanks for pointing that out. The PR stated the shares were sold to “institutional investors.” I would assume all of these offerings have been to the same institution and/or small group of institutions.

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  19. Actually when I googled it showed me the last conference in California. It is in NY this week, now I need to see if I can change my schedule to attend.

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        1. I did that last week and went live to discuss 🤷🏻‍♂️😂 For competitive (and legal) purposes, companies can’t tell people everything they have planned.

          This is why trusting management is critical. I trust Tim Huffmyer 100%, so it’s all good in my book. Nobody likes the stock’s action, but the market isn’t helping. A fall in the microcap index forces selling in SMSI and it moves a lot on small volume (tho not quite as much as GAIA)… but therein lies the opportunity for Buffett-minded investors. 💯

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  20. Anyone have any thoughts on TPCS? Saw this on Yahoo:

    Nov. 12, 2018 Barron’s–Interview with Ron Epstein Defense Analyst –Bank of America Merrill Lynch

    Quotes from article for what it’s worth

    “The change to Democratic control of the House is the best scenario for defense spending. It points to upside in the defense budget. Gridlock keeps budgets intact, and defense is a bipartisan issue.”

    “…we are in a really robust defense spending cycle.”

    “…we are thinking outlays will peak in 2023,2024…maybe 2025”

    Re: Electric Boat

    “Right now we are in a bull market for submarines. The Virginia-type is replacing the Los Angeles class of attack subs. The Columbia class replaces the Ohio class of ballistic-missile subs. That all bodes very well for their ship business.”

    These are very bullish comments regarding the market that TPCS is participating in.

    GLTA

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    1. I’ve made initial tweaks, but I don’t make it a point to keep it 100% updated. I’m generally comfortable with my models merely being in the ballpark. I leave the model in the public view for your use as a template, so feel free to download and update for yourself!

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  24. Mark, what are your thoughts on usat/usatp? If I remember correctly you were playing it by buying the preferred. It seems like the preferred would be holding up a little better if they go belly up based on your thesis of the shares being worth 40 plus if the co went out of business. Has your opinion changed at all? Thanks

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    1. I still feel the same.

      However, to correct you, USATP was worth about $42.20 as of 6/30/17 and grows $1.50 per year (so, $44-45 now).

      If they go bankrupt, we’re entitled to the first ~$20M that comes from the liquidation. If a full $20M came (I believe it would, because of the value of the assets, customers, etc), USATP shareholders would get the full $44-45 per share. Any fraction received would result in a commensurate fraction for the USATP holders. So, at today’s prices, USAT’s assets would have to be worth less than $7.6M.

      Whether it’s M&A or bankruptcy, I like that bet. USATP has fallen and yet it’s odds of getting acquired or going bankrupt has increased dramatically with this recognition issue 😎

      *********************

      In other news, bullish earnings and guidance from TPCS 🔥 Back to profitable and guiding to that to continue for the rest of the fiscal year (ends March). That’s the first time they’ve ever done that 🙌🏼

      Also mentioned being involved with aircraft carriers for the first time ever!

      Contract assets up too. Orders were strong and backlog was up significantly in the quarter 🔥 Cash usage was to ramp up new projects 😎 Things are picking up!

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      1. On USATP I understand the protection from downside risk in a bankruptcy, but can’t quite see what the upside is on this.

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        1. USATP is worth $10 per share, but has $34 per share of accumulated unpaid dividends, which are payable upon liquidation (with first rights over common shareholders). Read last year’s 10-K. Not many people know about it!

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  25. I caught the tail end of the TCPS conference call. I was not impressed. I’m going to have to go and re-listen to the beginning of it. Anyone else listen to it? I heard Mark ask one question at the end. Mark what are your thoughts?

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  26. Mark good to hear you on the TPCS call. I agree, Alex Shen doesn’t do any type of forecasting. The 16 million dollar backlog at the end of October is a dramatic increase from a year ago where it stood at 11 million. Also up nicely from the 12.1 million at the end of September this year.

    For the first time since Alex has been on board they have started doing work for aircraft carriers. This is exciting and could add materially to their business going forward. The work is with Huntington Ingalls at Newport News.

    Once the submarine orders get released for Block V it will be off to the races. The earnings leverage will be huge.

    GLTA

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  27. Quick question regarding Sprint Drive. Under the assumption that the app/product have nothing to do with SMSI — This product has a lot of the same tracking features as SMSI. Is Sprint working with another vendor that’s doing something very similar to Smith, if so what’s preventing them from working with this vendor and not Smith? Would it be strange for Sprint to have two different companies that do geotracking for them?

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        1. BINGO! As I’ve been saying, one of the key things SMSI will enable for customers is a centralized platform for seeing all IoT devices and use-cases.

          In other words, SMSI’s product will provide functionality AND VISIBILITY into complementary and even competitive products, thus becoming the central hub for monitoring ANY IoT device.

          People just need to stay focused on the big-picture tea leaves instead of getting excited and/or spooked by each new little data point😉

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      2. And that’s just cars! FYI, this product is very device centric and includes things like wifi. Not something I would expect SMSI to even compete with. They have plenty of other fish to fry. No need to compete aggressively in one area when there are big categories they more easily win.

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    2. Assuming that’s the case, it’s not strange at all. Many carriers have multiple vendors, just as Sprint now appears to have multiple SMSI products gearing up… just as many are liable to add SMSI’s new IoT functions without buying their current ones. It actually mirrors the common practice of corporations buying a mix of software packages to run their businesses.

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  28. Hi Mark, can you offer any insight into the the amendment of previously issued warrant agreements (which was part of the recent offering)? What type of changes would need to be made to the warrant agreements to allow Smith Micro to reclassify the warrants as equity?

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    1. That would be a lot of detail. Suffice it to say that those amendments (and more) are there and favorable for SMSI. While retail investors didn’t like the round (when do they ever?) it gave SMSI at least half a dozen positives by my count (many were discussed in my last live video).

      Good question tho. 👍🏼

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    2. Increasing my position in at least four of my top holdings today. Won’t say which ones (yet). Those who do their homework and follow my lessons should be able to figure at least a couple of them out 🤔😉 Recent information and/or common sense tells us to be buying several of these names… so I am 😎

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          2. The transcript is a GREAT exercise in professional investing. Anyone who wants to hone their skills should read it… I will review it the next time I go live so eager beavers can compare what they interpreted to what they should have picked up 😉

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    1. I’ll never understand why people (even smart ones) make comments like that when a stock is dropping (especially without any fundamental reasoning).

      Personally, I hope it does drop there. Fundamentally, they’re in a much better place than they were in March.

      Yet, the only reasons I can see for it are that 1) investors are getting nervous about the market, 2) they’ve grown impatient, or 3) they’re getting squeezed out of positions because they were investing on margin and now face margin calls.

      #3 would be the saddest, since I’ve been discussing the importance of hedging for months… but everyone must learn on their own, as I did.

      In the meantime, this is a fundamental chat board, not Yahoo… so if anyone wants to discuss why this profitable company with growing revenue and multiple paths to significant expansion should be falling, THAT is what should be getting discussed here.

      Not upset (at all), just trying to keep folks focused on the right things. That’s what we’re supposed to do I’m up AND down times. It’s not easy, but it is once you get used to it… even when you own as much of a stock like this as I do 😉

      Cheers

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        1. You could also genuinely state a possibility that it will rebound 20% next week… 😉

          …so, why choose one vs. another without any substantiation?

          Again, not upset or attacking. People do the same thing when it’s rising… and for the record I used to do the same thing when I was younger. However, it makes little sense if we think about it 🤔

          Understanding why we do it is valuable in understanding investor (and self) psychology, which is a powerful tool to have in an investor’s belt. 😎

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          4. They have multiple days of meetings. Plus, pro investors don’t just jump in (as retail investors often do). They delay can be days or weeks (and sometimes even months).

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      2. Mark, why would you want it to drop to $1.50/$1.60? So that you can buy some more shares at a seemingly advantageous price? What about POSITION SIZING?!! 😲

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        1. You actually just hit the nail on the head. Think about it…

          If the stock drops in half, my position size is half of what it was. Yes, my total net worth might be a little bit lower because the stock dropped, but maybe not.

          Either way, I can buy a lot more to bring the position size back up to where it was 😎

          I did that with my first-ever 10 bagger after it dropped from 30% in my first 9 months of holding it 😇

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  30. Did smsi have a road show in NY today and if so can we find out what was said.
    Mark hopefully this info is more at your finger tips but do you know how much cash comes in to smith if all the warrants are exercised and what is the new breakeven with quarterly sales (presently 6.5m) or how much in sales will they have to do for non-gap to be 0 with the increase in outstanding shares. sorry for the redundancy .

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    1. I have contacts meeting with them, but obviously they are making their moves before giving me the information and I will be making my moves before giving it to anyone else. That’s just business… but I am giving hints to those who listen and will give as much info as I can as soon as I can 👍🏼

      As for the warrants, anybody involved with stocks should learn how to look that up and do that calculation. Remember, I do this to educate, not to feed. Otherwise, I will be charging for the service. 😉😎

      Good questions though! Always good to ask. 💯👍🏼💯

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  31. Mark, what are your thoughts on over analyzing? There are a lot of stories right now since the second offering, so many assumptions. Do you think it can get to a point where it causes more damage than benefit?

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    1. Everybody already knows my thoughts on that. Confirmation bias is the human way of making sense of a situation that doesn’t make sense or justifying an unsubstantiated opinion on any given matter.

      In this case, that causes people to pay more attention to negative data points and give them more weight in their analysis. That’s a major mistake.

      Similarly when you have a market correction like we’ve had, people lose a lot of money and fear losing more. Fear is one of the biggest money losers for investors, because it causes them to sell when they should be buying, just as euphoria causes them to buy when they should be taking profits or hedging.

      But I can’t stop people from doing that… but that knowledge pays me dividends because I can predict how the average investor will react to a situation and make trading moves based on that.

      Asked for the secondary offering, I’ve said it too many times, but the CEO is the largest shareholder and wouldn’t have done the offering if he didn’t feel that it was in the best interest of his company (and pocketbook!).

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  32. my point is this they have 8m in cash on there balance sheet plus the 4.5m raised in the last offering (after debt payoff) plus at 2.20 for the warrants from the last offering would raise another 7m plus the warrants from the first two offering may raise another 10m were at almost 30m so buying a company for 15m is not out of the question if they can get the investors to convert.There bankers wed site states they do deals between 10 and 200m.If they pay 2X sales that would be 7.5m additional sales added on to there 30m in sales with less the 35m shares outstanding.
    That’s over 1.00 per share with a gross profit .85 per share
    I know these # are rough but I am just trying to start a discussion hopefully you can firm up the numbers.

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    1. Good discussion to have, but the warrant holders won’t convert until the stock is substantially higher. It makes no sense for them to do so.

      Personally, I don’t worry about who they will acquire or not. Just knowing that they are committed to making it quickly accretive (if they do one) is enough for me.

      I let them do their job in that frees me up to do mine… which is finding more potential winners like this one 😎

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  33. Is it possible with the announcement the stock could rise to a point that would make them want to convert and also knowing if they didn’t there would be no deal. chicken and the egg I guess

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    1. Anything is possible, which is why I focus on the value of the company instead of things the might impact near term stock movement.

      The former makes the world’s wealthiest people and requires less time. The latter leads to trading mistakes and consumes endless hours.

      I, for one, am thankful I was able to make the switch 🙏🏼

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  34. I, like all others on the forum, think there would be a new deal for SMSI. On the other hand, I have a little concern that whether the new share offering was required by Spring. It was simply another funding requirement for the Spring deal. What do you think?

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