Fortunately, we don’t own any more Magic Jack stock and actually made money on it. I’m sorry I just can’t handle the bizarre way management treats their shareholders. I never buy reverse merger stocks but the story and product on this was so compelling. I’m not going to make any allegations here because bloggers have been getting sued left and right but let me say, I have to redo my checklist. There is a flaw in the process as there is no way to account for the possibility of fraud. Granted this possibility exists in almost any transaction. Magic Jack is no exception. Formerly one of the highest rated stocks we’ve seen, (saxangle.com/2012/04/call-magicjack-vocal-tec-ltd-snapshot/) we are now withdrawing our rating entirely. This is why:
Approximately three weeks ago 4/27 CALL announces that their stock is so cheap, they are going to buy back another $20 million of it.
4/27/2012 | GlobeNewswire
WEST PALM BEACH, Fla. and NETANYA, Israel, April 27, 2012 (GLOBE NEWSWIRE) — magicJack VocalTec, Ltd. (Nasdaq:CALL) (“the Company”), a cloud communications leader that invented voice over IP (VoIP) and sold over nine million magicJacks®, announced today that upon finishing the current $55 Mil buyback plan, the company has been authorized to start a new $20 Mil buyback plan.
Nearly simultaneously they announce a Loyalty Rights Offering. Upon further review the so called Loyalty Rights offering is nothing more than a 1 for 4 stock split that you have to pay $2 to participate in and get a 30 day option to buy 1 share for every four you own, I think. It’s very convoluted. Come to your own conclusions:
WEST PALM BEACH, Fla. and NETANYA, Israel, April 27, 2012 (GLOBE NEWSWIRE) — magicJack VocalTec, Ltd. (Nasdaq:CALL) (the “Company”), a cloud communications leader that invented voice over IP (VoIP) and sold over nine million magicJacks®, today announced that it plans to distribute non-transferable subscription rights to present (Loyal) shareholders of record owning stock on May 7, 2012 to purchase ordinary shares at a subscription price to purchase one ordinary share for $2.00 for every four ordinary shares owned. The company’s cash balance will increase over $10 million if all the rights…
The stock spikes on this news inexplicably to me. I blow out of the stock we own despite my favorable impression of the fundamentals because it makes no sense a stock goes up on this to me. After a few days stock trades down and I’m alarmed about the naked puts I’ve sold quite a bit below the current price. I actually like their product and business model. I contact the company and the CBOT asking when the option strike price will be adjusted to reflect the split stock. No word from the Company and the CBOT informs me in their opaque way that they don’t plan to adjust the price.
Then the Company decides shareholders don’t like this deal so much and without warning haphazardly amend it: They decide to eliminate making you pay $2 for a stock split. Duh, haven’t you heard no one does that? Then they decide to extend the deal. But is it for everyone or just people who take physical delivery of certificates and not in street name? Still no word about adjusting the split price. By now I have no idea of what they intend to do. Is this all some kind of ploy to push short sellers out the stock and force a deliver?
5/11/2012 | GlobeNewswire
WEST PALM BEACH, Fla., and NETANYA, Israel, May 11, 2012 (GLOBE NEWSWIRE) — magicJack VocalTec, Ltd. (Nasdaq:CALL) (the “Company”), a cloud communications leader that invented voice over IP (VoIP) and sold over nine million magicJacks®, today announces cancellation of its Rights Offering to shareholders of record on May 18th, 2012. magicJack has decided it is in the best interest of the Company and its shareholders to terminate the rights offering to shareholders. After discussions with interested parties, the Company concluded that it could not go forward with the offering.
Good they’ve canceled the ill-conceived transaction I think and start watching the stock. It’s selling off but the whole market is. I don’t own any but am considering buying back in but management scares me now. I’ve never seen a Company act so impulsively and tout their stock like these folks do. I’m wondering what’s wrong with them? Are they you know what?
But here comes the bombshell. Quietly on May 15th, the Company does a flash secondary between related parties selling stock from the founder to the President and a Director at $14.97 15% below the market. That’s the final straw for me. Rating withdrawn. Who is the auditor on this thing?
I’m sorry I just can’t handle the bizarre way management treats their shareholders.
I’m going to have to change our 10 point checklist to include a smell test.