Good morning! This wake up call is brought to you by a very happy fellow shareholder. I got a call before 7am. Good thing I was already up, sort of. The network of friendly MVIS shareholders, which for years has closely resembled a crisis support group, kicked off emails and phone calls as MVIS jumped 40%, crested up over 100%, and ended the day just about a 98% gain. There must be great news, right? That is the way the stock market is supposed to work. Well, there was news and there wasn’t. Welcome to the world of investing in tiny disruptive companies.
(Here’s my MVIS primer.)
Other investors may not be surprised that I tend to wake up at about 6:30, just about when the market opens. Almost every day I wake up, check my stocks, see that nothing special is happening, and then roll over for another half hour or so. Handy things, these iPads. I can check in on the world in less time than it takes to put on a robe and sit down at a computer. Today I woke up, noticed about a 20% jump, didn’t see any news on Yahoo or on the company’s site, and shrugged it off to the volatility of small cap stocks. Minutes later the phone rings. The stock is up 40%, and fellow shareholder and blogger Peter Jungmann, has found the news. Sony is working with MicroVision. Finally, we have a name to go with one of the five possibly major OEMs that management has alluded to. Sony, definitely a good name. As good as the news was, I rolled back over because I wasn’t planning to do anything about it – except watch the stock throughout the day.
By the end of the day, the stock had settled to its 98% gain. I’ll celebrate that. Sony’s news was a public vindication of MicroVision’s technology. I also confused a few other stockholders. There really wasn’t any news. Yes, Sony is working with MicroVision, but nothing was announced that would change the valuation of the company. No specific product launch date, expected shipment volumes, or financial details were mentioned. Sony didn’t even mention MicroVision in the body of the press release. MicroVision was called out in a footnote. MicroVision hadn’t made an announcement. MicroVision hadn’t even retweeted Sony’s announcement. Slashgear, Engadget, and several investors had passed the word along; but MicroVision was acting as if nothing was happening. The company is either very coy or oblivious.
There was no news, but the stock doubled, and traded more shares than exist. Lots of investors weren’t trading, but evidently lots of other investors, speculators, and traders were shuffling shares fast enough to totally change the ownership of the company, though the actual shareholder list is probably almost exactly the same.
One of my investing mottos is, “What’s the company worth?” Regardless of the percentages and trading volumes, comparing the company’s worth to the market’s estimate via the market cap is my main criterion for major celebration, and action. (Details in my book.)
According to the market and the price it put on MVIS, MicroVision is finally worth more than $50,000,000; which puts it back above a key measure for being listed on the open market. Good. MVIS had other listing problems before, which is why it had a 1-for-8 reverse split awhile ago. The company struggled to keep the stock above $5 a share, failed, conducted the reverse split, and watched the market cap slide below the $50,000,000 limit and the shares approach $1 per share. In pre-split terms, today’s price rise was only about $0.165 per share. Taking the stock back to the same market cap that equates to the pre-split $5 would put it post-split at $40. Today, the stock rose $1.32. If MVIS continues this trend for 28 more trading days, MVIS would finally be back to $40, aka the pre-split $5. That’s hard to imagine, but that’s the math.
Maintain these conflicting notions:
There really wasn’t news. The relative price appreciation was actually small.
This is really good news.
This is really good news because, despite any quantitative news, the stock moved enough to hit the NASDAQ Most Actives list. If such small news can produce such large action, then when the real news hits there may be much larger action. And this is just the news from one OEM. My interpretation of management’s inferences is that at least three other major OEMs could also announce similar and better news.
As I’ve posted in the past,
“One investor estimates MVIS’ worth as $1,200 – $1,500, and considers it to be conservative. My estimate is more modest, but $600 – $1,000 . . .“
Such valuations don’t happen overnight. The largest single gain I’ve experienced was 240% in a day. The largest I’ve seen in the market is more like 640% in a day. It will take a lot of days to rise from $1 to $1,000. A lot can happen in those days.
But, what’s the company worth? Present value based on present revenues doesn’t justify today’s price. Present value based on future revenues can justify phenomenal prices, especially with the appropriately long list of optimistic assumptions. It could happen. Many things could happen. Something undoubtedly will. Until then, we shareholders are in for a long anticipated ride; especially, if MicroVision even announces news.