NASDAQ Strikes Back

In the past year, 99 companies have joined AIM, whilst 196 have left. That’s a net drop of 97.

Fewer quoted companies means less fee income for the Stock Exchange. This exodus is hardly good for the reputation of the junior market. It is about time that the LSE removed its head from the sand and took this matter a bit more seriously. Consider the story of OCZ Technology…

I am not a shareholder in OCZ. But I did manage to get along to a presentation for its shareholders – of which only one bothered to turn up! I wanted to know whether OCZ could make it on to the short list for my new “bounceback report” – shares that have been dragged down by the market, but which have great underlying businesses (I’ll tell you more on that soon).

Having travelled from America and surrounded himself with his broker, financial PR representative and Nominated Adviser, OCZ’s founder and chief executive, Ryan Petersen, could hardly have been given starker proof that the City seems to have given up on his company.

Nasdaq Strikes Back : What’s gone wrong with this share… when everything seems to be going right?

OCZ was valued at £27m when it floated on AIM two years ago. Last year it hit a peak of 170p but today it languishes at just 11p. Ryan Petersen, who is articulate, enthusiastic and intelligent, is entitled to ask what he has done wrong. I mean look what his company has going for it…

OCZ’s revenue has grown by a healthy 1,241% in the last four years. It has built market share in the hugely competitive market for computer components. It’s steadily lessened its exposure to competitive memory storage products, and built sales of flash storage, thermal management and other peripheral products.

The company also has a good reputation with retailers, which have been increasing their orders, and within the gaming community. To the latter OCZ has just introduced the ‘neural impulse activator’. It sounds like something off Star Trek, but it’s essentially a headband that senses electrical impulses from the brain allowing a gamer to control a character with facial movements and specific thought patterns.

Nasdaq Strikes Back : Trading at less than half what its assets are worth

Despite all this, the shares trade at just four times earnings, and at less than half net asset value. It is true that OCZ’s growth has given it an appetite for short-term finance for its working capital needs. It is true also that OCZ is heading into the important Christmas selling season for which hopes are not generally high.

But if a company is a little naïve in its optimism; if its voracious growth requires working capital; and if it runs into an economic climate that is a little hostile – these are not reasons for despair. These are not reasons for the City to withdraw all support for a small company that is clearly doing plenty right.

Rather than sit and suffer, OCZ is planning to take action – and this is where the London Stock Exchange should sit up and take notice.

OCZ intends to list on Nasdaq. A few years ago this would have been the natural home for a small technology company. But the notorious Sarbanes-Oxley legislation made the cost of a listing on US stock exchanges prohibitive. This caused several to list in London instead. Now Nasdaq is fighting back. It has already relaxed some of its rules and regulatory compliance costs have dropped dramatically in the last twelve months.

Petersen believes that OCZ’s shares are far more likely to be sensibly priced on Nasdaq than they are on AIM. The question is, when and if OCZ gets its Nasdaq listing, will it persevere with its expensive and fruitless existence on AIM? Petersen is saying that OCZ will maintain a dual listing, but I for one would not blame him for cancelling the AIM listing.

Will this share make it onto my “bounceback belters” report? It’s too early to say yet. For now, it’s staying on my list of candidates – I need to do some more work on it to see if it ends up in my top three. I have so many to choose from now, that it’s going to be a tricky job picking the ones I definitely think you should buy.

More on that soon… I’ll let you know when you can get hold of this groundbreaking report.

Until next time,

Tom Bulford

A return to National Government?

BY BEN TRAYNOR

All the comparisons now seem to be between the current crisis and that of the 1930s. So when, I wonder, will things be deemed so bad that a coalition National Government is formed, as happened in 1931?

This may seem far-fetched – indeed, I hope it is, and that things don’t get that bad. But some in the press are already calling for politicians to stop using the crisis to score points and instead work together. Bi-partisanship is the watchword.

The parallels with the 1930s are disquieting, to say the least. A run on the pound forced Britain off the gold standard (OK, so we don’t have a gold standard today…but you can see what I’m getting at). But it’s not the sterling parallel that disturbs me most about this whole thing. There’s another eerie echo that could specifically undermine the British economy.

I’ll have more on that later in the week…

The Daily Reckoning – Mr Market’s Advanced Seminar on Economic Corrections

BY BILL BONNER

Today, we look at a couple of simpletons – one to offer praise...the other, just to laugh at him.

Before we do, let’s look at the headlines.

The Dow dropped another 338 points on Friday. How much more of this can investors take? Berkshire Hathaway fell below $100,000. And GM appeared to be heading for the junkyard.

You can read the Daily Reckoning in full here

P.S. If you enjoyed this article you can find out more about our free email, The Right Side by clicking here.

^ Back to top

LinkedIn
Twitter
Del.icio.us
Digg
Facebook
Google Bookmarks
Livejournal
StumbleUpon