Microvision (MVIS) – A Visual Opportunity in Discounting

by Jon Ogg | November 19, 2009 11:46 am

Microvision (MVIS) – A Visual Opportunity in Discounting

Microvision, Inc. (MVIS[1]) has been one of this morning’s top losers on the NASDAQ, after the company priced a deeply-discounted secondary offering.  The company, which makes visual displays for autos, as well as mini-projector displays and even wearable displays, could have much relevance today, and perhaps much more relevance tomorrow.  Most importantly, MVIS makes handheld bar code scanners for retail, mobile inventory, health care, and many more applications. 

  Is Buffett Playing It Safe?[2]

Most recently, interest in Microvision has come on the back of its unveiling of its picoprojector technology, which allows users to turn small devices like cell phones and laptop computers or even gaming systems, into video players without the need for a TV, computer monitor or video projection screen. Unfortunately, this is a product that loses money.  But this is also a company that could be a tool chest acquisition for a larger company in this sector.

As far as the financial terms, the company sold some 6.7 million shares of common stock at $3.00 per share.  At first blush this morning it almost appeared to be a typo… yesterday’s closing bell price was $4.11.  Suddenly it is of little surprise why Microvision shares are down over 20% at $3.27 on the dilution.  But the company’s earnings, reported at $11.5 million last quarter, is already out of the way, as it was reported in late October.  Revenue was under $1 million, so you can see just how speculative and emerging this company is at this stage.  That is changing, as more of the products are reaching commercialization.

Oppenheimer & Co. and Thomas Weisel Partners were the joint book-running managers; and Craig Hallum Capital was the co-manager.  These underwriters received a 30-day overallotment option for up to 1 million shares.  Based upon the discounting and the reaction today, it is a safe bet that the option was or will be exercised.  Microvision probably just bought some new analyst coverage, as neither Oppenheimer nor Thomas Weisel officially covered the stock before.  What are the odds that the coverage will be “outperform” in their ratings now?

Microvision expects $18.7 million from the offering and listed the use of proceeds for general corporate purposes. 

That figure would be about $21.5 million if the underwriters’ option is exercised.  The company was running very low on cash with just over $20 million in cash and equivalents at the end of the September quarter, with very little debt.
It is generally easy to pan a company when they do such a deep discount on a secondary offering.  But Microvision has been a low-priced stock for more than five years, and it has a very strong product offering with some aspects of the products just coming on the market for commercialization.  This is a stock that some traders have speculated could be an easy acquisition target by many much larger players.

Before earnings, Microvision was a $5 stock.  Then it was under a $4 stock before recovering recently.  Suddenly today, it is a $3.30 stock.  With a $250+ million market cap, today’s offering is probably hitting the stock more than it deserves, even if there is a risk of further offerings down the road.  It is always easy to say that maybe Microvision was too eager to raise cash because of that discount, but with its product line-up and with sales expected to start coming on in 2010, it seems more like an opportunity than a red flag.  The large drop in the market is probably keeping added pressure on Microvision that would not otherwise be there.

At 10:50 AM EST there have been 4.4 million shares traded. MVIS has an average daily volume of about 870,000 shares.

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Endnotes:
  1. MVIS: http://studio-5.financialcontent.com/investplace/quote?Symbol=MVIS
  2. Is Buffett Playing It Safe?: http://investorplace.com/experts/douglas_mcintyre/articles/warren-buffett-berkshire-brk-a-filing-13-f-wmt-bni.html
  3. Hot Topic (HOTT) Posts Tepid Earnings
    : http://investorplace.com/experts/jim_woods/hot-topic-earnings-hott.html
  4. Housing Stocks Cooling Off or Freezing?: http://investorplace.com/experts/douglas_mcintyre/articles/housing-starts-news.html
  5. Winners in the Race for Federal Stimulus Dollars: http://investorplace.com/changewave-alliance/articles/infrastructure-spending.html
  6. download your FREE copy here.: http://investorplace.com/order/?sid=DF3208

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