When updating the price to borrow Tesla Motors (TSLA) shares for my recent article, our broker gave me a heads up on another name that was extremely hard to borrow and had a negative rebate of 65% with no availability: VocalTec magicJack (CALL). Now the company has both supporters and detractors. But I remember when VocalTec first came to America demonstrating the service in 1997, almost 16 years ago. They were the first Voip technology I witnessed through an Israeli partner and vendor of theirs who was later acquired by Harmonic (HLIT). In retrospect, they should have bought VocalTec. That's not important, but CALL's short interest is:
Total fully diluted shares today are 19.985,000 according to the company's most recent 10K SEC filing. The short interest is over 25% of the total shares outstanding. But like many of the short squeeze candidates we have written about, there is a twist here too as we see in their latest proxy:
As we can see, insiders and management hold over 28% of the total outstanding, doubling the short interest ration to over 50%, which explains why the shares are so hard and expensive to borrow.
We understand the regulatory FCC issues the company is addressing with regards to 911 and Universal Service Fund. They are well disclosed in CALL's 10K. But these issues are very complex and can take a long time for a final outcome and most likely will have little or no effect on the company's business prospects. CALL has no structured debt, it has over $2.00 per share in cash and cash equivalents on its balance sheet, and made $2.70 per share last year. If the company reports an in-line number, the shorts are in trouble. Given the painful squeezes for short sellers we have seen recently in names such as Tesla and Netflix (NFLX), why do the shorts want to stay short this name? We like CALL and we think it is a buy here.