Despite the negative headline, I am confidently yet cautiously long shares of Unipixel (NASDAQ:UNXL). I emphasize the word caution, because any long shareholder who isn't is clearly not paying attention. Unipixel's Uniboss is an unproven technology in the marketplace, the company's success depends entirely upon it (the company has nothing else in its portfolio), and a sudden 60% drop in share price on no concrete nor reputable news reflects the risky nature and froth that can develop in such a stock.
If I were an expert in touchscreen technology I would profess it here, however I am not. But what I do know with certainty is that the technology marketplace will ultimately decide the value of the Uniboss product and Unipixel itself. A man with a few photos from his camera phone, supposedly taken at Unipixel offices while officials went for a coffee break, will obviously have no bearing on the company's success nor the long-run price of the stock. But did he have a valuable inside look?
Let me touch on this latest development a bit more. On Friday May 31, shares of UNXL were abruptly taken to the woodshed for a nearly 25% haircut. The latest article written about Unipixel, essentially an op-ed piece, included photos of a seemingly inferior touchscreen product (again supposedly, but not proven, to be of Uniboss). The article goes on to reference unnamed engineers and former employees who left the company years ago, and comes to the bold conclusion that "Unipixel cannot produce Uniboss".
I find a number of things particularly curious about this article. First, the author does not explain how or why he was granted special access to visit Unipixel's offices. More than likely any sort of privileged access would only be granted to professional representatives of companies considering business with Unipixel. If this was the case, he would have signed a confidentiality agreement. Furthermore, if he actually deemed the product as inferior, he would be reporting this to his firm (especially if he was a research analyst) and not in an investment blog. Possibly illegal, taking a vested short interest in the stock would be frowned-upon by his employer and Unipixel, and yet he is out publicly advertising this fact. By these accounts, it is pretty likely that the author of that article is not a professional businessperson, but somebody who just may have happened to be inside Unipixel's offices. And as such he is unlikely an expert in touchscreen technology. And we don't know, but perhaps his photos come from the back room where Unipixel discarded product after stress-testing for breakage (hence the apparent "lines" on the screen). Or perhaps they are of an elementary test version from years ago.
The second thing I find curious about the article is why it was released when it was. If for some reason the author felt he had a duty to inform the investing public, he could have written it as soon as he accumulated photos and information. But it sounds as though his visit to Unipixel was some time ago, and that he didn't meet with several engineers and former employees just last week. It appears that he chose to release his article specifically at a time when Unipixel stock was in a downdraft and investors feeling particularly vulnerable. And coincidentally also on an options expiry day. This author was very successful with what he was aiming to do - drive down the share price for his benefit.
Overall, it's been an unfortunate and frustrating run for the shareholders who believe in this company. Few investors expect a quick 60% decline in their stock without a material development reported directly from the company. With companies who are particularly poor at keeping their shareholders informed, usually the blow would come in the form of a warning or downgrade from an investment house or research firm. In Unipixel's case neither has occurred, except a mildly-cautious valuation comment from Barrons when shares were in the high-30s (They are now at $15.20).
All the recent negative reports have come exclusively from outsiders who have limited access to accurate information about the company's technology. The parties who should hold the most valuable material information and have done the most due diligence (internal management, research firms, institutional shareholders, and the underwriter of Unpixel's secondary share offering at $32 just a few months ago) have not offered any substantially negative reports.
While it appears that shareholders are caving into doomsday scenarios, and while it could be true that Uniboss sales will not deliver on the hype surrounding the product, the verdict is still in limbo and will remain in limbo for a long-time to come. The success of this technology will be determined over many months and years, not over a couple of weeks. Many resources have gone into its development, and Unipixel is fortunate to have a pristine balance sheet with lots of cash thanks to fortuitous timing with respect to its recent share offering. Improvements can continue to be made, if necessary.
So there is no need for additional fear in the short term. The froth is out of the shares. Due diligence has been performed by many large backers of the company (the research houses and underwriter). The company has signed-up some big partners. The jury will not reach a verdict tomorrow, yet the share price is beginning to reflect that it already has. It is time for shareholders to pause and consider these facts, and ideally begin to place heavier weight on qualified statements from those with the most information.
Disclosure: I am long UNXL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.