Pegasus Wireless - Horsing Around with Investors?

| About: Pegasus Wireless (PGWC)

Excerpt from our One Page Barron's Summary (receive it weekly by email by signing up here):

Slow Hand, Fast Hand by Leslie P. Norton

  • Highlighted companies: Pegasus Wireless (PGWC)
  • Summary: An in-depth exposé of Pegasus Wireless (PGWC), and its CEO Jay Knabb. Pegasus makes wireless routers that allow computers to beam high-quality audio and video to TV screens. This month they promised to unveil a "cutting edge technology" for streaming video. Q2 earnings were about .01/ share. Last week share prices fell 54% on seemingly no news. Knabb recently stated a goal of $500 million in sales, via "one or two key acquisitions." In the past 2 years, PGWC has acquired 5 companies. Yet the company and its CEO have been plagued by controversy: 1) Shareholders claim they are being illegally blocked from selling their shares. 2) Shares spiked recently when Pegasus issued a stock-warrant dividend. Closer investigation found there was "a catch"—only registered shares were eligible, disqualifying most share which are held by brokerage houses in "street name." 3) Knabb has bought $18m of Pegasus stock this year, despite not drawing a salary, financial difficulty, and living an otherwise 'low-profile' lifestyle. 4) A previous Knabb company filed for bankruptcy; Knabb has been arrested for possible insurance fraud. 5) The Chairman and a board member recently resigned. 6) Two previous Knabb companies ballooned and then collapsed. Barron's bottom line: Unless Pegasus unveils a truly groundbreaking technology, its battered shares appear to have little chance of recovering. Knabb's viewpoint: "It's really a shame the true story of the stock is not being told. This is a real company with real technology, and real people. We will show the world the new video-streaming."
  • Quick comment: Pegasus bulls cite the CEO's insider purchases as a reason to load up on the stock. But, according to some pundits, "Common sense says it will take more than a few nifty features to sell wireless-networking equipment, especially competing against such established players as Netgear (NASDAQ:NTGR) and Cisco (NASDAQ:CSCO)."

PGWC 1-year Daily Chart