Seeking Alpha
Long/short equity
Profile| Send Message|
( followers)  

During their last Q2 of 2013 conference call on August 8, 2013, Uni-Pixel's (NASDAQ:UNXL) CEO and President, Reed Killion, stated that the "drop dead date" was October 1st for getting their UniBoss touch sensor solution into a product before the end of the year. As we inch closer and closer to the deadline, it is appearing more and more likely that Uni-Pixel will once again face another delay with shipping actual UniBoss orders.

Also during the last conference call, Killion stated that they hoped to rebrand UniBoss with Kodak within the next month. That should be a relatively simple task even for a company like Uni-Pixel but now somehow they missed that time frame as well. Of course if you refer to my previous article on the company, missing dates and failing to deliver is kind of Uni-Pixel's forte. During their history there were numerous promises of future orders, design wins, and partnerships which never came true.

In addition, on the conference call Killion also admitted that original test units shipped to their PC OEM partner had to be discarded due to a design issues and new units had to be shipped and retested. This was something I and others had mentioned in the past but many Uni-Pixel bulls had vehemently denied. The "design issue" is now the latest excuse for delays in actual orders for UniBoss along with the Windows 8.1 delay excuse.

Insiders Cashing Out On Their Options

(click to enlarge)Uni-Pixel Recent Insider Sales

While Uni-Pixel has been very quiet on their progress the last month, insiders have been cashing out on some of their options and sold shares. Their CFO Jeffery Tomz and directors Carl Yankowski, Adam Ross Yong, Anthony J Levecchio all sold shares on September 3. Meanwhile Bruce Berkoff sold on August 27. The most significant sale was from the company's CFO Jeffery Tomz who sold 36,000 shares for $720,000.

Some Uni-Pixels bulls will claim since those are Rule 10b5-1 planned sales they are therefore insignificant. However you first have to take a look at when their sales plan was setup or last modified. Were they setup when Uni-Pixel ballooned to prices that were even more drastically overvalued than the current levels or at much lower prices?

The dates on the Form 4s show that the planned sales were all adopted on June 3, 2013 except for Levecchio who set up his sales on June 14. The stock price of UNXL on June 3rd was trading around $16 after crashing over 54% from approximately $35 in just 1 month. So did this mean the insiders had faith Uni-Pixel's stock price was going to recover soon or were they cashing out of their stock options while they were still in the money?

With planned sales insiders can setup regular sales after a certain period of time has passed (such as every 3 months) or sales when the stock hits certain prices. Judging by how most of the insiders sold at $20 on September 3, it appears they have set their planned sales when the stock price hit $20. While Berkoff's planned sales were when the stock is at $19.

If the insiders were confident that Uni-Pixel would finally be delivering significant orders for UniBoss in the near future after years of delays it begs the question why where they were willing to cash out on more than half of their options at $19 and $20 back in June? Wouldn't they have set much higher prices for their planned sales?

Either way it would seem they certainly aren't as bullish as the analysts covering Uni-Pixel, who have lofty price targets. And speaking of analysts, one of the main reasons Uni-Pixel's stock was able to get to $20 was based on the positive opinions from of the analyst covering the stock. Robert Stone from Cowen, whose firm helped Uni-Pixel conduct their $44 million secondary offering at $32 a share back in May, first stated that the manufacturing build up was going as planned at Kodak on August 27, 2013. Then just one week later on September 3, 2013 he stated that production progress was also being made at Uni-Pixel's Lufkin facility.

However soon after the two positive mentions by Cowen, the share price of Uni-Pixel collapsed once again. The stock fell over 20% from the closing price of $19.83 on September 4, 2013 to $15.50 as of September 11, 2013.

Why the October 1st Deadline Looks Ominous

One interesting comment from the Barron's article on how Cowen was impressed by the Lufkin facility was that Stone stated production should be ready "once the roll-to-roll tester is in (due in October) and qualification is complete." Seeing how the deadline is on October 1, 2013 and an important testing equipment isn't due in until sometime in October, it would appear highly unlikely Uni-Pixel would meet the deadline.

This would suggest that the company is behind schedule for a October 1st date and commercial rollout for UniBoss would once again be pushed back further. Possibly now to sometime in 2014 after numerous delays and excuses already since as early as 2011. Facing delays and issues isn't anything new with new technology and production processes. However if another delay occurs we fully expect Uni-Pixel's stock price to fall much further from the current levels.

Other metal mash competitors are pulling ahead of Uni-Pixel

While Uni-Pixel is still struggling to ship actual orders for UniBoss, numerous other competitors are already shipping orders of metal mesh touch sensors or very close to it. Many of them are Chinese and Taiwanese companies such as JTouch, Young Fast Optoelectronics, O-Film Tech, and Mutto Optronics.

JTouch should be producing metal mesh sensors for Asustek, Acer, and Sony in Q3 and ramping up production further in Q4. Young Fast is stated to have already been shipping to Lenovo as early as Q1 of 2013. O-Film Tech is expected to ship 14-16 million units of touch screen materials in 2013 and it was recently reported that they won orders from Lenovo and Acer for their metal mesh solution. This is in addition to supplying other notebook vendors with their metal mesh sensors already since earlier in the year. Mutto Optronics was reported to have shipments pick up during the second half of the year for tablets and notebooks.

In addition since all these companies and many other ITO alternative competitors are based in Asia, they may make a more attractive supplier than Uni-Pixel even if UniBoss could successfully be produced. The majority if not all of the supply chain for touch screen electronics are located in Asia these days along with the assembly. It is easier to coordinate production with them then with Uni-Pixel who would be manufacturing in Luftkin, Texas and Rochester, New York.

Conclusion

Once again investors should not put much faith in the claims made from Uni-Pixel's management. Not when the company has a long history of making promises of future orders which either gets delayed or is never mentioned again. Adding on top on that insiders were willing to cash out on a significant portion of their shares at $20.

We feel fair value for the stock is closer to $5 to $6 a share until they can actually ship significant units of UniBoss. Even then the landscape for touch sensors and ITO alternative solutions is highly competitive and the future is still uncertain.

Source: Uni-Pixel: Why You Should Sell Like The Insiders