Altair Nanotechnologies, Inc. (NASDAQ:ALTI) has seen its shares soar over 200% during the last two weeks on heavy volume. However, the lack of news from the company combined with poor fundamentals leads me to believe that this is a temporary pump of the stock and the stock will soon retreat from $8 back to the mid $2 range. I think this company is a compelling short, especially at current levels, however, when a company is pumped up to such extreme levels, it can take some time before the pullback occurs.
CHART AND RECENT HISTORY
The stock had been trading in the $2 range for about six months, when without any warning, it exploded 200% on heavy volume. When moves like these occur without any news it is usually an indicator of a stock being temporarily pumped [see figure 1 taken from TD Ameritrade's news platform]. Additionally, only 110,000 shares are short which is less than 3% of the float, which tells us this was not a short squeeze either (the last "Days To Cover" number is also meaningless since volume has reached over 1 million shares a day) [figure 2]. Something to note: from the company's latest 10Q we can see the company has more than 400,000 outstanding warrants with an average strike price of almost $15 [figure 3]. So if you're asking yourself who might want to pump the stock to astronomical levels, perhaps it is someone wanting to exercise the warrants.
In figure 4, which was captured when ALTI had a $56 million market cap and was trading at roughly $5 a share, we can see how ALTI compares with its competitors. And, due to the run up to $8, the current market cap is $92.6 million, which is higher than ALL of its peers by a significant margin. Meanwhile, the company has produced a loss greater than all of its competitors except two. The company also has the second lowest amount of net sales. According to a recent "TheStreet" report from October 10th 2013 [need TD Ameritrade platform to access), "stockholders' equity ("net worth") has significantly decreased by 29.24% from the same quarter last year." Also, despite increasing revenue Q/Q the company's return on equity has remained constant at -47.5% while the industry average is 15.4%, according to the report. Additionally, cash dropped from $35 million in Q2 2012 to just $14 million in Q3 2013. The company has a price to sales ratio of 13.19 while the industry average is 2.22, and we can't measure the price to earnings ratio because the company has no earnings! These numbers suggest a struggling company, a company that is most definitely not worthy of a 200% price increase.
Last year, in order to maintain its listing on the NASDAQ, the company announced a 1:6 reverse stock split (to increase the price of the stock by reducing the number of shares outstanding). This was already on top of a previous 1:4 reverse stock split, which took place in 2010. The reason? "The primary objective in effecting the reverse stock split at this time is to better enable the Company to maintain its listing on the NASDAQ Capital Market and to attract a broader range of investors to the Company," according to the CEO at the time. Twice in the last three years the company has had to artificially inflate its stock price in order to remain listed on the NASDAQ; not exactly a symbol of success.
The recent spike in stock price is likely a temporary pump as no fundamentals or news support such a price increase. The stock will likely retreat back to the $2 range but it can take some time. If you can tolerate a continued increase in share price and find a broker who will lend you shares, then ALTI is a highly attractive short.
Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in ALTI over the next 72 hours. 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.