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Summary

  • On August 15th WPCS International held a special shareholder meeting to vote on the sale of its Seattle Assets.
  • 94% of shares the voted did so in favor, making this sale the second in weeks following the sale of WPCS' Australian operations.
  • The company should raise another $1.5 million in cash.
  • Shares are down 23% since my call to invest, were down 68% at one point, but still swing wildly enough to profit from news driven events.
  • While I applaud the company for taking necessary measures, I believe my call to invest long-term is too risky and was simply wrong. I reject my thesis.

WPCS International just reported that it has received shareholder approval to sell all of the assets of its Seattle Operations. According to the release and filings to come, on August 15th the company held a special shareholder meeting to vote on this sale. The company had previously urged shareholders to agree to the proposal. This comes just a few short weeks after the sale of Australian operations. The present sale of the assets of the company's wholly owned WPCS International-Seattle was approved by over 94% of total shares that voted. The EC Company, an Oregon-based electrical contracting company, will purchase the assets in an all-cash transaction, at a sales price of approximately $2.7 million, WPCS expects that this transaction will close on or around August 31, 2014 and that it will generate over $1.5 million in working capital.

So what does this news mean? Well, here is the thing. I opined back in the winter that WPCS International was an excellent trading stock. Up and down, it could be traded effectively. That has been true. But I also said that the stock was a good investment over the longer-term because of the potential for its bitcoin trading platform and revenues it could generate. Since that call, the stock is down from $1.41 to $1.09, or 23%. That's a bad loss. Not terrible if you are in it for the long-term, but I am disappointed with this performance on the call. But, the call was even worse. After two very painful quarters and disappointing results, the stock actually dropped all the way down to $0.45. Anyone who panicked and got out at the bottom after buying because of my call would have dumped 68%. Mea culpa indeed.

So what now? My call has been wrong, at least in the 6 months since I have made it. I applaud the company for taking the necessary steps to clean up its balance sheet and refocus its efforts on its bitcoin trading platform. The company is raising the needed cash to complete its transition. As such, the stock has more than doubled off of its lows. I think the momentum can continue, but I am no longer recommending this stock as an investment. There is simply better places to put one's money. For those who bought after my recommendation, I think you can hold a little longer, but you may have to sell for a loss. While I think the company CAN execute on its plans, I simply cannot stay behind this recommendation because of the substantial risk. I reject my investment thesis given the profound losses in share price, but do believe swing traders can still make substantial sums on news driven events, including the present announcement of the sale of its Seattle operations.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Source: Update: WPCS International's Sale Of Seattle Operations - My Call Was Wrong