Will Progressive Gaming Suffer The Same Fate as Pegasus Wireless?

Recent headlines on Progressive Gaming International (PGIC) have attracted my attention primarily because the storyline reminded me of Pegasus Wireless (PGSW.OB), formerly PGWC. In Sept. 2006, Pegasus CEO Jasper Knabb took several jabs by going after short-sellers, a complete no-no for those who truly believe in the efficiency of the market.

Fundamentals and future prospect of a company should drive the stock prices up and down, with perhaps a bit of industry-specific noise here and there swinging the prices in the near-term, but not due to short sellers. The message was that Pegasus CEO Jasper Knabb was a non-believer in market forces.

Following the reaction by Pegasus to go after the short-sellers, a series of articles were published by major publications such as Barron's and The New York Times, both revealing the truth behind the foundation of this company. The Motley Fool published article after article in an attempt to educate daytraders and speculators alike on the scam scheme of pump and dump of individuals involved in this company.

It appear that PGIC is following on the footstep of Pegasus Wireless. On March 26, 2007, the company announced that it uncovered potential trading irregularities causing its stock to go down in price. This is a mirror image of what Pegasus Wireless attempted to accomplish by creating a smokescreen to the true fundamentals behind the drop in its stock price. The company did not elaborate on its claim, but it is obvious based on the trading volume and other technical analysis, that its stock tanked because of the growing concern over statements in its 10-K filing.

Although the stock did recover a little bit for several days following the initial drop, the trend is similar to that of Pegasus Wireless, most logically due to short covering. Several weeks following erratic trading in Pegasus Wireless, the company decided to delist itself from NASDAQ to OTCBB. It later reverse split 5/1. Its stock price now is only 50 cents give and take a few penny. Those who shorted the stock or bought put made tons of money.

Today, Dow Jones Newswire reported that Progressive Gaming failed to report that a casino in Vegas (The Palms) ripped its highly touted Rapid Bet Live machine. At the same time, it hired Baccellierri, former The Palms Sports Director. Progressive now claims that it received approval for Rapid Board Live in the Bahamas.

Guess what? Several months ago, in Feb. 2007, Pegasus Wireless also reported that it opened manufacturing facility in the Bahamas...

The company stated that it might have to declare bankruptcy because it might not be able to post bond for post trial appeal. All signs point to spiraling death of this company. In the equity market, there's no such thing as a fairy tale.

Disclosure: Author is short PGIC