Rubicon Technology (NASDAQ:RBCN) manufactures and sells monocrystalline sapphire for LED, radio frequency circuits, and other optical applications. Apple announced in 2010 that they planned to use sapphire for the iPhone and then later backed out of that decision. This caused a surplus in the industry and a dramatic decline in prices. Rubicon Technology is operating at a loss in terms of net income and operating cash flow. However, Rubicon is currently a net-net candidate using Benjamin Graham's formula of taking current assets less total liabilities.
Rubicon's market cap is currently $19.7 million, and its net current asset value less prepaid is $46.57 million. Rubicon currently trades at a 42% discount to its net current asset value less prepaid expenses ($1.74/share vs. $0.74/share). This is before taking into account the Net PP&E of $56.47 million, or $2.11/share. However, the main issue with Rubicon is the cash burn. Rubicon lost roughly $16 million in operating cash flow in 2015 and that number crept to a loss of $17 million for the trailing 12 months ending March 31, 2016.
To make it more interesting, there is currently a proxy war being waged by Paragon Technologies . Paragon Technologies owns a mere 0.30 % of Rubicon but is pushing for two board seats at the shareholder meeting on June 24, 2016. One of those board members up for vote is Hesham Gad, who owns 30.7% of Paragon Technologies through Gad Capital Management, LLC and his personal account. Paragon wants to halt Rubicon's current cash burn and explore strategic alternatives. Rubicon has been fighting Paragon's initiatives and questions why Paragon would launch an expensive proxy war with such a small stake in the company.
Nevertheless, I believe Rubicon is worth the risk, and the best option for shareholders is for the company to liquidate and sell all of its assets. Management wants to continue to operate, which may continue to burn cash. Either way, the war will unfold at the shareholder meeting on June 24, 2016, and will have large implications on the future outcome of the company.
Disclosure: I am/we are long RBCN.
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.
Additional disclosure: I am not a registered financial advisor.
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