I was surprised when Lime Energy (LIME) announced that it was selling a million shares to Richard Kiphart, one of its own directors and its largest shareholder. Last year, CEO John O' Rourke had told me that Lime expected to reach profitability without having to raise additional capital.
What happened in the meantime?
It was the best of Limes, it was the worst of Limes
Two things had happened: one bad, one good.
The bad was that Lime's C&I business turned in a particularly weak first quarter, cutting expected profits by a little over $1 million. Cash reserves are always seasonally low at the end of the first quarter after the slow winter season, so liquidity was a bit tighter than usual.
I thought the earnings miss would bring a good opportunity to buy the stock, especially given that the company’s new strategy of focusing on utility contracts is paying off. That's the good thing that happened: Four utility contracts were awarded in the first quarter. That’s a total of seven, up from just one a year earlier.
Because of these contracts, analyst Graig Irwin at Wedbush Securities was quoted in a Charlotte Business Journal article saying he expects the company to end the year in the black, despite the first quarter loss.
To make Lime's targets, the company will need to ramp up the new utility contracts quickly, and that takes cash. Director Richard Kiphart, who already owned 9.6 million shares, 40% of the company worth $24.5 million, stepped up to the plate for another $2.55 million for another million shares at the current market price.
Lime, not lemon
The market's currently treating this Lime like a lemon. I look at this citrus and see green. Apparently Kiphart, who knows as much as anyone can about Lime's prospects, sees green, too.
Disclosure: I am long LIME.
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