SoundBite Communications: Time to Put Our Money Where Our Mouth Is

I am initiating a third (3) BUY recommendation of SoundBite Communications, Inc. (SDBT), a leading provider of on-demand customer contact solutions, at or around $4.00 per share. Sometimes the market presents us with a deal, and we need to be ready to pounce.

Why: Read my last company update and buy recommendation here. It pretty much covers the reasons why I am recommending a purchase of SoundBite again at these levels.

Why Has SoundBite Fallen?

The Million Dollar Question…

If I knew, or cared, I would not be picking stocks, but buying lottery tickets. What I do know and understand is that we are being presented with an opportunity, and quite frankly, a gift.

The only possible scuttlebutt that MIGHT be influencing the price of SoundBite comes from a filing that it filed with the SEC on Friday, April 25th, a form S-8, which is a registration statement of shares that can be sold once their lock-up period expires.

Now, this registration statement could be causing some confusion in the market for a couple of reasons:

1. It isn’t exactly clear that this statement is in fact for owners of the company’s shares to be able to sell them once the lock-up period expires, a standard procedure for any company that has come public and their lock-up period is nearing, and instead looks like it might be a registration filing for a follow-on offering that would dilute shareholders, a big no-no.
2. The perception by the market, if they do understand what this registration statement means, that all of a sudden, we’ll have a huge deluge of shares flooding the market and putting downward pressure on SoundBite’s shares.

Of course, both of these reasons have built-in falsehoods that we can take advantage of.

First of all, this statement is just that, a statement of fact letting shareholders and the market know that everyone who was originally stated to have owned shares before the IPO, is again being stated as a matter of procedure.

All public companies do this, and are required to do so within a certain time frame of their lock-up period, or else employees won’t be able to sell shares.

Secondly, if you read the filing closely, the average strike price of the shares in question is about $3.00 per share in aggregate, with most of the shares being priced at an average price of $1.19 per share.

I don’t know about you, but with SoundBite’s shares sitting at about $4.00 as of April 30th, there aren’t going to be many happy campers or investors lining up to sell their shares for a measly $1-3 gain on a few thousand or even hundreds of thousands of shares.

Trust me when I say that there won’t be a mad dash to the exits for insiders and executives!

And if any of them are that anxious to sell, so be it, with the low float and share price, there are many institutional and individual investors, like us, that have been waiting for more liquidity in the stock anyway, and I don’t foresee the share price dipping lower because of this.

Bottom Line

Hold the Line…

This is getting to be old hat, but that’s exactly how we do things at PeakStocks.com. My absolute passion is finding these kinds of stocks, making sure the story is straight, and then telling the world about them and investing right alongside my readers.

This instance is no different.

If you’ve been waiting to purchase shares of SoundBite, or have already bought but are ready to scale in some more and cost-average downward, there’s no better time than right now.

Say thanks to the market!

I say this of course knowing full well, and making sure that you do as well, that SoundBite might go lower before it recovers (although SoundBite’s Book Value is $3.00 per share, and it has cash on hand of $2.30 per share, so there is a downside limit here).

If you are scared, then buy a small amount, but I am upping to a full position in SoundBite as I believe this is the proverbial “fat pitch” that Warren Buffett always talks about:

When you see a fat pitch coming straight down the middle of the plate, you have to take a big swing and go for the home run.

After all the diligence and research that I’ve put into this company and the fundamentals, management team, business model, and prospects, there’s nothing left for me to say but it’s time to put our money where my mouth is.

That’s precisely what I intend to do.

• Caution: SoundBite trades with very high bid/ask spreads. Learn how to protect yourself from getting screwed by the market makers.

Read my latest research report on SoundBite that tells you all you need to know in a thorough, informative and engaging manner.