Manny Otero

What's Behind Force Protection's Significant Share Price Drop?

Dear All,

Again, thanks for the ongoing comments and discussions. I'm very happy that my opinion piece has generated this response. Voyager, let me just reply that I don't think you should join the class action against FRPT. Of course, I am biased and long on FRPT, so I am not objective. But, if I can offer you my honest assessment I do not think these class action suits will materialize into anything significant. First, FRPT has insurance against such claims, and it's not clearly obvious that there has been any intentional deceit on the part of FRPT management. It's true that there accounting has been at issue, but I expect them to restate very shortly. Furthermore, they have just announced a conference call for next week to address the various issues surrounding the company. At least they're finally issuing some type of press to address shareholder concerns.

Based on what they say next week, you can then decide whether to join. That's my opinion.

Lastly, thank you for your service to your nation. My wife is currently serving in Iraq/Afghanistan as a Weapons Systems Officer aboard the B1-bomber, in the USAF. I understand the sacrifice of family to military service, first-hand.

What's Behind Force Protection's Significant Share Price Drop?

Dear Readers,

Thanks tremendously for all the feedback, and I appreciate your analysis and commentary. I would just like to respond to Engrkenn who suggested that in fact the BAE product design is far superior to Force Protection's technology and design. Could you please provide the following data:

1. How many BAE vehicles have seen real combat, in excess of 1 year, and have been repeatedly challenged, either with conventional bombs or non-conventional IEDs?

2. What is the personnel survival right of the above data, assuming it is statistically significant?

3. Similarly, what is the vehicle survival rate?

4. What are the specific product design features that you feel make BAE a superior product? What is the cost of a BAE MRAP vs a Force Protection MRAP?

I'm sorry sir, but to say that the technology is superior, without relevant data to back it up, is in correct. Now, it's absolutely true that BAE has a large manufacturing capacity than Force Protection - no doubt. However, Force Protection had numerous mechanisms in place, including internal expansion and a partnership with General Dynamics, that would have facilitated expansion. Furthermore, Force Protection has always said it was open to further collaborations should the demand require it. As I have stated, the issue here is that DoD failed to provide the motivations - orders.

Thank you for your comments,
Manny

Force Protection Volatility Presents Unique Buying Opportunity

Hi Turley,

Thank you for the reply and your commentary. You've touched upon quite a few issues, and for the most part I agree. However, I do think that FRPT has been able to ramp up their manufacturing capacity quite nicely, and believe this ramp up continues. It's important to realize that not all MRAP vehicles are created equally, and the manufacturing of these vehicles is quite challenging based upon the specifications outlined. If FRPT is taking longer to produce a single vehicle, one needs to consider is this a question of manufacturing capacity, technique, or is the price you pay for a higher quality vehicle. I agree that speed of deployment of these vehicles is of the essence, particularly with the massive political pressure in Washington; however, I also have to hope that there is some push-back at the Pentagon to ensure that the right resources, with adequate quality-control, are procured.

As for PIPE deal, I agree that there was likely some significant negative pressure on the stock from the resulting short interest. However, do keep in mind that those involved in the PIPE deal are likely looking for a larger return that selling FRPT in the $15 range, which appears to be a decent support level. I think during August you'll continue to see pressure on the stock; however, this will be the result of traders and not investors. Investors, particularly institutions, I suspect are filling their stock orders and positioning themselves for 4Q07 and 2008, which look to be spectacular time frames for FRPT.

However, I also try to be objective. I am not very pleased with management's response to the recent price decline. I think they need to do a much better job of managing expectations, and although I realize their first priority is to ensure the strength of FRPT fundamentals (earnings, profits, growth, efficiency), I also believe that as officers of a publicly traded company they need to also manage their shareholders. I believe the public relations department of FRPT should have by now issued some press release in response to the contracts that have been awarded acknowledging that while they're disappointed they believe they have a formula for success, and describe that formula in detail. I also think they could do a much better job of pushing back on Congress and the Pentagon, and challenging them why they're not purchasing the best technically produced vehicle. Again, they shouldn't over-do it, but some concise and clear statements are warranted.

In any case, thank you for the response to my article.

Cheers,
Manny