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INFLEXION INC. is a research & advisory firm for private and institutional traders offering specific recommendations on anticipated catalysts. Primary markets include commodities, listed equities and currency exchanges that offer an opportunity for short term profitable event trading.... More
  • Boris Through The Looking Glass. 0 comments
    Sep 26, 2013 2:52 PM | about stocks: DSS

    Boris you are looking at it in the reverse. The pie in the sky articles with "back of the envelope" calculations are what draw in suckers to purchase the stock. Today's knee jerk price advance is soley based on your article and propels the price only temporarily rather than stabilizing the stock. It is the core business that will provide any valuation on the stock. The IP portion will be expensive and years in litigation and appeal. One only has to look at the VRNG timeline to use as a guide when in litigation with companies like Google, Facebook and Linkedin. Even a Markman win will not be enough now as any thought of settling with a company that has made so many tactical mistakes of judgment may be unnecessary if they appear to be on the ropes. The recent press releases are encouraging as they are finally picking themselves off the floor and getting back to their real core business. I do believe they will prevail in their claim but any valuation at this point is fruitless unless you consider the core. The company was losing money but growing the business albeit slowly. In 2009-2010 when the share price was 3 times higher than today even in the midst of a shaky economic recovery. There is a story here and a good one for all to read about how partnering with an inside financial investor can cripple a company. What should be discussed is an essay on the absolute destruction of the shareholder value by several management miscalculations. Somewhere in 2012 when IP monetization became the buzzword someone in management got the idea to diversify the company seeing the potential to make big money off IP. Somehow the board "got on board " which began the tragic path to staggering loss of value to recent 10 year lows. Not having inside information it is my opinion based on the unfolding of events Lexington either approached DSS or vice versa to explore a merger. I will say upfront DSS management was clueless in what would be potentially the outcome. They were essentially in the printing business and not remotely savvy to what manipulation would soon take place. For those new to the stock the merger took place in early July. Millions of warrant / shares where given to the financial "players" for their participation in the merger on the understanding they would not sell the shares in the open market. An almost comical incentive to not sell was the agreement of an additional 7 million shares for the "players" if the price remained above $4.20 for a specific length of time within a year after the merger Instead, the "player's" selling began immediately (possibly before the merger) and continued into August. I can only guess based on what transpired the seller most likely started to short the stock in late June with the knowledge the upcoming selling of millions of shares in a low volume stock would drive the prices dramatically down. There could also have been multiple "institutional" participants very knowledgeable to what the typical MO was with the financial "players" in this type of merger. A good example was the recent settlement with the SEC with 23 short sellers who were accused covertly buying shares from a broker, dealer or underwriter in a public offering days after short-selling the same securities.I know one of the accused high profile "players" or their affiliate was a major recipient in the DSS merger. Needless to say millions could be made both selling short in one account and outright selling in another. Yes it is legal to double up and sadly it was at the retail investor's as well as management's expense. You could hear the despair and anger in the voices during both the merger and quarterly conference calls. The best thing for this stock is to let it move sideways for a while to develop a technical base. if management can right itself in the core with less emphasis on the IP the stock will start to ascend gradually and recover over time.
     

    Disclosure: I am long DSS.

    Themes: IP Investments Stocks: DSS
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