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John H. Ford
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For the past 30 years, I have been involved in startups, as a founder, and active investor. My first company was purchased by Johnson & Johnson, which set the foundation for future investments. My level of trading escalated after graduating from college, primarily as a result of my... More
  • Clarification of Oculus's latest SEC filings 0 comments
    Dec 30, 2010 3:30 PM | about stocks: OCLS

    The latest SEC filings have caused concern for some investors. I just had a long conversation with Oculus management, and I'd like to clarify what these filings actually mean.

    First let's talk about the S3. This is a normal shelf registration, that most corporations take advantage of. It simply allows companies to sell stock, usually during a large price spike. Most companies never take advantage of actually selling the stock, but they like to have the option open. In terms of Oculus, this shelf registration has been in place for years. All they are doing is renewing it, because it expires in February 2011. I asked Oculus management if they were considering or planning a near-term secondary offering. They said absolutely not. Very often, these filings cause investors to fear massive dilution, but that is not the case here. If Oculus stock price jumps up to five or six dollars a share, Oculus may sell a couple of million shares, just to strengthen their balance sheet. But they will not sell anything at this level, in this time of low liquidity.

    In terms of the S8, this simply allows Oculus to replenish their options pool, which they use for bonuses for employees. This is actually a good thing for investors. Oculus generally does not give cash bonuses, but they do give stock options as bonuses. As an investor, I want management and employees to own as many options as possible. In that way, their actions are focused on increasing shareholder value, because they are indeed shareholders. Their old option pool was getting low, so they filed the S8 in order to replenish it, nothing more.

    Another question I asked, was whether or not Rodman and Renshaw had been selling any stock after their upgrade. I was assured they were not. Rodman and Renshaw will only sell during a large price spike, and in an environment of healthy liquidity. I actually like the idea of Oculus strengthening their balance sheet in this way. Oculus management felt they made a mistake, the last time the stock jumped up to five dollars per share, they did not sell any shares. I agree it would have been better for their balance sheet for them to sell a couple of million shares, and at least that is their plan in the future.

    As the recent selling suggests, these filings made some retail investors nervous, but these are market neutral, or market positive events. It's my guess that this selloff is temporary.  I have used this opportunity to pick up more shares, and will continue to do so.

     

    Stocks: OCLS
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