Smith Micro: Stock Craters After Tier 1 Carrier Contract Termination - Sell

Summary

• Smith Micro Software, Inc. shares sell off after the company discloses a surprise contract termination by a leading U.S. wireless carrier, which I would assume to be Verizon.
• Annual revenue impact likely to be in the $15 million to $16 million range, with gross profit being reduced by an estimated $11 million.
• Company has also experienced issues with its remaining U.S. Tier 1 customers AT&T and T-Mobile, thus resulting in underwhelming financial performance.
• Recently issued senior secured convertible notes are likely to result in substantial dilution for common equity holders. In addition, liquidity might become an issue going into 2024.
• Smith Micro Software, Inc. equity holders appear to have been caught between a rock and a hard place as they will either be saddled with substantial dilution or even face an outright bankruptcy filing next year. Considering the obvious lose-lose situation, investors should consider selling existing positions and moving on.

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Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.