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Globalscape & Investing Psychology 747: A Poker Tell

|Includes: GlobalSCAPE, Inc (GSB)

Okay. Psychology 747

Globalscape is letting top level investors at institutions, banks, brokerages et al know about their stock and the company behind it ... getting the word out. Since it's a real company drawing the finest talent from the IT sector and not a fraud fly-by-night outfit, they are going to want to establish a relationship with these investors, not just go populate the marketplace with ads to buy buy buy GSB. In order to have a real relationship, the investors are going to have to trust Globalscape. They are going to look it over with a fine tooth comb to see if there is any indication they are being lied to or if any claims are being exagerrated, and Globalscape for its part is going to be sticking with the facts and not getting outlandish on their claims. They understand that just as with business partners, private investors insist on honesty and integrity from them. It's Business 101 that you want to not only meet but exceed the expectations of others. Hence, Globalscape has gotten into the mode of hardly giving out anything that could in any way possible be construed as forward guidance, not because they don't really expect the numbers to come in, but because if those numbers did NOT come in, it could damage relations within the investment community and them. Simple enough.

So why write about something that seems so simple to understand. Well, everything is simple once we've thought of it. Application whitelisting is incredibly simple ... but you didn't think of THAT, did you? Oftentimes, that's all genius is is putting together things that should be obvious into a context that makes sense. With that in mind, I want to share a very good reason why I believe we are going to see strong financial figures in the 4th quarter and this Q1 of 2010.

If you'll visit and find the Events link, you'll find that on March 1st is a presentation Jim Morris made to Americas Growth Capital, a firm we know Globalscape has had a relationship with for a long time, just like the relationship I referred to above. Is that it? No. Hold on. Read on. While at this conference with AGC, Globalscape was only presenting what it felt would engender a growing relationship of trust and expectations about its future and its current prospects. They weren't out there to get wide-eyed, emotional and hysterical about anything. Everything was down to earth; this was a very pragmatic bunch; they've seen the stock go up and down and sideways; they are going to view things with a critical eye and a long memory. If anything is said March 1st that doesn't pan out, they are gonna know it right away because they've got it down in their memory banks.

So what's the point. Cut to the chase. Okay, now that we have the proper context to understand the intricacies of the ACG meeting, let's do just that. Cute to the chase. I indicated above Globalscape wasn't going to say ANYthing that would, after earnings release later this month, hurt, smear or tarnish their relationship with ACG. We all heard Jim at RSA mention a phrase he uses often in pitching Globalscape products, that they keep corporations from "tarnishing the logo" through a security breach. So obviously Globalscape isn't going to say something in the meeting that would one month later, three months later, clearly tarnish their logo and put a bad word out EVERYwhere that you want to avoid this company.

So if that is the case, then, let's look at one simple statement from the ACG presentation that, if it is NOT true, is going to tarnish the Globalscape logo for a long, long time with the investment community. Do you know what that is? Did you figure it out last week or yesterday already? Good for you. But 99.5% of us haven't gotten there until today. Simple as this is or seems. And tah dah, here is that simple statement that if untrue is going to smear and tarnish the Globalscape image with ACG and California investors for YEARS to come:

"Sustained, strong financial performance"

That's it? You bet it is! If they don't have that, if they don't show that, after going out to California and tooting their horns about "sustained, strong financial performance", their future in the California investment community is done for and finished. NOBODY in their right minds will want to invest in it. Double-talking and leading people on is one of the unpardonable sins in investing.

So what do you think? The ball is now in YOUR court. Do you think Globalscape is spinning a tall tale to somehow gain extremely short-term approval (which hasn't turned into any goldrush for shares, by the way) that they could somehow profit maliciously by? Or do you think they are a credible firm that's aware of all these things I wrote and just stating the plain truth to ACG last week? I'm in the camp that says Globalscape is not making a blatant, egregious false statement, but a very true one. That's what I MYSELF see on page 3 of the presentation. And that's the context I view it in. I see the 'tell', just like in poker, that they are going to show their 4th quarter hand with "sustained, strong financial performance". They haven't fudged or hedged in any of their presentations as if the 4th quarter wasn't that good, but now that we're in the first quarter, we're beginning to see a pickup. Nothing like that. Straight out it's "sustained, strong financial performance"... period.

My conclusion:
Globalscape is experiencing sustained, strong financial performance and we will see this verified and validated in the upcoming SEC annual filing they make. And that's a winning hand in my book and in my opinion!

Disclosure: Long GSB