Wednesday, October 30, 2019

SIMA off Grey Market and Requiring NDA

Unfortunately SIMA has decided to require an NDA now to receive their annual reports.  It makes me so mad I'm going to just post all their old reports.
Here are the numbers:

These numbers show a stable cash machine.  Even with the recent run up to $11 the stock is not expensive.  

In the past year the stock has been written up here on Value Investors Club and here on Focused Compounding.  

In Apr 2019 SIMA named a new president and surprise, surprise...it's the old president's daughter.  As always I thought change is good so hoped something was coming.  

In Oct 2019 SIMA came off the grey market and onto the OTCmarkets Pink No Information tier.  I'm not certain how this happened but I don't think the company did it.  A friend called OTCmarkets and was told the change is from one of OTCmarkets' subscribers who "wanted to get it quoted on an unsolicited basis."  I imagine someone paid OTCmarkets but I don't know who. 




Also in Oct 2019 SIMA decided to hold an annual meeting for the first time in forever.  I think this is their first annual meeting since they went dark in 2002, but don't quote me on that as I'm not 100% sure.  Here's the proxy.  

The most amazing thing about the proxy and annual meeting is they have a webcast!  I've only ever talked to their lawyer so this is my (our) first chance to ask the company questions.  They say shareholders can ask anything during the webcast.  I suggest all shareholders call in and ask them what they're doing to manifest fiduciary responsibility.  
The 2019 Annual Meeting of Stockholders of Sonics & Materials, Inc. (the “Company”) will be held on November 22, 2019, at 4:00 p.m. Eastern Time. For your convenience, we are pleased to inform you that the Annual Meeting will be a completely virtual meeting, which will be conducted via live webcast. You may participate in the Annual Meeting online, vote your shares electronically and submit your questions related to the proposal below during the Annual Meeting via a live webcast by visiting www.virtualshareholdermeeting.com/sima2019. Details regarding how to participate in the meeting online and the business to be conducted at the annual meeting are more fully described in the accompanying Notice of Annual Meeting and Proxy Statement.
 I don't get it.  I was excited when they came off the Grey Market.  I was through the roof when I saw they have an annual meeting with webcast.  And then my heart sank when their lawyer responded to my report request with an NDA.  If they are just trying to satisfy the state law then why have the webcast.

Here's what the lawyer told me
The Company has determined that an NDA is necessary given that the financials are not widely available and contain sensitive information. As you may know, the Company is not a reporting company and thus does not publicly file or post its financial statements or other information. Regarding 2(f), for this reason, stockholders should not be disseminating the information to other stockholders – rather, the Company can provide the financials directly to any other stockholders once an NDA has been executed. Lastly, please note that an NDA is not required in order to view the annual meeting webcast.
What a bunch of BS.  There is nothing sensitive about their annual report.  It's just numbers like any other financial report.  SIMA may have de-registered from the SEC but they are not a private company.  SIMA holds a fiduciary duty to do what is best for shareholders and hiding in the darkness is not it.  If anyone wants the latest annual you'll have to buy a share and contact their lawyer:
Robert A. Barbieri 
Finn Dixon & Herling LLP 
Phone: (203) 325-5022 
Email: rbarbieri@fdh.com
You can also contact the company info@sonics.com or president Lauren Soloff lsoloff@sonics.com

SIMA, if you want to be private then buy out all minority shareholders for a fair price.  You are still traded on a public exchange.  You still have shareholders not named "Soloff"


--Dan
disclosure: long SIMA

26 comments:

  1. Hi Dan, Thanks for the heads-up. What do they require as proof that you are a shareholder? Is a brokerage statement sufficient?

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    1. Yes. Just redact your sensitive information.

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  2. What percentage do they own?

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    1. I always wondered that until getting the proxy. The president and her family own 73%

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  3. It's absolutely ridiculous when management requests an NDA from part owners of a business, why not just post the financials on their website then?, or go 'pink limited' and put them on the OTC markets website which doesn't cost much.

    I might buy a share so I can join to the webcast and pepper them with questions!

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  4. Did you already review TORM? The most interesting part is that this stock trades below net-current assets. However, they recently did go dark. Market cap is only 6M, P/S of 0.15 and P/B of 0.22. Further, I like that this stock trades at a multi year low but I do not like their history of losses...

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    1. I had heard of that but never took a look. Cheap but man that chart is a death spiral and the loses are heavy. I'd wait for it to level out. one to watch for sure

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  5. I am wondering how you use the price to sales ratio. You often consider a stock below a ratio of 1 as cheap. However, I think this highly depends on the industry and for some sectors this is not cheap, e.g. see here: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/psdata.html

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    1. it's just a rule of thumb and yes it depends on industry, margins, etc.

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  6. I wonder what your opinion is regarding market capitalization versus value. Wouldn't it be better to simply buy the cheapest, small stocks (e.g. based on P/E, P/S, P/Book or whatever) e.g. with a MC <100 Mio. or so regardless if it is a super small stock or not?
    Further, does not illiquidity fully explain the small cap premium (regardless of market cap)?

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    1. I don’t know. I just try to go as small and illiquid as I can find

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  7. ...Liquidity means the trading volume e.g. per day/week/month in USD or how many stocks are traded daily compared to all outstanding stocks (relative liquidity). Liquidity and size is closely related but it is not the same. Also a bigger comany can have a low liquidity (e.g. if the freefloat is only a fraction or investors are just not interested in the stock). Based on some papers, it seems there is clearly a illiquidity premium. I think it is stronger than the size premium but I am not sure.

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    1. I’m not sure either. I try to go where others won’t. Less competition

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  8. Have you ever looked at the stock Amira Nature fds? The interesting thing about this small stock is the extremely low price to sales (0.05) and price to book (0.07) ratio. The stock dropped from about 250usd to about 7usd within 5 years. Within 2019 the share price was also once at 33usd. It could be a total fraud. But I kind of like the crazy volatility.

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  9. see the write up here including the interesting comments. probably it is rather not a stock that fits with your style:
    https://seekingalpha.com/article/4293508-amira-nature-foods-corporate-reset-you-wont-want-to-miss

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    1. Thanks for the idea. Rice exporting does not excite me

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    2. In the meantime the stock is up by 100-200%. A boring business can be a very good investment too...

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  10. Dan, can you comment at all about SIMA's results for the fiscal year ending 6/30/19?... Realize you don't want to get in trouble with respect to the NDA... Any generic comment like similar/slightly better/slightly worse than FY 2018 would be greatly appreciated...

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    1. sorry I can't comment. I still hold my shares

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    2. Fair enough... Do you think the NDA is intended to depress the stock price as a prelude to buying out the minority shareholders at a price that's less than fair?

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    3. I don't know. the whole thing is weird. My feeling is they don't care about the stock price and they just want to be left alone. Maybe too many people were asking them for financials and they just got sick of it. but then I don't understand why they had an annual meeting broadcast online when they could've satisfied state law just having a local one in their building that probably no one would have attended.

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  11. I know you can't speak about the results, but wondering if SIMA's 2020 annual report has been released yet?

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    1. I just got the proxy the other day so I hope the annual report is in the mail

      I have sold all my SIMA shares except for 1 share btw. Needed money for some living expenses. I marked the row blue in my blog performance page to show that I'm out

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    2. Appreciate the response and the forthright answer... So YOU'VE been the guy keeping the stock price down... Haha, just kidding... But I know you bought your shares at much lower prices, so I assume so you owned a pretty good amount... Given the lack of liquidity, must have taken weeks/months to sell your position, yes?

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    3. HA! No I never had very many SIMA shares. at the time of my buying my portfolio was small and SIMA was only a small percentage position within that. It was quick and easy to sell my shares

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    4. Understood... Hearty congratulations nevertheless on finding the stock and investing when you did... I'm a much more recent investor in SIMA and in the red so far... Still think it represents good value, but nothing like it did 4 or 5 yrs ago... Hopefully they managed to get through Covid without too big of a hit to their operating performance...

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