For all my negativity and rants towards companies de-registering from the SEC, sometimes it does help operations. It definitely saves them money and enables them to spend more time on the business.
The real risk is communication. If they cut the world off the stock can drop to nothing but as long as they keep talking good things can happen.
Dynasil (DYSL) de-registered from the SEC in the fall of 2019 with the hope of saving $900k per year. They filed their last 10k in Dec 2019 and told shareholders to only expect an annual report moving forward. A week ago they put out the report and the numbers back up their motivation for de-registering.
Getting straight to the point the numbers are good. They did save money with the de-registration and have a common reduction from their reverse split. Revenue wasn't impacted much by covid and they saved money by not attending trade shows. The numbers:
- revenue $44.0M in 2020 vs $43.7M in 2019
- cash $2.9M vs $0.3M
- BV $21.6M vs $18.8M
- shares common 14.9M vs $17.1M
- net income $2.5M vs -$0.4M
- EPS $0.17 vs -$0.02
- ****update 20200210 DYSL had a $1.5M PPP loan forgiven which I did not realize when I first wrote this post. EPS without that would have been $0.06****
Often times when a company de-registers from the SEC they claim a major reason is cost. You see estimates from a few hundred thousand dollars to over a million. I understand the motivation but I'm always a bit skeptical the savings will actually benefit shareholders. What if the executives just increase their own pay or use the money to fund a dying business? What if the company stops communicating and the world never knows what happens?
My first question of a newly dark company is always how they will communicate. I always send an email to ask. Will they keep filing quarterly with OTC Markets or post an annual on their own website or what? With their answer comes the next question: will they follow through? You don't really know if they'll feel the same way a year or two later. All you can do is ask and try to evaluate. Do you trust them?
Sometimes it works out. DEWY saved money, it flowed to the bottom line, and the stock is now up 200% from the de-registration lows (real estate also played a part but you get the idea).
Other times it does not work. RBCL is one I own that de-registered 5 years ago then disappeared. It happens.
I wrote up DYSL in Sept 2019 laying out the case for this dark stock and you should read it for all the background. So far the darkness is working for DYSL's business. Margins went up and expenses were way down while revenue slightly increased. I hope they keep that recipe going once covid is gone.
So now I go back to waiting. I hope to see another report a year from now. The risk is it may not come...
disclosure: long DYSL