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VTSS Investor Forum

Raging Capital's strategy

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Raging Capital now owns 17.6% of the company as far as outstanding shares are concerned. They have also acquired $8.6M of the convertible debentures (convertible at $4.50). Since they already own more than 9.9% of the company, then as I understand it, that prevents them at this point from converting the debentures to shares if and when the price ever gets to $4.50. By virtue of their ownership demands, they'll get two board seats it appears. One is hand picked and the other appears to be a compromise candidate instead of Paul McWilliams, who writes an investment newsletter and is known for his semi-conductor knowledge.
Can someone smarter than me tell me what is Billy Martins' strategy here in buying the debt? He hasn't bought it at a significant discount. Wouldn't he have to reduce his holdings to less than 9.9% to convert the debentures? I'm sure there is a reason for him acquiring the debt (reducing his stock holdings to convert debentures would put downward pressure on the stock at that time and would be counterproductive to the conversion). I'm not smart enough to know what the debt accumulation strategy is, but hoping someone like DaWiley or Dlog can explain it. Also, because I'm too lazy to look it up, what % of the debentures does Billy's $8.6M represent?

Switching gears, whatever happened to Granpubha? Seemed like he was buying shares like crazy for awhile, while certain pumper friends of his were quietly selling. Maybe he got tired of the excuses and lame management and inept BOD and finally bailed (can't say I blame him if that was the case). Hope he didn't listen to that same pumper and jump into that flywheel storage company (Beacon Power) that hijacked the old Vitesse message board for awhile, before going belly-up. That one turned out to be another pump and dump scam for the average "wanting to get rich quick investor". Glad I was smart enough to stay away from that one. Wish I could say the same for this POS we know as VTSS.

Long time bagholder,
Sharp

Posted by sharpinvestments - 10 years ago | Updated 10 years ago

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from my notes - -(which can be wrong) of the filings i have read -- raging billy owns 6,491,127 shares or 18% of 36,466,296 (that total from the columbia pacific filing) with cost of $13,961,818 and avg cost of $2.1509.

also from the filings - -he owns $6,492,000 of the debentures ( i call it covert A originally $50MM at 8% due 10/30/2014 - $4.50 conversion now $46.5MM remaining) converting to 1,442,666 of the original 10MM shares available in the debenture.

if converted, raging billy would hold 7,933793 shares of the 46.5MM total - - or about 17% of the fully diluted shares.

i think the only 10% limit was put in the wording of the convert A for the holders of it at that time. their overage was then issued in non-voting preferred shares which they could call on if they sold voting shares to go below the 10% limit. most of the preferred shares have been called an converted to voting shares and they now are not a significant count.

i don't think raging billy is bound by the original documents pertaining to the issuance of the convert A. or his lawyers might contend that he is not bound. it is a good question for the share holder's meeting or the coming cc. his goals to me are to increase the share price to conversion which would double the value of his holdings while unlocking the 1.4 MM shares held in the debenture.

i see his goals as those of a value fund that sees a ticker selling at a severe discount to its peers while holding key technology that will lead the next semiconductor roll-out of comm equipment. i would say in my opinion, this slice of the semi sector is under researched - -and the only two who have it right are the anal cyst for needham who asks technical questions on the calls, and whoever is guiding billy to lay down his millions. thus the perfect situation for an inefficient market until vtss shows improvement on the bottom line and bean counter anal cysts take note.

i leave you with the words of dr. nuss, our real tech leader who will soon be knighted for his achievements :

"So IEEE 1588 is a much more reliable network-based timing technology and is becoming increasingly important. That is the other component that Vitesse provides. We are the leading 1588 timing provider in the industry."

Q: Can you comment on what you see going on in China in terms of TD-LTE?

A: China Mobile said it intends to deploy LTE in the 2013 time frame. As you said, China will use the TD-LTE flavor of LTE where the network timing requirements are much more stringent, this will be very beneficial for us. We are looking forward to the rollout.

Posted by daWiley1 - 10 years ago

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update to my notes!!! thanks sharp - -a new filing friday by billy for his raging master updates the last post in the amount of the convert A he now owns:

billy added to his holdings of convert A - -now he holds:

$8,639,676 which converts to 1,919,928 shares

he paid $2,029,554 for $2,147,676 worth of the debenture

or in bond terms : $94.50 (close to par means conversion and interest rate and repayment odds are thought to be more secure than other junk).

add the 1,919,928 to the 6,491,127 common shares and his total is now : 8,411,055 his cost is $22,601,494.00 and his avg cost is $2.68 - - he also earns $691,174 per annum til 10/31/2014.

i would say the debenture holdings are non-voting if converted but it is a good question to ask of vtss.

Posted by daWiley1 - 10 years ago

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Never mind. Just idle handicapping on my part.

Posted by phobos - 10 years ago | Updated 10 years ago

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"what % of the debentures does Billy's $8.6M represent?"

the original debenture was for $50MM so 8.6/50 is his share

but linden converted when vtss was over $8 (siu min wong was the only one to know that LTE would take longer to roll out in china and bailed - - all imo)

the debenture is now $46.5MM so 8.6/46.5.

i think the purchase by raging billy was just to add potential shares and ownership and to get a better seat at any re-fi table.
also just because another unnamed owner decided to sell (we might not ever know who the seller was - as the bond holders are not required to file 13s and the information is only in the annual report or proxy filings if you dig deep enough.

i expect that vtss is talking to fat andy right now - - but won't just pay down his secured note and convert B without discussions on the convert A - - - fat andy is not the lead dog now - -any discussion of the convert A must be conducted with all note holders. and this can take time -so a fast (before feb. 5) resolution to the debt deals pending might not be possible.

i will add to phobos above - that the real pros do have tech advisors like Needham's that put them in a ticker long before the earnings hit the sec filings. sometimes they are wrong but often they get it right for a deep discount to the buy on earnings folks.

billy did not get it right in vtss on his first try - -he had to double down 3MM shares to get near the current price and right now he is underwater (2.10) by a nickel. he is in range of the lows and will do very well if vtss does execute in this next roll out phase.


if anyone knows why the mkt maker's flash $5.46 often near or after the close - -please let us all know - -seems to be a signal.

Posted by daWiley1 - 10 years ago

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Sharp:

no particular insight from me. I will say this. There are only 2 ways to address this refinance. That is 1) find a new source of money and pay off the bond holders and 2) negotiate with the current bondholders.

I have to believe there is 0 chance for the first. Basically VTSS management has to march into a bank (or some other new source of capital) with a set of financials that is REALLY UGLY. I would rate it as next to impossible to secure new financing with the track record of 5 consecutive years of decreasing revenue and the demonstrated inability to pay off your current creditors. If I am the lender I have no interest at all.

That leaves VTSS negotiating with the bondholders again. We saw who won that battle last time. Management gave away two thirds of the company at 40% below the then current market price.

maybe ragin wants to be in on the negotiations this time. But i don' feel at all comfortable that this is the reason. I will have to think more on it.

Posted by dlog - 10 years ago

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daWiley1- Regarding mkt maker's VTSS quote at the close, I would venture a guess it is nothing more than them opening up the Bid/Ask spread really wide for after-hours trading, which seems to be the case for stocks that don't have much activity and mkt maker's don't want to be involved.

Posted by Techinvestor - 10 years ago

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