Nighthawk: Can the Stock Be Far Behind the Company?

Let’s see- NIHK recently announced its highest revenue quarter in four years. Then it announced the single largest order in its history. Then, it announced it would be shipping the hi-def hospitality industry set top boxes in December, which means the December quarter will also be the a new record high top line.

Sounds like NIHK is really getting its act together on the fundamental side. CEO Doug Saathoff is talking about a new day for NIHK in 2008 as the company finally plows through the excess supplies of stock, generated by 4 years of losses as they have been building the company.

Where’s the turning point? When does the company stop creating excess supplies of stock? When does the stock break out, and generate the big run NIHK fans have come to expect on an annual basis?

They say timing is everything. The timing on the last serious of events out of NIHK has been bad from a market point of view- we had a great run in equities Sept through mid Nov, been since then investors have been very reluctant to reach into their pockets and start bidding for oversold stocks. The “headline” shock is pervasive everyday.

For those who are becoming impatient with the stock and are wondering why it didn’t trade better on a 2 million share day- I suggest you look at the past patterns in previous runs- the volume simply needs to be higher. Here’s the chart:

nihk1.gif

Look at the huge spike from last March- note- it was accompanied by many days where the stock traded 9 million shares plus.

We need a more microcap friendly market tone for a repeat of this performance. Everyone has their hands in the pockets, afraid to jump in right now.

If you sell the stock right now it’s more of an overall market call than a call on the company. The company is doing great.

If you have the intestinal fortitude to wait it out for another month, past the tax selling and the daily sub prime shock which is winding its way down, you are in for better days in my view.

In this market, we won’t get the big run. Most of the damage is done, and the next market is coming.

Comments and questions are welcome.

40 thoughts on “Nighthawk: Can the Stock Be Far Behind the Company?

  1. seems like a good price for accumulation

    Editor: Accumulation being the key phrase. If you have expectations it’s going to zoom up the charts tomorrow, you might be disappointed. But, someday, probably when you least expect it, off we go.

  2. I just wonder, why suddenly some people want to sell two million shares on a day after the release of such good business news? Are this just a few sellers of just a lot who decided to sell anyway.
    Another more important question I have, the previous ‘surge’ in stock price required a 9 million shares volume… but, how much additional suplly of excess stock has been created since? Are the required 9 million evolveld to say 18 million today? Is the total stock amount doubled since previous major run or what is the equation ?

    Do you have information concerning the evolution in the stock amount (numbers) ?

    Looking forward to your answer, kind regards,

    Bart

    Editor: Bart- good questions- You can never find these things out for sure, but it is likely there is one big seller of NIHK- their financier- Dutchess capital out of Boston. Dutchess has stuck with these guys for a number of years, and kept the company financially sound at great risk. In return for taking the risk, Dutchess owns a substantial number of shares, and the number does keep going up. However, this cycle appears to be coming to an end in 2008 as the new structure related to their Set Top Box acquisition is far more shareholder friendly. There were 129 million shares I&O in the last quarterly report. In the exact same filing one year ago, there was 77 million share I&O, meaning the market has had to absorb 52 million shares over the last year. It has managed to do this thanks to the following the company has and the progress they are making. However, the rate of new shares coming to market has slowed. The company has less cash needs, and the new SEC regs prevent companies like NIHK from entering into arrangements of this nature. The market has had a long time to absorb what’s out there. AT some point, the company will deliver a bunch of positive news and the supply will have been absorbed. We will then have a much healthier trading level. It’s easy to see it, as the company is delivering great corporate developments on an ongoing basis- record orders, record revenues, a certainty of new record revs in Q4- pretty good stuff.

  3. Can you comment on the “value” of these so-called “record sales”. Are they meaningful in size to drive the income statement/balance sheet in a meaningful manner? The announced sales always seem puny to me, no matter how much noise they make because of them. I know it is only a $10 mill company but still, are these “record sales” enough to make the company profitable?

    Editor: Actually, the numbers on the remote disconnect power stuff don’t add up to that much. At this point, less than $2 million per year, but growing very nicely with lots of upside as demand grows from the utility industry. The set top boxes are a different story. They could do somewhere in the range of $800k in December alone. That’s a revenue run rate which puts the company in a whole different light. It’s an exciting new component of the company’s future.

  4. NIHK needs a 100:1 reverse split. Institutional buys are forbidden to buy penny stocks.

    Editor: No it doesn’t. Not yet. This company is not ready for institutional sponsorship yet. Hopefully, someday.

  5. If the Dutchess Financing Deal is that Toxic (and a jump from 77mil to 129mil I&O seems pretty toxic to me) whats the capstone to stop this stock from continuing to get bled?

    Editor: It doesn’t fall under the “toxic” because of the structure. When we talk about toxic, we mean a structure where the company can reduce its debt under some sort of formula related to a discount to the prevailing market- meaning the lower the stock goes, the more shares they have to issue. In the case of Dutchess, the price is fixed. I believe around $.05 at this point in time. So, as the company converts its debt to Dutchess, and Dutchess sells the shares, they get a credit on their debt of about $.05 per share. Here’s why its not toxic- the higher the price of the stock, the more money Dutchess makes. Therefore, it is in everyone’s best interest to have the stock trade higher. That’s not the case with all financings- the financings of the past were known as “death spirals”. The stock will stop “bleeding” when NIHK turns cash flow positive and doesn’t need to raise any more money. Could be 2008 if the set top box business goes well.

  6. I question the suggestion that Dutchess is the “one big seller” of NIHK. Dutchess structured financing for NIHK’s acquisition of Eagle’s IPTV business on very favorable terms to NIHK. If that is acquisition is beneficial to NIHK, as it appears to be and as you suggest, then Dutchess, the informed financier, is unlikely to be an agressive seller, especially at these levels. I suggest that the more likely sellers are groups like MarketPulse which receive large chunks of NIHK shares (4 million last transaction) in addition to cash. Unlike Dutchess, these promotional groups have minimal invested interest in NIHK’s IT/LT success and sell simply to complete the business transaction. Were Dutchess aggressively to reduce its position in NIHK, the pps impact would be severe. To solidify the argument that NIHK’s acquisition of IPTV technology is long-term beneficial, and to reduce the risk of a single-customer source of business (even if that customer is a substantial one) it would be very favorable, and a validation of their competitive technology, if NIHK were to announce a second IPTV customer.

    Editor: Perhaps there is some truth to that comment. However, the 4 million shares Marketpulse received on this stock stretches over about 3 years- on a daily basis that’s a minute amount of stock. The vast majority of shares issued out of NIHK have gone to Dutchess, who I would guess liquidate a monthly quota to meet a coupon of sorts for the debt. Here’s the good news- the financing for the set top box acquisition was the most shareholder friendly one done to date. So, as soon as the market works its way through the current dilution, the next big amount will be far less oppressive to the markets. Dutchess simply transferred the business and the debt from a very unhealthy company to one in their portfolio that is working, growing, and managing its business quite well.

  7. I ve been holding nihk for a while now and was getting impatient, I actually had a sell order in but didn’t sell. Now Ive cancelled t and decided to wait it out.
    looks like a good investment it’s just time…right?

    Editor: In the high risk penny stock realm where you have to assume it is possible to lose all your money, I believe it is a great speculation. I’m still waiting for a big home run out of the company, but for time being they are hitting lots of singles and keeping the runners moving around the bases. If and when the big home run comes, that’s when you’ll make a lot of money in the stock. In the meantime, their growth helps diminish the risk profile.

  8. I think it would be a great idea if management bought stock. This would show investors how much they believe in their own company. The price is so low at this point. Wouldn’t that make sense? Maybe the shares would move up finally.

    Editor: Are you suggesting management, which simply means Doug Saathoff, should buy with his own money? Or do you mean the company should buy back with its own money? Whether Doug buys or not, I couldn’t say- it probably depends on his personal financial circumstances. On the company side, they are not in a position cash wise to do anything like that. It’s not the sort of thing that could happen until ’09 if the set top box business goes well.

  9. In one of your blogs you mentioned that NIHK has about 10 “big deals” under consideration?
    Are there any new developpments regarding this deals?
    When do you expect the launch of their WebConnect software?

    Editor: Really, one of the biggest deals is the set top box acquisition. That one might not be super high profile, but it certainly has lots of upside. It seems like a lot of their current real business is coming in through the utilities, and there are some big opportunities there. As far as crossover to other applications like the Mercedes deal, I do believe they have a few of those in the pipeline as well.

  10. What is going on with this stock? All it has is good news. Why is it still going down? What do you feel it will take to stop it from going down?At this price are you buying shares?Happy New YR.

    Editor: Just a whole bunch of volume. A whole bunch of new contracts/sales should lead to a lot more volume. As I have been saying, the slow but steady growth has removed a lot of the downside risk- the orders you haven’t heard about yet are your upside potential.

  11. With oil reaching the $100 mark for the first time, recession talks seem to be all the rage lately. I know a recession is not good for the economy but how would the penny market take to it? I assume it would not be good. How do you think NIHK, with nothing but good news lately, would react in a recession even if it is banging out great news and numbers? Would a recession limit it’s possible highs or would the market trade it at what it should be worth?

    Editor: A recession would not necessarily effect the individual companies very much, but a bear market would definitely have a major negative effect on stock prices- all across the board- NIHK would no doubt be lower just like all other stocks in a bear market. We’re not quite there yet, but there is a lot of noise keeping investors on the sidelines.

  12. the news about netflix’s set top box to deliver movie’s have anything to do with this company or is lg electronics or apple going to capitalize on it

    Editor: No- their product is strictly for the hospitality industry. Netflix is for the home.

  13. with all this talk about
    Dutchess Capital going around. I just met another investor who mentioned that you are Dutchess Capital or at least a principle in the company.

    Editor: That would be wrong. I am neither. I did invest some of our defined benefit capital in their fund at one time, but that has since been withdrawn. I have no affiliation with Dutchess aside from writing about one of the companies they have financed- specifically NIHK. Aside from that, I am personally friendly with the principles.

  14. principals, not principles

    Editor: Not unusual for me. Lucky I can get out of be in the AM.

  15. “Lately, I have been suggesting accumulating the stock when it is trading quietly and no one wanted it- I was emphatic at $.10, and was equally emphatic at $.09. It was the feature of my “Summer Ends Early For Micros” edition this past weekend, and the one-two punch of the last two news releases has investors excited again.”WELL NOW ITS AT .07 AND THINGS LOOK TO BE THE BEST EVER THERE.Do we load the boat here and hope that your friends at Dutchess run out of stock to sell?In my opinion this stock should be at the higher end of its trading range not its lower. Does this stock still have the chance to trade at its highs like you were saying back a couple of months or is it likely to just stay here and go lower like other stocks Dutchess has their grips on. Is it time to buy or sell?

    Editor:When the market starting getting heavy in December, I published an edition clearly defining the SSL (suggested stop losses), how you use them, and caution relative to some perceived rough going. The market has had the worst first week to a new year in recorded history. NIHK is not immune to this along with all other stocks. My view on it has been unwavering and well stated- the SSL for NIHK is $.08- if you chose to hold it down below $.08, you have decided to become a long term investor. As such, today’s price should not be a big concern for you. Lots of companies are delivering good news right now, and no stocks are responding. Can you accumulate it at this price? Sure. Is the company continuing to grow? Yes- Is the supply finite? Yes. Is it a buy today for a trade?- No- and it’s not going to be until capital starts chasing stocks again. You tell me if we are in a Bear Market, or if this is just a correction in an ongoing Bull. You tell me when the microcap switch will flip back on for investors. Then, I will tell you the stock could have another run. Right now, if you love it, just accumulate it for better times. Your call.

  16. I think you might of misunderstood my last post. I did listen to you and buy under .10. Nothing higher than that. Im ready and waiting for this stock to turn around. Should I still be using your ssl of .08. I have been buying it under .08 and think its got a great chance of going to .20 with the right size order.

    Editor: We need a combination of factors- some good news, combined with a good market, diminishing supply, and increasing demand. In the interim, you aren’t holding a very risky $.07 stock in the whole realm of $.07 stocks as we know the company is growing nicely.

  17. What you think this statement will do for a Co like NIHK?
    “Next year in California, state regulators are likely to have the emergency power to control individual thermostats, sending temperatures up or down through a radio-controlled device that will be required in new or substantially modified houses and buildings to manage electricity shortages.”

    Editor: I believe it could be great for NIHK if they can capitalize on the opportunity.

  18. What this mean high volume on no news?
    Maybe preparing to start up.
    Thanks

    Editor: Hope so. It would be nice to see news flow out of the company start up in earnest again.

  19. On Nov 29, NIHK said they initiated the shipments of aprox. $880,880 worth of the IPTV set-top boxes. I want to know how those figures go on the books. Would all of that go on Q4 earnings, or does it go by when they ship them? If they all go on Q4 then last quarters revenues should exceed $1 million. With these orders do you think it’s possible that their bottom line could be positive for a quarter? Also, that was a huge deal with the NY orders. Could be a very good thing especially with 371,000 customers.

    Editor: If they shipped in Q4, it should go into Q4- we might see some nice increases in Q4 numbers.

  20. So I didn’t sell on the SSL of 0.08 and even if I’m only a very ‘small’ investor, I like this company and I like the way it is holding in this ‘so called’ bear market. It is, from a technical point of view, a revival of the stock value was to run into the 0.21 value, but I guess in this market psychology, it will not be february but rather july, august or so. So there might be a delay in stock value delivery. On a technical view, considering the company continues in delivering, when do you see a ‘revival’ in stock valuation by the market ? I’m very convinced somewhere along the second half of this year the stock will be trading in the low 0.20′ies and then make a pull back. What’s your point of view form a combined ‘real business’ and ‘technical stock valuation’ view ?

    Editor: Unfortunately, since I’m traveling, I don’t have time to take a hard look at the chart for you right now. Like a lot of small stocks, just trading sideways waiting for volume to come back. Will do a more comprehensive update later this month. A good question.

  21. I think that this company needs better advertising to more people know about Nihk. I think it’s good company with lots potential to growth. I just wandering what happened with 6 million $ order of MediaPro IP3000HD video set-top box what Eagle Broadband had, and couldn’t deliver?. I read somewhere about that deal if I correct? How that deal would effect on stock price and future of company if Nighthawk get that order and deliver that order in time. What You think about that last two news?
    Sincerely

    Editor: Business as usual. Following the same pattern- nice order flow. Be interesting to see how they do in Q4 with the set top box business.

  22. Do you know how much cash NIHK has? It is enough for the next 6 month? Thanks.

    Editor: They got an extra $1.5 million with the set top box financing, so they should be fine.

  23. Do you think a cash-expensing incentive could accelerate set-top box purchases? I imagine they’re currently amortized over their useful life, maybe 3 years or so, but I’m no CPA so I could be way off here.

    Editor: Pretty interesting question. One I would have to get Doug Saathoff to answer. Need to touch base with him. Will do so.

  24. Been buying and buying for over a year now…. Just today I noticed a little blood oozing out of my rectum…

    Editor: This stock is doing just great compared to some of the other issues out there in the large cap world. One good day could get it back in shape.

  25. I have given up I threw in the towel today I sold under .06. Why has the stock gone from .12 to .06 on great news. You cant say its the whole market fault. there has to be something wrong at NIHK for it to be at .05 with all the positive news for them.What do you think it will take for this stock to stop going down and go up to .12? I will jump back on if I see something of a up move starting. . So when and what will do this?

    Editor: Seems to me like it has really gone from about $.08 to about $.06 in this market correction. In recent months, it was only up at $.12 for a micro second. I was advising a sell at $.08 if you weren’t prepared to be long term. Psychologically, you need to have a discipline and stick with it. You were either long term, or you weren’t. There’s nothing wrong with selling and moving on for now- you can always go back in if the stock gets hot again. As i have been saying all along- the company is continuing to grow, but the stock is floundering. BTW- there are dozens of much larger cap stocks that have been cut in half in this correction. Look at any stock in the financial world. They are all down at least 50%, if not more.

  26. Can the stock be far behind the company? Just wonder, where is the company. On dec 5 the company announced ‘their largest remote disconnect order in company history’ and the stock just keeps continuing going down, not even a temporarily upside rebound. That largest order was 600 pieces. Now they announce an order of 500 pieces, stock trading is double of average and again no gain. The company delivers and stock owners just sell at this 0.06. So, what’s hidden that we do not know ? Or is it just, as I guessed on a technical base an anavoidable slow pull back into the 0.048 before any stock revival is to be expected. And another thing, all quiet on the front of the IPTV set-top boxes. All quiet, good news ? in proverbial speaking terms ?
    On the other side, ‘major’ stock upside moves seems to occur in the pre-days of the delivery of quarterly results. So can we expect a relevant upside move next week or so this time again ?
    I wonder.
    And as to Douglas Saathoff I would like to say that the sentence in their announcements (We do not intend to update any of the forward-looking statements after the date of this press release to conform these statements to actual results or to changes in our expectations, except as required by law.) is not exactly stock owners friendly because with such a sentence anyone could tell just anything.. expectations are OK, follow up is more OK, telling about realizations of expectations is still more OK and creates ‘trust’.
    After all, investors invest in companies and in the persons (‘officers’) who run the company, who they trust having something to offer to society and having a sound business. Sentences as mentioned above are not quite motivating, humanly speaking, even if legally everything is OK. So, where are we heading with this company and its stock. What’s your opinion ?

    Editor: Nothing has changed with regard to my view of NIHK. Their sales continue to grow, their new line of business takes them to a whole new level, and the company is headed in the right direction. On the other side, the stock continues to flounder as the market is delivering enough volume right now. This is simple. You need to ask yourself if you are a long term investor, or you are going to let the stock price bother you. If you are long term, just follow the company. If you are subject to psychological challenges of a weak market environment, sell the stock and get out. You can always buy it back if and when it gets hot again. The market will change to the better, and volume will come back. It’s just a question of when and where the stock price goes between now and then.

  27. Dear Editor,
    I’m still in on NIHK as I do believe the company and its products have some real potential. Nevertheless I’m a bit concerned on the ‘communication’ side of the company towards its investors. But I remain a mid-long term and perhaps long term investor. Hope the company continues delivering and hope that management comes to a better ‘communicative policy’ towards its investors. And yes, I do believe ‘psychological challenges’ will drive the stock downwards for a while from here on. So, lets take them and hold on, the future is to the company and its stockhoders.

    Editor: The most important thing you said is that you know what you are and what your philosophy is. Perhaps I can talk to the company about ratcheting up its communication.

  28. I just noticed that Grannus Financial Advisors are working with Nighthawk are they replacing MP to promote the company?? also in MP disclosure they are paid $95,000 and 4 million restricted shares for the year or is that each time they profile them ? ,is Grannus also being paid ? if so were in the hell does all this money come from. It seems to me Nighthawk needs every penny it can get its hands on

    Regards

    Ron

    Editor: They just issue the shares. I’m pretty sure MP is out of the project, but the probably have some shares left. I don’t know who Grannus is.

  29. Huge news yesterday and I do not see any mention of it here or from you. Did you see the PR and if so what are your thoughts. With news like this in the past this stock would have shot up, I still do not understand with all of the volume yesterday who would be selling when NIHK seems to keep on delivering good news.

    Editor: I have told Doug Saathoff in the past that I only wanted to cover the really big news, not the one and two orders, which are normal course of business for the company. You are correct- time for an update on that situation.

  30. you keep saying you’re going to take such and such up with Doug, but you never report back to us on your discussions.

    Editor: I will at some point. However, I only suggest reaching out directly to him if you want an immediate answer. His email address is on every press release, and he sends out his own letter along with every press release. To get it, all you need to do is sign up at their corporate web site.

  31. For almost a week now we’ve seen a slow but steady increase in the stock with no news since last Wednesday. Could the heavy sellers be finished here and this stock be ready to take off? Comparing this to its history, we are in the months from which it has done the most successful, January-April.

    Editor: Possibly- the amount is finite, and they will run out sooner or later.

  32. Are there big contract announcements on the horizon which may push the price of the stock up? Or is it likely that we will see the stock drift further ‘south’?

    Editor: I don’t know. I haven’t communicated with Doug S in a while. I am working on some follow ups for other ideas at the moment, but will be checking in with him next week.

  33. Any chance of an update on nihk? The stock feels like it has hit the bottom do you feel that is true?What is the possible upside if they get a big contract from a major utlity Co.Or a couple of big city traffic dept.?

    Editor: Will be working on that soon.

  34. Now that nihk may be on the verge of positive cash flow, do you think they will need to do a reverse split to undo the dilution damage of the past few years?

    Editor: That’s certainly a possibility, but the timing should accompany a major transformational event to the positive.

  35. I think a reverse split would be a terrible thing to do. But a lot of message boards are suggesting to do that. If it’s anything like I have experienced with other companies that did that. I never recovered my investment. The market stinks anyway. I think that’s the only reason it’s been down.

    Editor: Could be problematic in the short term- a good thing in the longer term depending on how the company performs.

  36. Do you think there will be announcements of any deals between now and the 4Q and Annual Report?

    Editor: I haven’t spoken with the company in some time. I would certainly expect so. We won’t see the annual report until the end of March.

  37. Should we be worried that you havent spoken to the co in a long time you think something is wrong there. You said you would have an update coming and now you say you havent spoke with them. Im getting concerned do I have just cause to be?All they have is good news and the stock just goes lower.

    Editor: Talking to the company is no reflection on what’s going on there. I’m just really busy- every day. When I get to it, I’ll fill everyone in. Would love to know what’s going on with the set top boxes.

  38. Looking at the chart, it appears that support is at $0.055. It also seems that the major financial storm is behind unless we get bad employment or inflation numbers in the future. This could be a bottom for NIHK. Do you agree this is the current support price?

    Editor: If you look at the four year history of this stock, it has always proven to be a buy during these extended periods of quiet trading and listless stock performance. Whether it’s $.055 or whatever number, I believe you are on the right track.

  39. Well here your answer to what is going on with the set top boxes. If the stock cant rally on this then someone needs to go talk to dutchess.

    Editor: I believe if you look at the volume side, there’s your real culprit. We just need more interest, and it’s tough to find in a bear market. However, buyers at today’s levels could just end up being the big winners if they have a multi month time horizon.