Wednesday, August 13, 2008
ABAT - trading action not looking good
I should have posted this earlier but I liquidated my ABAT position so that I could buy another stock. I thought there was greater upside with the other stock, ABAT trading / momentum had slowed and I was getting skittish re: lack of continued movement upwards. When the 5 day moving average went below the 20 day moving average (crossed negatively) I got worried.
So what happened? I sold around $5.50 and then the company came out and announced a secondary offering. That offering, at $4.40 or so per share, took the stock down. The company needs cash to retrofit buildings C & D (currently empty) and to retrofit their A & B buildings to increase capacity/efficiency. When everything is said and done their capacity will go up by 165%.
Now, if I was them I would have taken on DEBT as the stock was undervalued, sold at TOO low of a price, and diluted existing shareholders. Since then the stock has been sliding and is near $4.50 today and likely headed to $4.25 very shortly with $3.75 possible based on previous trading action.
I will step in and buy some shares after I see a bottom as I think the company's business is phenomenal and I think these guys are really plugged in close with the PRC gov't officials, which should help them in getting contracts. They will be moving out of small batteries into larger capacity batteries trying to lure large auto manufacturers to utilize them. They currently sell their product to motorcycle companies, electric bike companies (HUGE market in China) and Zap Auto (http://www.zap.com/). I'll be revising my target price here in the next few weeks after I look at their recent EPS announcement closer. Revenue growth has slowed to 53% annual but Y-Y EPS growth is 100% +.