Bob — On The Sutter Hill Filings — Spot On.

Bob writes, overnight — in response to mine, of Tuesday:

…Only real, net buys or sells by long-time shareholders count.

The number of shares issued is so large compared to daily volume that any major acquisition or divestiture of shares has to be managed outside the open market.

Acquisition is the endgame, and if MATR wants to be acquired, their case would be better served if their model actually worked and with $40m in revenues they could actually show a real, unqualified, profit….

Truer words were never typed. Happy Thanksgiving one and all — i’m out!

This Distribution MAY Make Easier For Sutter Hill People… To Exit Quietly

 Well, at the outset, I will candidly admit (in fairness) that all of this may simply be year end window dressing/tax planning for the named partners — of the general partner, of Sutter Hill Ventures. You see, it COULD be that they need taxable capital losses, to offset other (tech start up investments’) capital gains, taken during 2015. Longer term, all of these shares of Mattersight should show capital losses. So — when distributed out in kind, these partners may elect to defer the loss, or take it in 2015, in a number of differing structures.

So it could be tax planning afoot. [Here is Sutter Hill Ventures’ twitter feed, just FYI.]

Careful investors may want to consider the OTHER possibility, as I say — i.e., that it could also be that some or all of them intend to sell their stakes as quietly as they can, under applicable SEC Schedule 13D rules. It is not clear whether these shares, now that they are distributed, must be voted in a block, or sold in a block, per some Sutter Hill instruction.

I strongly suspect they are free of any such restriction. I say this, because prior hereto, there was no need to have a control agreement, where SHV owned them directly. Now that they’ve been distributed, any control agreement should be filed as an exhibit to this amended Schedule 13D, under applicable SEC rules.

There is no exhibit. So — I think they are each free to sell, or pledge their shares.

We will keep an eye on all of this, but Mattersight has been off — albeit slightly — both yesterday and today, on the news.

Object lesson? Be careful out there. Lots of shares could show up for sale at any time in the next months — entirely aside from those we expect will be issued directly by Mattersight, soon.

Here’s the quote from the overnight Schedule 13D amendment:

…On November 19, 2015, in accordance with the terms of its limited partnership agreement, SHV distributed in kind, on a pro rata basis and for no additional consideration, an aggregate of 319,847 shares of the Issuer’s Common Stock and 96,261 shares of the Issuer’s Series B Preferred Stock to the managing directors of its General Partner, including the following Reporting Persons, who are also members of the management committee of the General Partner….

As a footnote, here is Mr. Coxe’s related SEC Form 4. Each of the other named persons has also filed a related Form 4 — but I’ll not link those here. They repeat this information, for each.

 

 

 

Of A Golden… Something, Or Another…

Bob is right on point here (and here is the presser, for context), with his overnight comments:

“…Maybe the stock has been reacting to the award of the first annual “Golden Headset Award”. More hilarity from Mattersight. And, after the laughing dies down, shareholders start to reassess their investment:

First, it’s probably not even real gold.

Second, good customer service means the demise of human agents via self-service and products that don’t need assistance.

Third, why not “golden” personality, sight, or something that ties into a vision that Mattersight is trying to pursue, instead of merely tying themselves to being just another call center accessory company?…”

And the stock is in the $6.70 range, on the news. Pathetic — but Bob has it nailed. There is no “there… there” when it comes to Mattersight vision/leadership.

As a post script — I’ll note that in the year 2000, yes — fifteen years ago(!) — Carnegie Mellon University awarded “Golden Headsets“. Seems Mattersight is simply adopting others’ IP, inventions and idea “know-how” work, once again. I just added that now ancient image to the graphic, at right. And it seems that another organization — not educational — also makes awards called Golden Headsets — since at least 2009. Nutty — and entirely. . . non-original.

 

You have been amply warned.

Bob Is Likely Right: New Equity Infusion Needed Soon.

Bob writes, correctly — that we should be expecting an announcement of impending equity issuances, soon:

“…I’ll bet we’ll see an announcement for new money shortly. I think they’re keeping the price down to set an acceptable entry point for the investors….

Fools’ gold….”

I think he’s spot on, with that.

————-

And while we wait for that, the latest official Mattersight blog entry had me smiling — though it is plainly trivial….

That link talks about some of the best quotes overheard at Mattersight’s “Call to Loyalty” event in Austin last week.

However, unlike a non-commercial — no revenue blog like this one (where “fair use” allows derivative use of others’ marks and images), Mattersight’s blog is a decidedly commercial endeavor.

As such, I think it a little dangerous to be using (i) Brad Pitt’s image, (ii) movie stills from “Money Ball” and (iii) Homer Simpson’s likeness (presumably) without permission, any disclaiming attribution, or payment of royalty — for commercial use. One might well be confused — with Mr. Pitt in particular — into thinking that he has endorsed the PBR product Mattersight sells. The quote is that. . . opaque.

I know this seems like a long game of trivial pursuits — but (in my opinion) it bespeaks a lack of attention to detail that runs right through Mattersight — from top to bottom. I am sure there are many earnest, hard-working and clever people in Mr. Conway’s employ, but a smallish subset of them seems to regularly shoot the organization in the foot — with junk like this.

Again — This Was Not An Open Market “Added” Share Transaction — It Was “Internal Shuffling” — By Coxe-Controlled Entities

A series of SEC Forms 4 were filed this morning, by Coxe-affiliated individuals and entities — and they make it doubly clear that no net outside buying in was going on here. Quoting from the first footnote to that form:

…For purposes of Section 16, the purchase of these shares by the reporting person’s family limited partnership constituted (i) a change in the form of ownership of the shares previously owned by the reporting person from one form of indirect ownership to another…

Got that? From one form of indirect ownership, to another. All within the Coxe-control group.

I write this because some goofy outlets are listing it as a new buy, and the stock seems to be rising a bit, on the NASDAQ, in response.

On Monday of this week, Zacks, the independent research arm, took Mattersight down from “Hold” — to “Sell”. That’s reality, folks. No puffery there.

Be very careful out there.

Bob Explains… Mattersight Hype, Deconstructed

Bob, in additional reflection on the 2,000 seat routing engagement announcement:

…If this customer applies the MATR solution to 2,000 agent positions and with an uber-conservative, fully-loaded cost of $50,000/yr (comp, benefits, facilities, tech, telecom, management, etc) then this customer is spending on the low end, $100 million dollars a year for their customer service operation (but likely more as this would be applied to the best, most expensive agents).

If MATR’s solution can provide the claimed benefits, then such a customer could save $10-$30 million per year and achieve the same results, or increase revenue by a similar amount (assuming the cost of the operation is equal to or less than the value it generates.

Either MATR is leaving money on the table because they lack pricing power due to their precarious financial situation which the customer uses against them in contract negotiations, or the solution doesn’t provide the benefits claimed and the business-case justifications aren’t realized….

That analysis is… Spot on, sez me.

Sutter Hill’s Tench Coxe Moves One Million Shares From One Self Controlled Limited Partnership, To Another: SEC Filing

While Sutter Hill Ventures affiliated entities in the aggregate still control about 19 per cent of Mattersight, it seems Mr. Coxe (who ultimately controls them all, and has been on the Mattersight board since inception as a public company in the Year 2000) has been “re-arranging his deckchairs, on HMS Titanic,” this week.

From a just now-filed SEC Schedule 13D amendment, this evening:

…On November 9, 2015, SHV sold 1,000,000 shares of the Issuer’s common stock to Rooster Partners, L.P. (“Rooster”), a limited partnership indirectly controlled by Mr. Coxe, in a privately negotiated transaction at a sale price of $7.29 per share, for aggregate sale price of $7,290,000. The source of funds used to purchase such these shares was the capital contributions to Rooster by its general and limited partners….

Ordinarily, this 1,000,000 share largely internal control-group move — at $7.29 — would be arranged to acheive some mitigation/diversification of portfolio risk purpose in one of his other controlled entities (perhaps one with exposure to outside investor pressures) — or to reap a tax benefit, in some still opaque and ill-defined way. But in the end, the same guy STILL decides the fate of ALL these shares: one Tench Coxe. Overall, the group’s percentage control of Mattersight has declined from over 25 per cent in 2008 — to 20 per cent in 2012. The now 19 per cent reflects the dilutive effect of the share issuances since then, offset (in part) by some purchases, in some of those offerings.

I’ll post Bob’s latest in the morning tomorrow, since Mattersight tried and tried(!) — to move north today on the NASDAQ, but ultimately staggered to the close — flat-to-slightly-off, from yesterday.

But now you know the latest, from the SEC EDGAR filing desk. UPDATED — Noon 11.13.2015 — I should update this, by reporting on Friday the 13th, that some autobot press outlets (you know who you are!) are erroneously tagging this as an increase in the SHV holdings — it is not. It is just a shuffling, from one pocket — to the next.

Be careful out there.

CEO Conway, With More Press Release Puffery — Post Q3 Flame-Out Edition

With the stock showing the effects of the (entirely avoidable) pre-Q3 results release puffery — all playing out as a continuing week-long down-bubble, on the NASDAQ, we read a press release from Mattersight this afternoon.

The release touts a rounting contract with a Fortune 100 health care company. But it does not name the company. That is almost certainly because the company declined to be named. It wouldn’t want tiny Mattersight using the behemoth’s coat-tails — to establish an undue patina of credibility. Here’s the bit — do go read it all:

…The deal, with a new logo customer, is Mattersight’s largest to date for its routing application, with an ACV of approximately $2 million and an initial deployment to more than 2,000 seats at the client’s outsourced contact centers within an Avaya environment. Tens of millions of customer conversations will be positively influenced by this partnership….

Make no miskate — it is good news. But Mr. Conway is so inclined to oversell everything, that he immediately throws in a multi-year figure “tens of millions” — and undercuts the credibilty he was building. It may turn out that way, but saying so at the inking of a contract seems. . . desperate.

But they ought to be, I suppose — as Bob points out, they are going to need new equity — again.  Perhaps most troublingly, they are going to need it pretty soon. Four times, to the equity markets — in a little over two years, right? Right. Crazy. All those conversations — and no actual GAAP earnings. Ugh.

Bob adds:

…Two questions (after your obvious one) comes to mind:

1. $2 million dollars for 2,000 seats for how many years? I think their contracts are for 3 years so that works out to $666k per year or $167k/quarter. If this is so valuable, how come they can’t get $10 million or more per year?

2. Is their market getting tapped out? Penetration will never go to 100% of seats at a client, because it hasn’t and it won’t (I could go on about why) and this is a big company/call center play and there aren’t that as many large ones out there in the inbound customer service space that would be attracted to this solution. If this is the nature of revenue they’ll get out of HUGE customers, then we should be concerned about true market potential….

Mhmmm… agreed!

Bob’s Right — “No More Optimists — Only Realists,” Now Trading MATR On NASDAQ. . .

I’ll simply note that Mattersight has now broken below the ninety day $7 a share floor, as of 11 am EST on the NASDAQ. It stands at $6.98, on solid volumes — and probably has another dollar to fall, near term. So, the rally pre Q3 results, was — once again — a suckers’ rally. Beware the impending reality — and its down-bubble — each quarter, herefter, through at least the end of 2016. And…

Bob writes overnight:

Not too many optimists coming to the rescue, for sure. The market makers facilitated one big trade after 11am that started the fall.

Looking at their latest quarterly results, Current Assets less Total Liabilities leaves them with about $6 million unspoken for, half of which they’ve likely blown through as we near halfway through Q4. You can see the increased amount they’ve spent on their “world-class” facilities in Equipment and Leaseholds, plus the huge amount ($3.4 million) invested in intangibles, which I believe is the largely the rights to the PCM framework.

We’ll see how their fund raising activities pan out. They need to raise about $12-$16 million by January to keep the party going for another year.

Me? I sure wish this public company board of directors would. . . grow a set — and do something about it.

And Down Again! Off Over 8 Per Cent Since Q3 Results Announced.

UPDATED: Now down 6% on the day alone!

Some may recall that as recently as October 12, 2015, Mattersight had closed over $8 a share, on the NASDAQ. That night, Mattersight closed at $8.07.

There were goofy analysts predicting $9 and $10 per share, some before year end. Hilarious. And sad.

Then Mattersight delivered yet another quarter in which (surprise!) more than all the increase in revenue was consumed by proportionately larger expense increases, on a GAAP basis. So it has added to its losses per share, yet again — leading analysts to revise upward the trajectory of losses they foresee for all of 2015 — and beyond the end of 2016.

So today, the stock is falling another 4.4 per cent, on pretty substantial volume.

Where are the Daniel Carlson types, now?

Cue the crickets.

This is truly a fascinating case study — of 15 years in the making. . . a completely broken business model. And an entrenched, duty-shirking public company board of directors.