[U] A Tale Of Successive Down Rounds, And Egregiously Massive Dilution: Executives Get Richer; Shareholders Get… Shafted.

Below are links to each of these offerings to my prior posts…

[U] Bob’s comments: “…They can’t make a profit, and the top executives are wildly compensated based on internal metrics that have absolutely no link to profits, but at least they outfit the offices in the modern way – “What is this a business or a day care?…”

Bob: “…You never hear any of this stuff from the entry-level analysts who basically regurgitate what they are spoon-fed from MATR’s executives and investor relations….”

The last four privately placed Reg D Mattersight equity offerings, then:

February 2017

July 2015

July 2014

November 2013/January 2014

Ahem.

The graphic/chart at right (coupled to my updated guesses, below) really says it all — do click to enlarge. It is a little busy — but one may readily see how badly each of these offerings jilted the ordinary shareholders. Over just the last three and a half years, Craig-Hallum and Mattersight executives have worked hand in glove, to extract some $50.2 million from outside investor pockets, while losing vast sums, on a GAAP basis — and all the while, Mattersight’s top executives received more and more free “give-away” shares — so they didn’t care (too much) about falling stock prices, and the yawning dilution each additional round caused. Disgusting.

It is my assessment that the conventional debt markets are essentially closed to Mattersight, now — except for predatory lenders like Hercules Capital — at well north of 10 per cent per annum. Of course, the dilution at above right takes no account of Hercules’ rights (see directly to the right) to soak up more very cheap equity, coming this fall, if memory serves. [Hmmm… perhaps $3.50/share isn’t cheap any longer, though — here in May 2017 with the stock trading around $2.70 a share as I write this.]

In sum, this is a public company in a pretty significant cash pinch — by late summer or early fall 2017 — unless Mr. Conway brings in several very large, very high margin new engagements — and gets them installed by beginning of Q3 2017. Not likely, given the past 16 quarters’ experience. In fact, in seven of the last eight quarters, the company has missed its own internal targets, and significantly so. Q4 2016 being the lone exception — which, miraculously(!), allowed for big bonus payouts. But $700,000 of the Q4 2016 revenue had to be “given back” in Q1 2017, to a large customer — when (we were at least told that) the install had slowed appreciably.

I wonder if those executive bonuses were likewise clawed back? I doubt it. I also wonder if that’s what the able, hard working SEC staffers are looking at, when they regularly visit here. Hmmm….

You’ve been amply warned. Avoid this name, on the NASDAQ OTC. Word.

UPDATED @ 2 PM EDT: After everyone digests Bob’s cogent comments, below — this graphic will be part of a new post, in a bit — it is my informed guess as to what it is going to cost — in dilution — when (not if) Mattersight cannot meet its continued borrowing covenants (more on that, in the next post) with Hercules (in order to borrow more cash), in the back half of the year. So back to the C-H PPM route, thus:

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3 thoughts on “[U] A Tale Of Successive Down Rounds, And Egregiously Massive Dilution: Executives Get Richer; Shareholders Get… Shafted.”

  1. They can’t make a profit, and the top executives are wildly compensated based on internal metrics that have absolutely no link to profits, but at least they outfit the offices in the modern way – “What is this a business or a day care?”

  2. By the way, whatever happened to Mattersight’s next big thing, “Workstyle? How much profit has that product line brought in, or rather how much has it cost the company?

  3. You never hear any of this stuff from the entry-level analysts who basically regurgitate what they are spoon-fed from MATR’s executives and investor relations.

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