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back to article Overland's Nasdaq market cap gap trap map

Back from the dead? It's a little too soon to say, but Overland Storage - threatened with costly ejection by Nasdaq because its market capitalisation was under $15m - has got a $12m stock issue to put that threat into touch. It's not a done Nasdaq deal yet, but the outcome seems pretty certain. CEO and president Eric Kelly said …


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Brilliant headline!

And since I'm here, I may as well read the article...


You'd think some people would learn by now...

There's a sucker born every minute.


How to pick a Zombie Stock

Hats off to Kelly for spinning what must have been an amazing story to convince some less than savvy investors to part with $12M!

It beats me how this one passed due diligence though!

A few facts:

* The Snap business, supposedly the savior of the company, contributed $1.8M in revenue last quarter. This is down from $3.5M just over a year ago when they purchased the business from Adaptec. Quite a growth engine...

* The HP lifeline has almost gone. OEM revenues (all NEO) were down to $4M last quarter, down 50% vs. a year ago.

* Service and maintenance now represents 35% of revenue. This might sound good (recurring revenue stream, stability...), however, most of it is tied to the rapidly disappearing installed base of NEO's, and is just a vestige of Overland's former glory.

* The NEO product line is down 29% in CQ4 versus a year ago, despite the recent press release celebrating a 28.8% rise in NEO sales vs CQ3. The reality is that CQ3 numbers were so dreadful it would have been hard not to bounce back as the economy pulled out of recession. CQ1 2010 will reveal the real state of the NEO business.

* Overland continues to burn cash. When you strip away the smoke and mirrors of the various receivables financing agreements and other fundraising efforts, they burned through about $4.9M of operating cash and repaid $1.4M of debt in calendar 2009. To finance that they raised $3.7M from the November share issue, $2M from liquidating the auction rate securities and $3.5M from the receivables financing agreement. In CQ4 alone the company had negative operating cash flow of $3.5M!

So Overland now has an extra $12M to burn. Maybe this is the start of a new investing trend, investing in the living dead. We've got junk bonds, penny stocks, CDOs... anyone for Zombie Stocks?

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