Is Medis Technologies Out of Fuel?
Written by: Aaron Katsman | June 22, 2008
Aaron Katsman
IsraelNewsletter.com
Shares in Medis Technologies (MDTL) reached a 5 year low Friday on news that the company was doing a $29 million offering. This raise leads to the question of whether the company is teetering on the brink of financial solvency? For those who don’t know, Medis focuses on its fuel cell technology, and sells through OEM partnerships.
The problem is that they aren’t doing much selling. The company has made announcement’s in the past about prospective deals but little has come to fruition. A year ago, after announcing a deal with Microsoft (MSFT) that was said to be in the millions, Herb Greenberg wrote in SeekingAlpha.com: “A Microsoft spokesman, noting that the order was “small,” told me there has been “inaccurate” information in the marketplace about what Microsoft plans to do with the fuel cells. “We have no plans to resell these products around the world,” she said. She added that Microsoft has no plans “for development of the product.”
Then what is Microsoft doing with it? As John says in his piece, Microsoft plans to use the Medis products as a giveaway at an upcoming event…like a chatchke. Yet another Medis announcement that isn’t quite what it appears to be.
Jonathan Weil of Glass Lewis, the proxy and research firm, added color in a report to his firm’s clients. He quoted a Microsoft spokesman as saying the Medis product is “not a Microsoft branded product. He added that the total purchase price was “less than $15,000. We have no agreements with them. No joint development. There’s no partnership around accessories. If you think of this as akin to Microsoft buying a pen or a Frisbee — that’s the way you should think of it.”
If you look at their Q1 ‘08 earnings report you will find that the company lost more than $14.7 million in the quarter. The report goes on to say: “We recently announced the signing of a $60 million equity line of credit facility with Azimuth Opportunity Ltd. We believe that the equity line offers financing which is sufficient to meet our current and near term foreseeable needs but is also very flexible. As we move forward with our sales and marketing programs we will determine how best to finance our activities.”
That was on May 12th. A short time after signing a $60 million equity line of credit, the company goes out and raises $29 million? I know that when talking about an alternative energy company this may sound heretical, but it seems like Medis is about to run out of gas.
Disclosure: Author’s fund has no position in any stock mentioned as of 6/22/08.
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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
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