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When I make a mistake in an investment I usually spend hours reflecting on what I did wrong. As you all know, EGMI shares have been temporarily halted by the SEC. Without getting too far down into the details of the release (you can all read it on the SEC website), it seems to me that there is more to the story than we know.
First, what did I do wrong? No one in their right mind could look at the numbers and say it was a bad bet. Indeed it was speculative, and I never once said the management was on point. I was really hoping the board would kick out the current management, go back to their core, and start focusing the business in China for growth.
Here are the current numbers which are accessible to anyone. Unless the company hired a chef instead of a CFO right from the get-go these should have been accurate.
- They have 12m+ in the bank
- They have a debt / equity ratio of 0%. In other words they have no debt
- Their return on sales is roughly 46%
- Their return on equity is over 35%
Whatever the case, there has long been a struggle for power at EGMI, I'm not sure of the exact details, but I imagine that the board & management are at odds based on the lack of execution over the last few months. I think this power struggle lead up to the events of last week.
I believe there is a chance that they do have the 12m cash that they always claimed to have. We have no choice but to wait, and hope that there is something brewing internally and we'll hear all about it next week before the stock re-opens. Whatever the case, even if they have a glowing story and "it was all just a big misunderstanding" the stock will likely drop before it moves back up.
If anything, I learned to stick to my core principals. I hate 99% of all American Small Caps. If it looks too good to be true, it probably is. This is why I like TRADING stocks like CYCC, and INVESTING in stocks like SYNM which is no hype, no b.s., just facts and assets that you can actually go out and touch.
So what did I do wrong on EGMI? I can't be sure I did anything wrong yet. I won't say I did wrong until I hear the final outcome of this story, because it's simply not over yet. ..and I have little choice but to wait and find out the outcome. Usually these outcomes aren't pretty, but when it's all over I'll write a follow up blog.
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