Gediminas Jasionis

WPCS International Incorporated (NASDAQ:WPCS) Up and Waiting

by Gediminas Jasionis August 30, 2010
WPCS_chart.pngWPCS International Incorporated (NASDAQ:WPCS, WPCS message board) epopee from Friday might turn out not too favorable for the longs, if the story driven buyers see no more space for appreciation. Currently, things are heavily influenced by an outstanding takeover proposal and thus significant risk remains associated with the stock price.

The company has an officially addressed takeover bid from the Riley group, which has offered a price of $3.5 per share. In such cases, the stock usually sticks near the suggested level until the transaction is completed. This case is slightly different, as the confirmation of the takeover is not out yet and the negotiations should be just starting.

Riley group is the interested 9% shareholder, who doesn't like the idea of dilution that the company has been driven to by its diminishing net gains. As expressed in the letter to WPCS, Riley doesn't see the CEO's management as fit: "we have serious concerns that Mr. Hidalgo may seek to take actions to meaningfully dilute us as shareholders."

WPCS_logo.jpgIf the buyout is accepted, Mr. Hidalgo will likely be the first one to be forced out of his position. Not a very unfavorable option for the company, considering that the recent financial performance of WPCS was hardly acceptable, even under tough economic conditions. The entity has been losing its profit steak even as the economy bounced off the bottom.

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