Why I Shorted Turd Of A Company PokerTek, Inc. (PTEK)
Posted by timothysykes on Sun 8th of Jun, 2008 08:57:05 PM
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If you’re familiar with my short-biased PennyStocking trading strategy, or watched the latest episode of LiveStock (in which I detailed this setup), it’s not hard to tell why I shorted 1,000 shares of PokerTek, Inc. (PTEK) at $4.69 right before the market close on Friday.
Not only was Friday its first down day after 5 straight—agonizing for early shorts, opportunistic for later shorts—up-days, after a blatantly-obvious-typically-bankruptcy-coming-type 50% mid-month drop in May, if on Monday we get a morning panic (which seems likely considering Friday’s price action with hugely fading volume due to the gradual realization by bitter long-term shareholders realizing they’d better take this bounce as an opportunity to the hell out and aggressive shorts to get in) that takes out Friday support of $4.50ish making $4 a likely downside target, which if the sellers can take out the probable stop losses there brings up $3.80ish, if you take a look at the reasons for the runup, you’ll see it’s no different than f#@%ed-company-last-chance-at-raising-capital-through-hype-type plays like IPIX, CAFÉ, VION and eerily-similar VRML of the past, all of which had been great piece-of-3-day-old-smelling-dung-type stocks to short into these message-board-rumor-floated-fueled-type plays.
That’s right, this runup has been orchestrated by either the desperate company themselves or desperate company shareholders, carefully constructed to manipulate the stock price higher to fake public interest to some naïve “institutional investor” who’s only as talented as any inbred-and-coke-loving-second-generation-“fundmanager”-more-interested-in-the-perks-associated -with-financing-a-sketchy-wannabe-gambling-company could be. A less cynical, more classically taught S@#$ing Alpha contributor naively believed the runup due purely to some positive talk at the Goldman Sachs-classy-peddlers-conference —forgetting the key lesson that management talking anything up means exactly squat, example: optimistic lying-through-his-scummy-teeth Bear Stearns CEO on CNBC days before total failure—at least getting his conclusion right by announcing “The momentum appears to steep, the trigger to flimsy to validate even a short-term hold.”
But any PennyStocking DVD student would instead focus on the Gizmodo article that featured PTEK’s product, the very day of the start of the runup and later message board chatter trying to get everyone excited that their product would be featured on the World Series of Poker.
And the hiccup that the company, despite their revenue increases, is constantly bleeding cash, ignored by banks so forced to be taking out loans from sure-to-be-begrudging-execs and will soon be forced to raise actual capital—that is if they can find anyone gullible enough to get excited by $100,000 contracts or to believe this manipulated stock price rise—ignoring comments like “A casino I go to in Vegas tried putting in some blackjack tables like this with screens and no real cards or chips. They sat empty until the casino removed them. When most people want to gamble, they want to play with cards and chips. These things failed miserably”, the recent resignations of execs and that at their current pace, their product ain’t nothing new or revolutionary so they’re out of cash in a few months.
Now you can Twitter any questions/comments to TIMhelp and obviously you can follow TIM on twitter too!
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TIM Alerts
View All| Date | Stock | Position | Ideal Exit | % Gain |
|---|---|---|---|---|
| Nov 24 | KVHI | Short | $3.70 | 18% |
| Nov 20 | STSX | Short | $3.10 | 11% |
| Nov 18 | PERY | Short | $3.75 | 25% |
| Nov 11 | IIJI | Short | $2.80 | 5% |
| Nov 6 | CVI | Short | $4 | 15% |
| Nov 5 | MECA | Short | $1.95 | 51% |
| Nov 4 | CVI | Short | $4.81 | 4% |
| Nov 3 | NAK | Short | $3.20 | 5% |
| Oct 29 | EVC | Short | $2 | 26% |
| Oct 28 | HSNI | Short | $6.80 | 7% |
| Oct 28 | HSNI | Short | $5.75 | 4% |
November: 9 alerts, 15% avg gain
October: 11 alerts, 14% avg gain
These things blow. I saw something similar in Rhode Island where its blackjack with screens in the table. This company is gona S*it themselves.
Hey Timmay,
Finally got your book review done. Muddy’s still trying to figure out the tennis racket thing, LOL.
http://tiny.cc/TmhOV
Laura
Posted this in a comment today on GOS:
13th said…
Tim,
Loved your book as did Laura and Muddy.
I’m not much of a reader but I couldn’t put it down.
I read it in 2 sittings and for me that’s saying something.
To me it read like a great adventure story.
For your first writing I was amazed at how the book just “flowed”.
Loved your tennis racket story:)
Hope you’re thinking about a book #2!
If you wanted it looks like you could have a future as an author.
Hey Timmay, just posted my review on Amazon too.
BTW, I SAID IT FIRST!! (Or I think I did, LOL) http://tiny.cc/2sCb2
To quote: “Tim is a sweetheart and very friendly, honest, and down to earth. IMO, he is the next Cramer!! But nicer. Go TIMMAY!”
I thought that looked a lot like a rich Jewish late night TV star.
Mike_13th sounded like Tim offered you a Job.
p.s. i cant spell very well (used my spell check for this post)
DaBear,
It’s so hot here on the East Coast ( 101!)I am now Da BARE,talk about NAKED shorting!
When your teeth sweat you know it’s hot!
If Tim pays me in cases of COLD beer ( not the cheap stuff Tim ) I’d consider it:)
Good grief, you ain’t kidding Mike. COLD BEER……..Stinking hot in the Philly burbs.
Holding short. PTEK is waaaaayyy over valued. This thing is going to roll over big once people get a dose of reality…
Tim this one sets up real nice for you. What a crap product.
I’mma gonna follow your lead, Tim, and short PTEK first thing tomorrow morning if I can cover my PARL position in time to catch PTEK hanging at around $4.50 still. Anyway, it’s probably more probable that PTEK will decline than it is probable that PARL will decline so I’m willing to channel my buying power towards PTEK. Does that make sense? What do you think?
timmay SOLID review and explanation of the stock-i get a feeling it aint over yet for PTEK and(remember coinw)squeezed folks severly before failing-someone is selling into this run -bet its the insiders controlling the float-you got gnads holding over the weakend-i thought you did not risktake like that? well thanks for the good review of ptek and keeping your site free-you need to hire a crew to keep it all rolling smoothly -could be a future…nite
The Week Ahead:
http://super-trades.blogspot.c.....ahead.html
The Week Ahead
www.super-trades.com
Focus stocks
TAYD (first entry $5.75) - News articles everyday about the need to update building codes and earthquake proof buildings and schools. TAYD is a global leader in seismic dampers. I beleive it is only a matter of time before Wall Street discovers this stock. I dont see how demand for these products doesnt take off given the recent events with earthquakes.
NTI (first entry $10.00) - Extremely exciting, profitable Company. Has three very exciting divisions. 1) Biodegradable plastics. Plastic bans all over the news from many countries. This will be a big industry and NTI already has unique product to sell. 2) Waste plastics to crude oil technology. I believe this technology has the potential to make NTI a big mover in 2008. This award winning technology is currently being placed in India and Thailand according to the last earnings release. Any update on this technology and I think Wall Street becomes very interested. 3) The Company is test marketing a solution to the huge rust problem the oil and gas industry faces. In my opinion, in its own scale, NTI has the potential to be to plastic waste what FSLR, SPWR, and many others were to solar as NTI addresses this plastic waste issue with a biodegradable replacement and a technology that converts that waste back to crude oil.
AETI (first entry $5.75) - New wind energy division should bring this stock focus.
VSNT (first entry $31.00) - EPS guidance of $2.60-$2.70 leaves this stock undervalued.
HDSN (first entry $3.00) - This stock should start to attract alot of attention after its next earnings report.
HEK (first entry $8.10) - This SPAC is buying a Chinese bottled water Company - no need to say more.
Superman Returns to PUMP! HEK looks poised to fall, thanks for the notice.
Ben_Bien, you first shorted PARL at $4.39 as I read your post, did you shorted more at higher price like above $5 to average higher? How many shares are you holding and what is your exit price?
Superman,
I am interested in AETI to open a long position, what price do you recommend? $5.50-$6.00?
Whoa Nelly! You seem to be very casually dismissing the revenue growth here. Did you notice that PTEK’s: 1) Seeing increased licensing revenue per table deployed over the past 8 quarters, 2) Getting reorders right, left and center from their large Canada customer, now up to 4 orders and 55 tables? (Reorders don’t happen if the product is not well received by customers!), 3) Selling a LOT of amusement products to bars, restaurants, 4) Tracking to cashflow breakeven in the next 12 months?
I would agree that this product will not work everywhere. But there are more than enough places where it will work to make their revenue progress believable. (And many of those places are international, where they have been aggressively setting up distribution partners.)
The Trump location in AC will also expose the product to 1000s of investors on the East Coast who like to gamble on stocks as well as cards.
I bought into PTEK recently after playing one of their games for a lot of hours on a cruise. It’s a really solid product and has a super compelling financial proposition for a segment of the casino business that is desperate for greater profitability.
I think you missed the boat on this one. If you’re betting this company won’t make it, you’re on very shaky ground. It’s bled cash for years but all you have to do is take a good look at Q1 results to realize they’ve turned the corner. With a base driven by licensing revenue, there’s no reason to expect anything but growth from here on out. In fact their balance sheet is improved enough over the past 6 months that I would expect them to be able to knock down traditional financing to fund their continued expansion and CapEx requirements.
Good luck on this one. I predict you take a bath.
Notsofast…..i completely agree with you. I hope he changed his mind on the short. It seems to be the one to buy right now.
blah blah blah who gives a flying f#@! about PTEK’s story, they’re a classically failing company thats getting hyped on message boards as a turnaround play…i respect the hype, thats why i covered quickly but dont believe it for a second
Who cares about their story? What else is important OTHER THAN their story? I don’t care about the hype on the message boards.
Time will tell. Either revenue will grow rapidly, as I’m predicting, in which case I make a bunch of money…or it won’t.
But it’s ALL about the story. PTEK will do between $15MM and $20MM revenue this year, up about 400%. I think $30MM next year is a real possibility as well.
ha u, like most people actually believe these companies might succeed…experience teaches me otherwise…revenue can grow or it cant grow, doesnt really matter to the stock, if lionmaster et al are successful in getting people to believe their product will be a success, u’ll make money. the game is all a self-fulfilling prophecy dude, all these companies, 999 out 1,000 are going to fail, kinda funny more people dont understand this
Revenue “doesn’t really matter to the stock?” Nuff said.
I’ll see you back here in about 6 months as we’ll see who’s right.
Thanks for the yucks.
ha, its like trying to teach someone in the 1940s that smoking is bad for them LOL
NotSoFast, whoever you are, if you read Tim’s strategy of trading stocks, he is interested in only for a short period of time not for six months. Who cares where PTEK will be in six months. His game plan was to take a quick profit from any stocks usually downside (or we call it shorting, if you didn’t know). Today, however, Tim didn’t make any out of PTEK. Maybe we will reshort it later and make bunch of money. In six months maybe PTEK will be trading where you want it be and maybe it will make you money. We trade, we don’t ivest like you, period!
Whaddya meas, “less cynical”?!?
I recommended to short PTEK on Thursday and was out Friday afternoon with a 17% gainer: http://www.todaysfinancialnews.....asdaqptek/
Really, how much more cynial can you get?
Best,
Christoph
Fundamentals is just as important as technicals, can’t be one sided trade monkey all the time.
If your game is guessing where the stock is going to go 5 minutes from now, that’s great. But if you read the original post there were many longer-term observations included which addressed the company’s long-term viability. I think Tim was off base with those observations which did not seem to me to demonstrate much knowledge of this company’s position or recent accomplishments.
You must be an idiot if you think this company is going down. Are they desperate, maybe? But all statistics lead to long-term gain. I’ll put a guarantee on that. It’s not their fault that signing new casinos creates gain for the company. And our economy is bull shit right now. I posted a long article about PTEK waiting for approval, Read it and argue me if you want after. If you are 45 years and older you might be the age group that just doesn’t understand. I explain it quite throughly in my post. I’ll say it here as well. Best example for anyone who represents retail brick and mortar companies, and doesn’t see the growth of technology watch the South Park episode about the internet! You’ll learn a lot, surprisingly. Put yourself in a casinos owners shoe’s as well. My example before, pay 2 technicians $100 an hour, or 100 dealers. Casino owners are business men only! Every year that goes by will be growth in PTEK tables. Just like newspapers, you won’t see those around much longer. Bye bye dealers. :( Mark my words, it hits $8 your too late!
I’ll be interested in responses to my PTEK post after approval, you’ll find it http://finance.google.com/grou.....a12d3781a2
Once it’s approved. Email me if you want, bmxcraze2107@gmail.com, AFTER you read the post. I might not be as educated about the market as most of you, but all the stocks I do lie prediction in, seem to pull through very well! I talk to this company personally and work for a company that sells their product. I’ve studied this stock more than most. My goal is to make everyone money not myself, so do email me if you’d like, not for a childish argument, but you side an opinion is welcome to discuss. Maybe we can all come to a conclusion about the true future of this stock. The up coming presidential election is a very scary thing for all stock enthusiasts though, so prediction will be hard. KEEP OUT THE REPUBLICANS! How many trillion did we pay for the war on “terror” AKA Oil. Mr. Bush wanted to finish what his father started and couldn’t. Now, I’m still going to be paying 5 a gallon, sorry I got off track, but make the right choice. Vote democratic and hope our President he/she is not assassinated to early in the career. It’s ashame I actually have to worry about that. :( People are just sick!
Tim, your post brought back memories of my horrible experience playing on a PokerPro table on a cruise. I took the time to write about it on my blog, thanks for the inspiration. And I definitely agree with you.
http://www.bullringer.com/poke.....-expected/
Hayden, interesting post. One issue I’ll disagree with. Experienced poker players will play where they can win. If you are right that newbies will be attracked to PokerPro, that by definition guarantees the sharks and grinders are not far behind. The lower rake and no tipping are also hugely appealing for the experienced players. Time will tell.
PTEK has the best product in it’s market, and has a solid business plan. TIMBUCKS shows his ignorance by his admitted disrespect for revenue trends and his juvenile, somewhat crude style.
Please - TIMBUCKS - short 10,000 shares of PTEK do it asap, PLEASE!!!! I want to see you bleed…
david, PTEK could sell everlasting life and they’ll still mess it up, we’re playing 2 diff games, u beign the sucker, caring about a company’s products, me understanding skeletons in the closet/bitter shareholders. guess which one of us is gonna teach more people to succeed?