From: Adam Rifkin -4K (adam@XeNT.ics.uci.edu)
Date: Sat Jan 08 2000 - 11:14:20 PST
I'm surprised that this kind of takeunder of a Nasdaq-listed stock is
allowed, but I should never underestimate the power of the Israeli mafia
and the lax attitudes of the SEC. Net2Wireless, darn that's a good name
for a company... I wonder if there's any truth to this claim:
> A study of press releases and federal regulatory documents filed in the
> autumn reveals that Sensar engaged in a reverse merger with two Israeli
> companies that have patents on intriguing technologies that could turn
> every cellular phone easily and cheaply into a browser capable of
> receiving streaming, real-time color video and data on demand from the
> Internet.
Rohit, if you have a chance, can you tell me what you think of their
patents? Thanks...
[By the way, the whole concept of "reverse merger" is a weird one, as
pointed out by the second article below. It could be as innocuous as
not wanting to do IPO road shows, or as insidious as having something
significant to hide, and investors will not know if it's one or the
other until after the stock has risen 1000% or dropped 90%... or both...]
From:
http://moneycentral.msn.com/articles/invest/models/4956.asp
> Sensar: distributed broadband over wireless
>
> In January 1997, the shares of a little analytical instruments company
> in Utah named Sensar (SCII) hit a high around $57. After that it was all
> downhill, with shares dropping to $1 by the spring of 1999. Following
> two years of business setbacks, the firm was essentially moribund. It
> had sold all of its operating units, and was little more than a shell
> corporation holding about $6 million in cash.
>
> So why did the shares suddenly begin to levitate in April on virtually
> no news -- quintupling to $5 in April, and then doubling again to $10 in
> November and reaching as high as $68 by the last week of December -- a
> fabulous one-year gain of 3,362% that beat virtually every other stock
> on the planet?
>
> A study of press releases and federal regulatory documents filed in the
> autumn reveals that Sensar engaged in a reverse merger with two Israeli
> companies that have patents on intriguing technologies that could turn
> every cellular phone easily and cheaply into a browser capable of
> receiving streaming, real-time color video and data on demand from the
> Internet. Rather than go through the trouble of trying to find a U.S.
> brokerage that would take them public, the owners of Israel-based ITES
> Corp. and Net2Wireless simply found a Nasdaq shell to crawl into. The
> board controlling the former Sensar quietly resigned, and the new
> managers took over.
>
> The real ramp in the share price came in late December, when it was
> announced that the former head of ECI Telecom (ECIL), a highly regarded
> global telecommunications equipment company based in Israel, had joined
> as the odd little firm's new chief executive. That got the attention of
> money-management firm SAC Capital in Connecticut, which has since
> acquired a 7% stake.
>
> Soon, the whole world will find out whether Net2Wireless' technology
> works because the Israeli affiliate of United Kingdom cellular giant
> Orange (ORNGY) is launching a pilot starting this month. If all goes
> well, Sensar very quickly could start to license its intellectual
> property to cellular providers worldwide, and quickly could zoom to a
> market cap approaching that of wireless browser licensor Phone.com
> (PHCM) -- $15 billion. Considering that Sensar today has a market cap of
> just $173 million, that gets you close to a 10,000% gain without
> breaking a sweat. (Yes, that's a big if.)
Here's a second opinion, forwarded from TheStreet.com:
http://boards.fool.com/Message.asp?id=1240788000005001
> Provo, Utah-based Sensar (SCII:Nasdaq - news) has no ongoing revenue.
> Its CEO is a former lawyer who doesn't know much about technology. And
> it barely avoided being delisted by the Nasdaq stock market last year by
> scraping together some additional cash and doing a reverse 5-for-1 stock
> split in May, transforming its "penny" stock into one that at least had
> a number before the fractions.
>
> Then why -- and how -- could this little-known technology company find
> itself branded a hot wireless communications concern whose stock had one
> of the most successful performances of any company on the Nasdaq last
> year? Shares of tiny Sensar skyrocketed from less than 2 bucks -- or
> below 40 cents before the reverse split -- a year ago to as much as 74
> 1/2 last week, before settling down to close Monday at 55.
>
> The answer lies in a combination of factors that, on the one hand,
> should give investors pause: Sensar is going through a "reverse merger"
> that will render it unrecognizable -- and, for the time being,
> unanalyzable -- to public investors. On the other hand, the company has
> attracted impressive people and partners and therefore has a legitimate
> shot at becoming a hot prospect in the global race to supply ubiquitous
> Web connections through handheld devices.
>
> First, the facts. Sensar's stock has taken off because the company
> doesn't intend to be Sensar anymore. Instead, it wants to be the product
> of a transaction whereby a private company trades its assets for shares
> in an existing public company. The turnaround specialists brought in to
> save Sensar -- formerly a hodgepodge of scientific instrumentation
> companies -- essentially went shopping last year for an Internet
> company. On their quest, they dangled precisely two assets: $5 million
> in cash and a Nasdaq listing. What they found was ITES, an Israeli
> company which, together with a U.S. affiliate called Net2Wireless,
> promises to deliver not merely data over cellular-phone lines, but
> full-color Web pages to personal digital assistants.
>
> The deal that will merge Sensar, ITES and Net2Wireless -- the latter
> will become the company's name -- isn't expected to close until the end
> of the first quarter or the beginning of the second.
>
> But shares of Sensar, the lone public entity of the lot, began to run in
> the third week of December after Sensar announced that David Rubner, the
> former CEO of Israeli telecommunications player ECI Telecom (ECIL:Nasdaq
> - news), would become its chairman. Rubner, a veteran of Israel's
> high-tech community, will build a management team for the company around
> ITES founder Hemi Davidson, who will remain a senior technology
> executive. Davidson's specialty is data compression, a critical factor
> in cramming Web pages over wireless signals. This morning, the company
> will announce that Joav Avtalion -- co-founder of Israel's Nice Systems,
> which 3Com (COMS:Nasdaq - news) acquired four years ago -- will become a
> director.
>
> The stock moved up from 21 the day before Sensar disclosed Rubner's
> involvement to 74 1/2 on the penultimate trading day of the year. (The
> shares had begun to move when Sensar first started dealing with the
> Israelis.) Daily trading volume, which barely poked over 100,000 shares
> several months ago, reached a crescendo of 1.1 million shares Monday.
> That's nearly half of Sensar's float, meaning that half the shares
> available for public trading changed hands Monday.
>
> Howard Landa, a lawyer brought in to salvage Sensar when its other
> businesses were failing, speculates that Israeli investors are excited
> by Rubner's participation. "He liked what he saw, and we obviously liked
> him for his connections in the wireless industry," Landa says.
>
> Careful, though. Scarcity value largely explains the run-up of Sensar's
> shares. With a float of only 2.4 million shares, out of 2.9 million
> outstanding, it doesn't take much buying to drive up the price. The
> company's additional juice is its agreement with Israeli cellular
> carrier Partner Communications, which is conducting a trial of ITES'
> technology. Partner is a unit of Orange (ORNGY:Nasdaq ADR - news) in the
> U.K., a company which itself is being bought by Germany's Mannesmann.
> Mannesmann, in turn, is the subject of a hostile takeover attempt by
> Britain's Vodafone Airtouch (VOD:NYSE ADR - news). The upshot of this
> Monopoly-like trading is that the eventually renamed Net2Wireless, with
> its Israeli tech team and Nasdaq listing, could have connections with
> very powerful players in the cellular industry. That is, if the
> complicated deal is completed.
>
> What's disturbing here is the very existence of a reverse merger. Former
> Sensar CEO Andrew Bebbington -- who is temporarily consulting for the
> company -- says the technique is ideal for his Israeli partners because
> there's no time for fooling around with the hassle of IPO roadshows and
> their attendant distractions. But companies that look for ways to go
> public without listing the normal way often either are naive or have
> something to hide. Creating a public company on the sly is certainly no
> way to build trust with a shareholder base.
>
> More, Bebbington and Landa will be long gone when the deal closes and
> Net2Wireless moves to New York. "What people are buying is the Israeli
> group, not us," says Bebbington. Right. Then other than a listing on the
> Nasdaq -- thousands of others have done it -- what does the Israeli
> group get? Investors plugging into this red-hot -- and risky --
> situation better hope everyone involved knows the answers.
---- Adam@4K-Associates.comHe who would do good to another must do it in Minute Particulars. General Good is the plea of the scoundrel, hypocrite, and flatterer; For Art and Science cannot exist but in minutely organized particulars. -- Blake
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