Sunday, August 10, 2014

LIME: Better for my Coronas than for my portfolio

LIME took off big on news that it obtained 180 Million contract.  I bought pre-market on the news.  $5.80 and sold premarket $6.15 .  This was a reactionary trade and although I made money, I'm not pleased with my decision making process. Based on my research, I do not believe that this is  a Big Gain stock that some may think it is.

But let me run through the process:
  • Step 1: Big move after neglected period with high volume?   


Many traders will chase these types of moves.  But I'm still not yet convinced that Day 1 is the must buy date. As often gaps are tested or quiet period will ensue 2-3 weeks later on a weekly chart.  That can be the best low risk entry point.  In my opinion, trying to buy immediately is asking to be chopped.

Observation: If Lime is indeed a Big Gain stock, then there is still time to buy as a better opportunity to enter will present itself.

Since Lime easily passes the big move test on to step 2.

Step 2.  Does it have "game changing news?"
"Lime Announced it has been awarded approximately $180 million of new utility program business.
Lime has 3 Million shares outstanding and even after this burst it only has 18. Million market cap?  Sales 10X market cap, Amazing. That could be a recipe for an explosive move. Right? At first glance, I might be tempted to answer this in the affirmative. ( In fact, I did which is why I took a position. )  After more research, I don't think so.

Here's why.

First, and foremost, I question the legitimacy of the 180 award.  According to the PR it will be earned over 5 years.  Still a huge number but obviously more realistic. But here is the language that I view as the caution flag:
"The recognition of the potential revenue of these awards would occur over five years and depend on the receipt of certain regulatory approvals and Lime’s ability to sell sufficient program services."
So how much revenue do the legitimately expect to earn? Is this simply 180 million program that LIME has  been accepted into as well as other companies?  I do not know the answers to these questions.  

By Comparison, when CDXS announced a big deal with GSK, they called a Conference Call so that such questions could be asked. (Thus, I know CDXS expects to realize 11 Million this year)

Given that this award would be so much greater than any other revenue quarter I'm leery of taking it at face value.
  • Caution Flag Number 2: Shady history
    • Numerous Reverse splits 
    • numerous warrant agreements w/ insiders
      • Warrant deals often cause dilution allowing insiders.
    • Prior restatement of earnings
    • Class Action lawsuit  (LIME paid over 2.5 Million to settle one suit, it appears another is still pending. They expect that D/O insurance will pick up tab.
    • SEC investigation
The company did fire its prior CEO so maybe it's gotten clean.  In my opinion, it still sounds too much like a pump and dump.  I'll keep it on my radar as q2 earnings and conference call may answer some questions

Lime reports q2 earnings on August 14.  One thing I'm certain of is that we will now see some analysts now attend this call.  q1 there were none. 

The key question is how likely is LIME to obtain additional revenue? How much? and when?


  1. Good assesment. I have a small position at 5.40 and am still debating whether or not to hold through earnings or take a loss now. If the news is even halfway accurate it may still pay off big.

    1. If it holds the gap, you may get a bit of the bounce. Earnings won't have the award included so it would be all about the conference call