Many FT Alphaville readers won’t have heard of Pursuit Dynamics, a London-listed company that claims to have developed a sophisticated fluid processing technology.
But the firm is at the centre of an extraordinary battle between short sellers, City dealers and day traders that’s being played out on internet chat forums and is becoming increasingly more poisonous by the day.
Pursuit has been a punters’ favourite for years but started to gain a much wider popularity when the company appointed Roel Pieper, a former Philips Electronics executive and serial entrepreneur, as its CEO in September 2009.
Hopes that Pieper would commercialise Pursuit’s technology fuelled a massive rise in its shares. Its stock price rose from 234p to hit 700p by December, giving the company (which is loss-making and barely generates any revenue) a market value of almost half a billion pounds.
But then the price started to crack, as dark rumours swirled about Pieper, who the bears roared was involved with Lernout & Hauspie, a speech recognition company at the centre of a major financial scandal and had been an investors in several other companies that had gone to the wall.
However, the main reason behind the fall (and an increase in short-selling activity) was an anonymous dossier that questioned the effectiveness of Pursuit’s technology and many of the company’s claims.
Click the below to see the full document:
To which Pursuit has now responded.
In the past few days it has been taking analysts through the 16-page PowerPoint presentation, detailing the what it says are inaccuracies and false assumptions.
A message that brokers are now passing on to their clients.
From Mirabaud:
We have been sent a presentation on PDX which we understand has been circulating around the city (see attached). Our first impression is that this is an old document which has been rehashed with more recent comments. We have had a detailed discussion with PDX management to confirm a number of inaccuracies – we discuss these below:
Overall the presentation is old and fundamentally flawed – its conclusions do not merit much discussion. It is also worth pointing out that that a number of the Group’s LOB’s are omitted:
· Decontamination – 2 JV’s Karcher and NNL – revenue from NNL expected during Q1 2011 and product from Karcher expected to ship in current financial year.
· Industrial Process Applications – the agreement with P&G and global license to Tyco omitted and the potential for further such agreements.
· The newly launched water division is also omitted – this was launched after the date of the presentation. Within this division both waste water and water desalination look like promising opportunities for the Group.
And Cenkos Securities:
We had a conference call with PDX yesterday in light of the recent collapse in their shareprice. I came away from this more convinced than ever that the recent bear raid has created a great opportunity to buy the shares, and our analyst Peter Read will have a note out later today. We spoke to amongst others the head of the brewing business line, the head of ethanol and one of the non-execs. A so called “dossier” supposedly dismissing PDX’s technology has been a feature of internet “chat forums”, PDX went line by line through this 16 page powerpoint and pointed out inaccuracies, false assumptions, claims which appeared to be based on PDX data but are not, as well as omissions of various positives. Suffice to say the rebuttal of the bear story was extremely robust, particularly convincing when the head of brewing is the ex head of GEA’s brewing systems division and therefore extremely credible on the strengths of PDX’s offering, the cooperation with GEA that is underway and the factual errors in the “dossier”.
Finally the rumour started on the web that the CEO may stand down or be sacked was firmly dismissed by the NED – “the Board are very happy with the direction and the progress of the company and its management”. This management team has strength in depth and is delivering, they believe revenues will be delivered this financial year which will prove the success of the model. We agree and reiterate our BUY with £11 price target for Dec 2011. Recent price action has seen substantial volume with no signs of selling from the 65% core shareholders. Ignore the noise created by the shorters and BUY at this level.
That’s fighting talk.
And it’s had a positive impact on the share price on Wednesday morning:
But will it last? Possibly.
But until Pursuit starts to generate revenue from all the contracts Pieper has announced in the past year, the company will find it hard to defend itself against these bear raids.
This highly entertaining battle has much further to run.
Update: 15.31 (GMT).
A few of the comments below mention Pieper’s previous business dealings, which we note were fully disclosed by the company at the time of his appointment.
Lernout&Hauspie NV, the company filed for Chapter 11 protection in November 2000.
Stonehenge BV, the company filed for insolvency in late 2000, after a failed financing.
Opinio BV, the company was put in voluntary insolvency in March 2008.
ETIRC BV, the company filed for insolvency in March 2009 after shareholders agreed in super majority to suspend operations.
Eclipse Aviation Inc, the company filed for chapter 11 in October 2008 after a refinancing failed and a restructuring was agreed amongst all debt holders.
ROAD Group AG filed for insolvency by a majority of its shareholders in July 2009. Its application for insolvency was approved by the Swiss courts late in July 2009.
MyGuide (an operating subsidiary of Road Group AG) applied for insolvency supported by a majority of the shareholders in December 2008 and was declared insolvent at around the turn of the year.
Axiom International Limited, the company was placed in voluntary creditor’s liquidation on 19 November 2004 and dissolved on 4 July 2007 following the completion of the liquidation process.
Paperx.com Limited, the company went into voluntary insolvency on 1 March 2001 leading to its dissolution on 19 February 2008.
Moreover, the company also disputes the article in Quote. Further details on this to follow.
At pixel time shares in Pursuit were 50p higher at 380p.
Update: 16.03 (GMT).
A spokesman for Pursuit says the piece in Quote is inaccurate. The house in question was in fact that of Pieper’s son and bailiffs have never turned up, he claims. We don’t know if the house was transferred to Pieper’s son.