Promoters Create Clear Volume Spikes

The latest promotional push appears to have ended on the 28th of April... [Image] People ask me why I write about promoter activity. Surely they don’t have that much influence over a stock’s price action? Then I show them companies like Vuzix Corporation (NASDAQ: VUZI), and it starts to make sense. A quick look at the chart below, which highlights several promoters’ pushes, clearly shows movements in volume, if not price, during those periods. [1682951136--y0ks03.png] The latest promotional push appears to have ended on the 28th of April. However, with one promoter paid $949,250 to date, there’s a good chance we’ll see one again in the near future. Here’s why. Vuzix Corporation (NASDAQ: VUZI) - 1-month trading range: $3.56 - $4.39 - Typical average daily volume: 559,250 - Float: ~59.1 million Vuzix Corp.’s Business Imagine a heart surgeon tasked with removing an incredibly small and hard-to-find mass. Even the most experienced doctor would struggle, going back and forth between the patient and reference screens. But what if that same doctor could look down to see a heads-up-display highlight the area? Not only that, it identifies several other abnormalities worth a look at the same time. What we once considered science fiction is now a reality. Vuzix’s augmented reality eyewear and accessories aren’t meant to turn a blank wall into a full-blown marketing display. Their hardware helps critical industries, from healthcare to warehousing, perform tasks more efficiently and effectively. [1682951137--nwf3e6.png] [Source: Vuzix Website]( The company’s product looks awesome. Yet, it struggles to gain any traction. At the moment, Financials [1682951136--8u8n16.png] [Source: StockAnalysis.com]( Vuzi’s seen a surprising amount of revenue growth, essentially quintupling total sales by 2021 since 2015 before a modest pullback in 2022. Annual sales growth varies dramatically based on orders as they don’t have many steady clients yet. In fact, one customer accounted for roughly 1/5th of the orders in 2022. Unfortunately, their gross profit is virtually non-existent, hardly growing in line with sales, while operating expenses, especially SG&A, do. That’s left the company with a negative operating income that’s quadrupled since 2015. Operating cash burn has increased, though at a slower rate, going from -$11.5 million in 2015 to -$24.52 million in 2022. The good news the company sits on a hefty $72.56 million in cash and short-term investments with no debt. However, that’s all come from equity dilution as total shares outstanding expanded from 17 million in 2015 to 64 million today. Lastly, the company carries a huge amount of inventory that’s grown from $12.15 million to $12.23 million year over year. I also want to note the company had to restate 2021 financials, adding in $187,385 in cost of products, and a total understatement of net losses by around $5 million overall. Promoter Activity I’ve received promotional emails from three different companies. All generally highlight the following points: - April 28, 2023 - Vuzix Receives Follow-On Volume Smart Glasses Order from Xpertinc to Support Expanding Customer Demand. - April 26, 2023 - Vuzix announced that it has shipped against a volume order for Vuzix smart glasses from Tabbara Electronics, a leading distributor of cutting-edge technology solutions serving customers across the Middle East and North Africa. - April 19, 2023 - Vuzix’s CEO is “Bullish Outlook” For 2023 Could Be A Major Sign Of Things To Come - April 10, 2023 - Record Sales Drive Significant Revenue (Preliminary) Jump In Q1 as first fiscal quarter of 2023 has surpassed $4.0 million, more than 60% ahead of the prior year's first quarter's revenues of $2.5 million - March 2, 2023 - Last month, James McIlree, an analyst with Dawson James Securities, reiterated his $15 target on VUZI. I applaud the creative writing here for giving the appearance of timeliness and importance. The first two event catalysts are both interesting, with the first more significant than the second. Yet, the third catalyst feels tongue and cheek. I mean, what CEO isn’t going to sound upbeat when his company has so much runway? Now, the record sales note is probably the most critical, though it had oddly very little impact on the stock. One item that wasn’t discussed, which is relevant, is the deal with Atomistic. Vuzix entered into an agreement with the French company to obtain its key mLED technology and design of a custom backplane. This cost $5.5 million in cash initially. It will acquire the company for $30 million in cash and equity, assuming it achieves contractual milestones. The rest of the promotions go on to talk about technicals, which, as we all know, can be manipulated to sound bullish or bearish. For example, one wrote the following as evidence of oversold conditions as of Tuesday: - 9-Day Relative Strength Index (RSI): 29.97% - 14-Day RSI: 36.78% - 14-Day Raw Stochastic: 2.41% - 14-Day Williams %R: 97.59% I’m sure all of those are true. But I doubt any seasoned penny stock trader uses all those specific indicators with those settings in conjunction. It’s too specific and lacks chart context With a 59.1 million float, this isn’t a low-float ticker either. So, how much did these promoters get paid? The first was paid $143,500 for a three-day campaign from April 25th to April 28th. And as mentioned, their total payments to date are a whopping $942,500. Another promoter was paid the same amount for the same three-day campaign period, with total payments to date ringing in at $949,250. A last promoter received $15,000 for a one-day email campaign and $20,000 for a previous one-day campaign back in January. Straight to the Facts From a 10,000-foot view, it seems to me that Vuzix put the cart before the horse. It developed a product without customers to serve. Either that, or its marketing and sales are just abysmal. In either case, it can survive IF it finds a way to stabilize and grow sales. For traders, I absolutely expect they’ll pop another few promotions this year, especially given how much they’ve spent already and their equity needs from the acquisition I noted earlier. Always at your service, Baron Von Stocks Disclosure: I am not a fin-an-cial adviser. All potential percentage gains are based on from the low to the high of day. Prime Tech Stocks full disclosure is to be read and fully understood before using Prime Tech Stocks website, or joining Prime Tech Stocks’ email or text list. 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