Knobias Clip Report (12-5-2007)

Submitted By Knobias ClipReport

Aftermarket News Has 3 Names on the Move

Wednesday’s session saw the indices rally on the back of jobs data which was reported higher than analyst estimates. The job growth displayed numbers which were in stark contrast of any expectation of recession. Even so, fear and anxiety remained with continued subprime talk on the horizon. Headlines were reporting that the Bush administration was proposing a 5 year interest rate freeze on owner occupied subprime mortgages. Large investment firms were also reporting the receipt of subpoenas to testify before congress on the selling of these risky debt securities. The fear and anxiety were still expected to be enough to tip the scales in favor of a cut in the interest rates by the Fed next week.

But the real news came post-market on Bidz.com Inc. (BIDZ), Hoku Scientific (HOKU) and Novastar Financial (NFI).

BIDZ has been battling a negative mention by Citron Research which was published last week. The Company refuted the allegations made by Citron in a conference call that did more harm than good to the share price. Following the report and call, shares were effectively been cut in half.

But it still didn’t dissuade analysts from coming to its defense. Roth, Think Equity, and Craig-Hallum all maintained a Buy rating in their reports and noted the weakness as entry opportunities. Roth even commended the Company in its attempt to address the negative report after shares dropped some $2.50 during the call.

Prior to the Citron report, BIDZ had issued guidance on November 27th of $180 million to $182 million in revenue for the 2007 fiscal year. Fourth quarter revenue was expected at $56 million to $58 million. The reason for the raised guidance was noted as the record Thanksgiving holiday weekend which saw a substantial jump. 2008 revenue guidance was also released which noted expectations for $225 million to $230 million in revenue and 47c to 51c in earnings per share.

In aftermarket action on Wednesday, the Company updated their guidance. In a little more than a week, the Company noted that it now expected revenue for the year to be at the higher end of their $180 million to $182 million view. Pretax income for the year was guided for $18 million to $18.5 million. Pretax income for the fourth quarter was expected to be $5.6 million to $6 million on $56 million to $58 million.

Not much changed except the Company’s expectation of 2007 revenue coming in at the higher end of their range. That and the fact that televisions (one of the questions brought up in the conference call regarding shill bidding) are no longer available on the site. Aftermarket trading saw shares hit highs in the $13.00 range before falling back down to closing levels.

Hoku Scientific, a clean energy technology company, which has been gathering extravagant amounts of prepayment contracts for polysilicon in hopes of gathering enough to construct a plant in Idaho, announced that the Company had signed a non binding term sheet with Merrill Lynch for $185 million in financing to facilitate the cost of construction. Following the announcement, shares jumped to the $10.40 range after closing at $9.80.

Novastar Financial Inc. (NFI) shares, which had been on many trader’s screens following their recent activity, saw another boost following the subprime mortgage lender’s waiver acceptance by Wachovia. At issue was the Company’s adjusted tangible net worth which had fallen below the convent levels. The Company originally broke the covenant on September 30th, but received a waiver until November 30th. The Company now announced that Wachovia has until Dec. 7th, this Friday. The first waiver was for 2 months. The second is now only 7 days which could signify Wachovia is running short on patience. Even so, shares were up some 30% in after market trade.

Wednesday’s aftermarket session saw a plethora of exciting, market affecting news cause some large swings in after hour trading. If the action continues to Thursday’s session, investors would certainly be wise to watch.



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Market Comments Submitted by Nick at Ambitions as a Stock Trader

Sumbmited From Knobias ClipReport

HOKU: Announces Deadline Extension Agreement with SANYO

Tuesday’s session saw the Dow give up almost 100 points as continued oil price spikes and housing worries dominated talk during the day. With earnings season in full swing this week, analysts were also watching some of the names report softer than expected numbers causing many to feel the housing slump is having a broader and longer term impact on the normally resilient consumer.

In the small cap space, alternate energy was again an area of interest, especially considering the recent hoopla involving LDK Solar Company Limited (LDK). The quick synopsis involves a successful IPO which many on Wall Street believe was based on the incorrect numbers provided by the company’s accounting department involving inventory which should have been written off but wasn’t to promote higher asset levels. An ex employee brought the proposed inaccuracies to the light of many, including the SEC, whose value has been stripped from the market cap almost ten times over.

The entire story involves a ‘he said, she said’ finger pointing battle between management of a growing company in a highly prosperous market and an ex employee who may or may not be blowing the proverbial whistle on accounting shenanigans. Again, the story is entertaining if one has no stake, but a real dread if one did because of the amount of manipulative action in the shares over the past weeks.

In any event, another solar player reported some news after the bell that also should have shares down a bit. Hoku Scientific, Inc. (HOKU) announced that it had amended its polysilicon reactor contract with GEC Graeber Engineering Consultants GmbH, and MSA Apparatus Construction for Chemical Equipment Ltd. to include an option for Hoku Materials to purchase additional reactors to enable the production of up to an additional 500 metric tons of polysilicon per year, which if exercised would bring Hoku's total polysilicon production capacity to up to 2,500 metric tons per year.

This portion of the release was a positive for the Company. They are attempting to be proactive for equipment which could be needed if they reach plant capacity and are attempting to expand.

Additionally, the Company and SANYO Electric Company, Ltd. have amended their polysilicon sales agreement by extending Hoku Materials' date to complete the financing to construct its polysilicon production plant until December 31, 2007.

This part of the agreement isn’t necessarily bad but isn’t exactly good either. Normally, parties would like the counter party to be able to deliver on each portion of contracts. In the particular case, SANYO had a take or pay deal with Hoku to secure financing for the construction of a multi million dollar polysilicon facility.

While SANYO has allowed Hoku to extend the deadline to secure this financing, will they be so generous come the end of the year if Hoku has still yet to capitalize? The answer is probably no, and with Hoku management hoping the Company can raise this capital through debt and not equity, the chance of raising the capital diminishes, especially considering the preliminary results for the quarter which were also released.

Hoku expects revenue of approximately $239,000 and a net loss of between $1.0 million and $1.2 million. In this credit environment, there probably aren’t too many banks or firms willing to lend a Company with these numbers, regardless of signed contracts, with millions and millions of dollars to construct facilities of which they have little experience in running.

The fact of the matter is that the Company has signed an enormous amount of contracts with nothing to produce the product. Though, the name still can raise the money and begin to collect some of the prepayments, the amendment of contracts isn’t a good sign. With that in mind, investors would be wise to watch.



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