Monday 16 October 2017

DGLT and Urban FT: The Ridiculous Saga Continues

Digiliti Money Group (DGLT) looked like is was turning a corner, up to an $0.80 close. I knew there had to be something amiss because the previous two days saw last minute closes in the low $0.50's on very low volume, purposefully cutting the stock price's rise on the day despite most of the volume going through in the $0.70 to $0.75 range. This time around it was pushed up to a day high. Then after hours we got this tweet from Kasey Kaplan:

You can see my comment in response to this development. So what does this mean?

He's likely telling the exact truth, but a truth that would benefit the cause of Urban FT. This wouldn't be the first time DGLT balked at an offer only to come back to the table later. So far about 90% of the information we have gotten about this proposed deal is from Urban FT through various articles and social media circles. Based on that I can only surmise that Urban FT is acting in good faith and putting forth a fair deal and DGLT management, or what's left of it, is acting like a bunch of incompetent rubes. It would be nice to see an 8-K from DGLT management so shareholders can get an official update on the story and hear DGLT's side of it. Until then, Urban FT can play these tweeting games which the firm obviously knows will impact the stock price but Kasey and team can likely get away with it if they are posting factual and timely information. All in the name of providing market transparency when there is none on DGLT's side.

I think the term supportive is particularly important in this instance. I think that this implies that the loan between UFT and DGLT is still active and that there is no imminent danger of the company going bankrupt, despite DGLT management playing with matches while it is teetering on the edge of insolvency. Or that's what we have been led to believe. But with only getting Urban FT's side of the story in the media and without properly audited financials or recent quarterly results, who really knows about DGLT's cash situation.

What will happen tomorrow? Who knows. Gut instinct is that there will be a sell off because this will be seen as bad news and cause a knee-jerk reaction. We don't know if Kaplan's tweet is merely being as diplomatic as possible because Urban FT must know it is under a microscope for price manipulation that may have at least partially led to the T12 halt. Or if he is being completely honest and Urban FT remains in hot pursuit of DGLT.

It could also be Kaplan trying to lobby retail shareholders behind Urban FT. Although there is a lot of anger directed Kaplan and Urban FT, some of it deserved, this is the only side we have been able to rely on for information. In my eyes, and others, these prospective buyers are trying to act in good faith even if they originally goofed up by yapping on Twitter about this buyout offer. It's DGLT management dropping the ball. That's where all anger should be directed except that there is seemingly no one answering DGLT's calls and emails in which to direct anger towards.

So instead of a drop, perhaps there is a rise tomorrow? Someone has been buying up large blocks of shares in the $0.70 to $0.75 region over the last few days. This wouldn't be a retail day trader trying to load up on a grey market stock. Someone is buying to accumulate shares. Possibly for a hostile takeover by Urban FT? Another entity buying up shares for whatever reason? The main reason to buy on the open market other than the obvious that one thinks the stock will go up would be to secure votes in a hostile takeover bid or to try to deny that bid.

I might put up some asks tomorrow at higher prices to see if they get taken out (not my entire holding, just a part of it). I suggest other shareholders do the same. A substantial block of shares up for sale at a reasonable price (say, anywhere between $0.75 to $1.50) could get taken out if my thesis about the big buyer is correct. I think it is wise to start offloading this position given the nonsense surrounding it, but I don't want to sell too much too soon and give a potential bidder cheap shares. Tomorrow should be an interesting day.

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