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Vuzix 2Q20, debt & politics ?3

16:25 14-Aug-20


We also got word of CenturyLink settling with DoJ about its compliance with antitrust provisions connected to its Level 3 merger.  In my mind, this fits right in with politics section of this note, as there is not such thing as real telecommunications competition in America.  It's good that the terms are immaterial and to have it out of the way.  We can now move on the the dividend declaration, which should come out in the next week or so.

On 8/14/20 1:41 PM, Esekla wrote:
I start this weekly wrap by documenting Vuzix second quarter results and then move on to the important stuff:
  • 13 cents of EPS beat by a penny
  • from $3.0M of revenue, which beat by $400K

As projected, there is growth, but it underwhelmed the market.  Management projects the growth to continue, particularly in healthcare, but provided no numbers.  I concur, but project continued underwhelming market performance and another equity sale. 

Other companies have also been raising capital, but through the debt markets:

Company
 Rate
 Term
 Amount
Covanta
 5.00%
 2030 $400M
Schlumberger
 2.65%
 2030
 $350M

I mainly note this in order to comment on the disparity between CVA stock and debt pricing, even though we've seen nothing but tough times for Schlumberger recently.  Even CenturyLink was able to refinance much more cheaply and remains a value in my eyes, despite appreciation.  CVA has declined a little this week, but a full reckoning is yet to come.  The same should be said for governments, and their support of companies like Westport.

BGC and Virtu are the only companies I see reducing debt.  The look like the main values left in the market, but BGC got less than 15% of its tender offer, which shows the appetite for yield and puts an exclamation point on my Covanta outlook.  Flow Traders, which very under the radar and more of a pure play market maker than Virtu, just announced a €4 interim dividend with an August 18th ex-date.  That may be of interest to spot traders in this environment since at current prices, (FLOW on EuroNext, FLTDF OTC in America) as it's over 10% immediate payout, though July showed a dip in market volume, similar to May.  Virtu's payout at the end of the month is more modest.  However, with €/$ steady at 1.18 after touching 1.19, oil disruptions and almost every corporation and government seeing to dramatic change, Virtu's big day is coming.  Possibly that will coincide, with BGC's, but I expect BGCP to languish as it transitions management, in contrast to VIRT.  A lot is happening except in the stock market and Washington.  Invest accordingly.