There are certainly things that have merit in the short article, especially about the CFO, but there are also other “points” that are “pointless”. For example:
Major insider selling since 2012 - If you can find ANY Motley Fool recommendations where there hasn’t been lots of insider selling, let me know. I’m sure that if you look at the best performers on the scoreboard, they’ll have enormous insider selling. This point is meaningless.
“unique” product actually made in China - This one is just silly. Just because they have their product manufactured in China is absolutely no source of criticism. Probably half the companies on the major stock exchanges that sell a product rather than a service have at least some product made in China.
with more competitors in the space than noted by management - Whatever the writer claims, the company is growing revenue very fast, which doesn’t seem to go along with the writers claim that they’ll be overwhelmed by large competitors. (They were just rated one of the fastest growing tech stocks in America by Deloitte, who are certainly reputable).
Unsustainably high gross margin compared to competitors - Now that’s a funny one. They take a sign of success and lack of true competition and try to turn it into a negative. If they had a low gross margin then the writer would attack them as selling a “low gross margin commodity product” but because they have a successful product that can demand high margins, the author says it’s unsustainable.
$500K paid to stock promotion companies - This is a common practice among small cap companies without analyst coverage. It’s an attempt to get their story to the public.
IPO by reverse-merger instead of traditional IPO process - Here’s an excerpt from an article on reverse mergers:
Buffett bought out a textile manufacturing company and then merged his insurance empire into it without even changing the name. His company, Berkshire Hathaway, is the product of one of the most famous reverse mergers to date.
CNN founder Ted Turner merged his Turner Outdoor Advertising to create the Turner Broadcasting System. Motivational speaker and life coach Anthony “Tony” Robbins was involved with an online self-help company that employed a reverse merger to jump start the going public process.
After becoming the first woman to purchase a seat on the NYSE, Muriel Siebert used a reverse merger to take her titular brokerage firm public.
Oilman and industrialist Armand Hammer (not to be confused with Arm & Hammer baking soda), is considered to be the creator of the reverse merger back in the 1950s. He invested in a shell company and merged his company, now the highly successful Occidental Petroleum into it.
Shifty auditing company and auditor switched shortly after IPO and CFO with a history of stock manipulation schemes and at least one previous lawsuit which he settled. - These I’m not happy with at all, but I think I’m willing to give a small rapidly growing company a chance to sort them out.
Saul