A year ago, LoJack Corporation (LOJN) was 3x larger than it is today, hovering then around a $150M valuation at its high in March 2014. After beating the streets earnings expectations today, it’s trading higher by 15% to $2.50 per share, but this is miniscule at $50M Market Cap compared to where it was. LoJack is now considered a Nano Cap company in the world of valuation, making filing costs and reporting in general just a hindrance, and leading many to ask – Why remain public?
The LoJack Heyday
As a public company, LoJack has been around a long time (since 1986), and at one point traded near $30 per share with growing sales. LoJack did lots of marketing, and got plenty of attention in Hollywood with good product placement in movies in the 90's. They even utilized brand awareness to create parallel products, secure and retrieve laptops in the tech industry. But ultimately, sales have never converted to a consistent share price – and a sale or delisting is likely.
I see shares as nothing more than a vehicle which allows management to have another currency to get paid versus a useful investment for portfolio managers or speculators. This reality holds true for many publicly traded stocks as they pass the growth stage in their business.
Companies Need to Reinvent Themselves or Die
Market watchers in the security space had higher hopes for LoJack back in February 2014, after shares had a solid Q1 and seemingly had a new influx of investors hoping the managers could utilize the brand and create some profitable product lines to add to the core business.However, this never happened, and the stock spent the next year-and-a-half falling to lows near $2.00. It makes the last two years nothing more than a huge waste of time and money for a portfolio manager who asks management - will anyone make money here besides you?
What happened to LoJack is what happens to many public companies - they create revenues, but not margins - and at $30 million in sales and fully engaged in a downsizing, the company has few options as we head into another year of doing nothing but paying managers.
Being a public company is a tricky business, but it is also a useful vehicle once you learn the system. In the case of LoJack, it seems management is just pushing the peanut down the road,and has lost what is important for a public company - concern for shareholder value.