Yesterday, we posted a blog regarding the news about the on-going investigation by Kahn, Swick & Foti into AlphaTec Holdings LLC to determine whether it had violated federal securities laws by issuing false and misleading statements to its shareholders. Ironically, what transpired was a tete-a-tete between various commentators and of course the usual attack on TSB. TSB would not expect anything otherwise. It is easier to deflect your anger at the blog post or TSB, rather than address the issue at hand, have an intelligent discussion about the potential ramifications for ATEC, and of course the behavior of the Board of Directors. Obviously, accountability is a noun that doesn't exist within our industry.
It seems that Kahn, Swick & Foti are not the only law firm that has a special interest in ATEC. Jacobs & Associates is also investigating possible claims for violation of federal securities laws on behalf of purchasers of ATEC common stock. In one fell swoop, tens of millions of dollars in shareholder value was wiped out. In addition to KS&F and Jacobs & Associates, there is a third law firm that is spearheading its own investigation into these alleged claims. So how did ATEC get to this point.
On December 17th, 2009 the Company announced that it was going to acquire Scient'x, S.A. a company owned by Healthpoint Capital Partners and affiliates, Healthpoint Capital which also held 38% of the Company's shares, in an all stock transaction. Ironically, five of the nine ATEC directors are affiliated with Healthpoint Capital. On December 17, 2009, the Company disseminated an aggressive full year 2010 guidance stating that the Company anticipated annualized pro forma revenues of $220 million to $225 million. Shares rose 8% on this news. This guidance was influential in causing ATEC's shares to trade at high prices, so that ATEC could sell shares in a follow-on offering and so that Healthpoint Capital could sell off a substantial part of its shares in that same offering.
Upon closing the Scient'x acquisition, on April 12th ATEC announced a follow-on public offering whereas the Company would sell 8 million shares and Healthpoint Capital would sell 8 million shares. The offering was priced at $5.00. This offering allowed Healthpoint Capital to sell off a significant number of its AlphaTec shares.
On August 6th, the ATEC stock crashed. Why? It seems aggressive projections lacked a reasonable basis, in that they appear to have been based on unrealistic calculations as to the speed of integrating the Scient'x acquisition, the effect of negative pricing trends within the industry, and the ability to replace lost revenue when it divested its Asian distributor at the time of the Scient'x acquisition.
As TSB stated in an earlier post, it seems that negative industry pricing has become the mantra of every CEO within our industry. Yet, how difficult was the integration of Scient'x? We're not talking about a Styker/Howmedica sized integration. Didn't anyone at ATEC anticipate the effect of having to replace lost revenue when it divested its Asian distributor? TSB could understand executive management forecasting conservatively in a sluggish market, considering analysts' even lowered their expected guidance to single digits for the industry. Yet, such an aggressive number leaves many unanswered questions. Let's give ATEC the benefit of the doubt, unfortunately, everyone knows the old expression, "where there's smoke there's fire."
If you purchased ATEC stock between December 18, 2009 through August 5, 2010, and have a loss, whether or not you still hold shares, or if you bought in the April 2010 offering, or held ATEC shares prior to December 18, 2009, and still hold your shares and are interested in discussing you rights free of charge call Roy L. Jacobs at 888.884.4490 or e-mail Mr. Jacobs at email@example.com, or contact firstname.lastname@example.org, or call Mr. Kahn toll free at 866.467.1400 x-200.