Patrick's Rants

ABAT was delisted as of 11/30/2011. The price promptly plunged from just under $1.00 to less than $.40 and I closed out the last of my holdings at $.41 for a significant loss and picked up another 100 shares of CMRG for $3.20 looking to get out at $4.20. I will be reevaluating how I manage downside risk to see if I need to make any changes in this part of my portfolio management.

ABAT filed form 8-K, basically a supplemental or informational filing stating that NASDAQ is taking steps to delist ABAT.
The main reasons stated are:

• Listing Rule 5250(a). The notice states that the Company failed to provide information requested by NASDAQ, specifically cash confirmations from the banks holding the Company’s funds prepared in the presence of personnel employed by the Company’s independent audit firm.
• Listing Rule 5250(c)(1). The notice states that the Company failed to file its Quarterly Report on Form 10-Q for the period ended September 30, 2011.

ABAT does appear to have filed a notice that its September 30, 2011 10-Q would be late. And they have filed a number of late 10-Qs without apparent repercussion.

So what’s different this time? According the this recent letter to shareholders it is the short sellers, the lawyers and a complicit NASDAQ (for believing the articles on Seeking Alpha). The stress of asking for cash balances at the banks has caused top level defections, according to the Chairman, of the CFO and the Controller. Is Chinese culture so different from ours that the Chairman’s claims have merit? Could be. It could also be that there is no cash to verify – which would be bad for all shareholders. ABAT had to meet all the NASDAQ requirements for initial listing on the exchange. NASDAQ had the duty to verify the submitted information and listed ABAT on the exchange. Now the deadline of November 30 looms large.

This reinforces my personal rule that not all my account be tied up in a single stock.

Trading has been halted on ABAT according to NASDAQ Trader.com for “more information requested”. I’m not sure where that leaves me and my 600 share position in ABAT. I’ve kept my teeth gritted through the ups and downs since April with the idea that I would “average down”. I’m sitting on about a 60% decline in the shares I own. I’m lucky and not so lucky with these shares. If ABAT never comes back to trade and becomes worthless I have no recover alternatives (unless previously threatened class action suits come to fruition) because the shares are in my IRA – meaning I have no taxable losses. Were these shares in a taxable account I would look to see them become worthless to offset other capital gains. The lucky part is that they are not yet considered worthless and since I can’t sell them I guess I’m stuck with them, for now.

Bought the Nov 17 calls back @ .18 on 11/07. Rolled forward to Dec 17 calls @ .80 on 11/08. If YHOO keeps rolling the way it is I could do this every month.

I’ve just completed my second round turn of SMRT. The first 200 shares @ 8.76 on 1/14/11 sold @ 9.84 3/17/11 for 11%. The second, shorter time frame trade, 100 @ 6.05 10/07/11 sold 7.02 10/27/11 for about 12.5%.

Yesterday afternoon, YHOO popped over 15.35, triggering a stock order to sell at 15.40. I wound 50 shares of YHOO out of my holdings.

I realized that I had not posted my YHOO turns, so here is a history on YHOO: bought 100 @ 16.15 (3/23/11) sold same @17.01 (4/7/11). Bought 100 @ 14.98 (6/23/11), bought 50 @13.83 (7/22/11). Original order: sell 150 @15.95. With nothing happening, I sold 100 Oct 11, 16.00c option for $.50 (after commissions net $39.25).

Not really, but I am taking a step back to remind myself of my investing/trading rules. I had bought 300 shares of CNU on 5/10 at 4.99/sh. I had an order into sell at 5.40 based upon recent chart activity. Just before leaving town on vacation I decided that the lackluster performance of the stock meant I needed to “cut my losses”. I placed my order to sell and got out at 4.20/sh. on 6/23. On 6/24 the price jumped to 4.77. On 6/27, CNU opened at 6.26. Had I maintained my normal patient “hold until it makes it” I would have had a nice gain. That’s a huge reminder that you don’t lose until you sell.

Now where are my newsletter subscribers?

I blinked on 1000 shares of ABAT. I just did not feel like I could keep holding a single stock so heavily in my account and I sold for slightly over half of what I paid. This doesn’t mean that I’m completely out, but I just couldn’t hold that much weight in a single stock comfortably. I’m now selling covered calls on what I have left. These are call options on the remaining shares that I hold, selling them on the $2.50 strike, next month out. It’s a long slow way to “recover” from the beating these shares have taken.

On the flip side of this, it doesn’t appear – based on a quick glance at the news – that any attorneys have picked up their needed lead plaintiff yet.

Only time will tell if I blinked too soon or if I will recover my outlay.

I did ride ABAT down, I even bought more shares. I’m in pretty heavy for my account; a little heavier than my own rules say I should be. The question is, with an actual class action filing against ABAT does it make sense to hang on? I don’t know that answer and it gives me pause. First, none of the lawyers offices appear to have an actual “lead plaintiff”. That could mean that nobody has enough of a loss to be considered. They could all be little traders/investors like me. The last time I had a stock (NXG) that nosedived on me, I started trading it at the lower range – then stopped believing in it and wound it down at a 0.91% total gain. I bought and sold it over 15 months. .91% is still a gain, but I could have recovered and then some – .91% is really just a barely recovered. Had that been in a taxable account it would not have even had any gains as I would have had to count my options premiums separately – as it was I counted them as part of my overall gains on the shares. Technically, tax-wise, options are separate sales – in an IRA where they are, today’s gains don’t matter in the same way.

So. I have to watch some more. I try not to trade on fear (my own). Nor do I try to “cut my losses”. I have bought several times on the way down and averaged my cost per share down. I’ve started selling covered calls against my holdings and if I get called out, I have my eye on another stock that has been trading in about a $1.00 range – 8 times in the last six months – that could really ramp up my balance.

I have not gleaned how long these potential suits tend to run and I may be on the losing side of time – but I do have a lot of years to make up for what look like hefty momentary losses. Perhaps I will spend part of that make up time reading the D & O Diary for insight.

ABAT has responded to the Variant Research posting that appeared on Seeking Alpha. In the point by point rebuttal, ABAT takes on each allegation made by the short sellers. It also appears that three law firms have filed class action suits against ABAT, although from the initial filings none appears to have acquired their “lead plaintiff”.

For its part, Seeking Alpha has posted a new damning story questioning a $20 million acquisition.

ABAT is up around 14% this morning.