TPS Position Update – May 17, 2016

| May 17, 2016

TPS Position Update

. . . . Finjan Technologies (FNJN) – SELL 

After we recommended Finjan at $1.64, it shot up to $2.32 for a 42% gain.

The pullback to today’s close of $1.37 has been gradual.  And after evaluating the increasingly uncertain Finjan future, we believe now is a good time to sell.

Here’s why.  The firm’s financial fortunes are closely tied to whether or not it wins patent infringement lawsuits.  Revenues are driven by legal settlements.  

We don’t think this is a fundamentally flawed business model.  But we are increasingly concerned about the climate of the courts.  It may be getting tougher for Finjan to win complicated and costly litigation battles.

Here’s an example.  Right now, Finjan has filed patent infringement lawsuits against FireEye, Sophos, Symantec Corporation, Palo Alto Networks, Blue Coat Systems, and Proofpoint.

Last month, a judge narrowed the scope of the claim Finjan has against Proofpoint.  He took two of the eight claims made by Finjan off the table.

This alone is not a death knell for Finjan.  It doesn’t send a signal that the lawsuit is in trouble.  But it is definitely a clear reminder of the uncertainties of the courts.

Right now, we believe the stock is overbought, and that this is a good time to take your profits and sell.  The Finjan future gets foggier every day. 

. . . . The Female Health Company (FHCO) – SELL 

Here’s another one of our penny stocks that did well after our recommendation, and has now staggered into an uncertain future.

We recommended The Female Health Company at $1.60.  It shot up to $2.45 for a 53% return.

Now, the company is exploring a merger.  The reason why: sales of its products are skidding.  

Sales were $24.5 million in FY2016, compared to $32.9 million in FY2015.

Revenues fell to $13.0 million from $17.6 million.

It’s planning to merge with a company called Aspen Park Pharmaceuticals Inc., a privately held firm.  Following the merger, scheduled to close later this year, FHCO shareholders will own 55% of the new company.

The Female Health Company believes it can create scale and expand distribution of its female condom products by aligning with Aspen Park, which markets male health products.

We are skeptical and disappointed. Mergers are historically fraught with peril.  We would rather have seen The Female Health Company stick to its knitting and focus on fixing a sales problem instead of pursuing a merger.

Let’s sell The Female Health Company and avoid the financial, managerial, and operational distractions of what look like difficult days ahead. 

. . . . . Unilife Corp. (UNIS) – Hold 

We have evaluated our position in Unilife Corp. following a 10:1 reverse stock split and other events, including the reporting of “irregularities”.

We are holding our position until more detailed information becomes available.  Price reporting reflects the reverse split. 

Action To Take

  • SELL The Female Health Company (FHCO)
  • SELL Finjan Technologies (FNJN)

Category: TPS Update

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