Telit Communications, a "once-hot internet of things' stock", had the equivalent of a cold shower last week, says ine Quinn and Beth Mellor on Bloomberg.com. The Aim-listed firm lost more than half its market value in days after its CEO Oozi Cats was linked to an old fraud case.
Media reports identified him as US fugitive Uzi Katz, who was indicted in a 1992 wire fraud case in Boston. A few days earlier, Telit, which makes the hardware allowing everyday items to be connected wirelessly, had reported disappointing first-half results.
Telit shares reached an all-time high of 372p in April, and Cats sold £24m of his shares a month later. The stock is now trading a little higher than the 140p shareholders paid at the 2005 flotation. "At first blush, the case has the ingredients of a classic Aim scandal," says Lex in the FT. "One of these is a colourful boss. Mr Cats has potential here." Another requirement is a company active in a hot sector: "Sure enough, Telit supplies components for the much-vaunted internet of things.'" Strong profit growth accompanied by negative cash flow over the past five years was another red light.
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Investors should keep in mind that occasional blow-ups are inevitable in a lightly regulated market that allows them to access risky start-ups more easily than other exchanges. "The lesson... is encapsulated in the old Scottish motto: Touch not the cat [without] a glove."
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