For me, Inseego has been one of those names that you just keep on your screen and, from time to time, and sometimes over the course of several years, you will eventually come back to and get rewarded. One day you’ll glance over at the ticker to find that the bulls have once again forgotten the reason that they abandoned the name during its last run, but have nevertheless once again decided that the story was worthy of another go-around.
This most recent battle, however, almost cost poor little INSG its life. At the beginning of 2024, with shares trading below 20 cents a share, the board needed to take some drastic actions to cut costs, raise capital, and steer their poor little ship to some calmer waters. The path then-CEO Ashish Sharma had chosen was discarded, and new CEO Phillip Brace was appointed. A 1 for 10 reverse stock split was announced to allow the company to regain compliance with NASDAQ listing requirements, and a plan was set into motion to eventually simplify its rather onerous capital structure.
The capital structure issue isn’t something new. Every crappy company like INSG just wants to believe that their shares are continually undervalued which leads them into making costly and ill-conceived capital-raising strategies that will only exacerbate their problems when the inevitable downturn happens. They had a chance during COVID when their stock was trading for a now-split adjusted $200 a share to make that course correction, but decided not to do so, and despite yesterdays press release about a “material debt restructuring” nothing much has really changed. Sure, the investors are different, the terms may be changed, the dates got pushed out a bit, the interest rate adjusted, a bunch of warrants issued, but the central problem remains.
Back on September 30th I once again highlighted shares of INSG as an idea worth considering. Like the proverbial phoenix, it’s shares had once again risen from the dead were giving the stock a market cap once again worthy of consideration. The company had entered into negotiations to restructure their burdensome debt, and to help raise capital towards that reduction, decided to sell-off the remaining piece of their telematics business that they had purchased with a certain amount of fanfare in the last decade.
Yesterday’s results only showed to highlight the problem with the business that remains.