Some Underwriters to Watch

And some potential names to avoid

In the close to 30 years I have been out hunting for Short Ideas there has always been a short list of underwriters who were the primary sponsors of companies I found to be of interest. There are underwriters like Goldman or Morgan that you turn to for long ideas, and then there are those that you turn to for short ideas. This is a post about the latter.

One of my favorite underwriters from the olden days was a company called Cruttenden Roth, which was later renamed Roth Capital, and now goes by Roth MKM. If you take a look at the current transactions page off of Roth’s website, and pull up a chart for some of the names, it’s pretty easy to see why. Over the past several months they have participated in the offerings or transactions of a number of companies that are likely on the favorites list of many bearish analysts, myself included, or at least on the avoid list. Names like LUXH, which has received some activist attention and has just been decimated; ISPR and APLD, both names I have highlighted in the past; and ZETA, which has recently found itself in the crosshairs of some detractors. If you go back 30 years, I would bet you likely have more zero’s and bankruptcy’s from their client list than companies that are still doing business today.

Every winter Roth would host these wonderful conferences down the freeway from me, and while I was basically able to just walk through the door and crash the event for the first few years, I was eventually forced to beg a client to be added to their list of attendees. It was at one of their conferences in around 2010 that I encountered their “China” track of companies, every name of which turned out to be a great idea. They had an entire ballroom set up just for Chinese companies that were all either private companies looking for a US-based shell company as a merger partner, or they were companies that had recently come public through the (discredited until the arrival of the SPAC) reverse merger into a shell process. And you know what? It was the most popular part of the conference.

While Roth MKM has been busy trying to climb that ladder of respectability over the years and move into the upper tier of the underwriting leagues, there have been a host of other companies more than willing to sponsor and fund the companies that may have gravitated towards a Roth Capital in the past.

Before moving on to that list of underwriters that I think bears some watching, a short interlude into what sparked the idea to put forward the dozen or so names on my list in the first place.