Telit Communications Plc., a once-hot IoT stock, has lost more than half its market value in a matter of days as the company hired lawyers to investigate reports linking CEO Oozi Cats to an old fraud case, and reported disappointing first-half results.
Telit Communications Plc, a once-hot Internet of Things stock, had the equivalent of a cold shower this week, losing more than half its market value in a matter of days as the company hired lawyers to investigate reports linking Chief Executive Officer Oozi Cats to an old fraud case. That was on Wednesday, two days after the maker of hardware that enables connectivity for cars and everyday items reported disappointing first-half results, which sent the shares tumbling 42 percent in London. Telit plunged another 33 percent on Aug. 9, when the company said Cats would take a leave of absence, noting “speculation regarding historical indictments” in the U.S. of the CEO it said are “unrelated to Telit and significantly pre-date its establishment.” The company is looking into media reports suggesting Cats is the same man as a fugitive named in U.S. court documents as Uzi Katz, who was indicted in a 1992 wire fraud case in Boston. Italian newspaper Il Fatto Quotidiano suggested Oozi Cats and Uzi Katz are one and the same, while the Financial Times said Uzi Katz and his wife Ruth were accused of engaging in property fraud. The last docket entry in the case, from April 1999, shows Katz had been on the run for more than 30 days. A spokesman for Telit declined to comment beyond Wednesday’s statement that said the company has appointed independent solicitors to “conduct a thorough review of this matter.” Anne Hassett, who represented Katz in Boston, said the events surrounding the case are 25 years old and that there are a lot of things she doesn’t remember, when contacted by phone. Street Favorite Telit, which reached an all-time high of 371.75 pence in April, is now trading little higher than the 140 pence shareholders paid in its 2005 initial public offering. Cats, who is the company’s biggest shareholder, sold 7.1 million shares — or a 5.5 percent stake — in Telit a month after it hit its record high. The stock, which rose 3.5 percent to 142 pence as of 8:25 a.m. in London, is poised for its biggest weekly decline since the listing. The catalog of bad news hasn’t prompted any of the four analysts who cover the stock to lower their buy or equivalent ratings on the company, a Street favorite that rose to prominence in 2014 among investors seeking to profit from the IoT megatrend connecting everyday objects with the Internet. RBC Capital Markets analyst Paul Treiber cut his target price to 225 pence from 300 pence on Thursday, though the average target of 265 pence is still almost double where the shares are currently trading. RBC’s Treiber wrote in a note that his revised price target reflects reduced visibility on near-term financials, though he reiterated his outperform rating, saying that “the news regarding the CEO may have nominal impact on the underlying business given the high mix of revenue from long-term design wins and the breadth of the company’s partner base and sales channels. Under this scenario, we believe Telit could still achieve its full-year guidance.’’ Not all investors are so bullish about the shares recovering, with short interest in the stock standing at 12 percent of the freefloat.