On June 30, 2017, Fenix Parts, Inc. (FENX), the recycler and reseller of original equipment manufacturer of automotive products, put out that the shares were going to be traded from that date on the OTC Pink operated by the OTC Markets Group Inc. We checked investment forums such as Yahoo Finance and the iHub forum and discovered that many market participants didn't understand what was happening. The delisting was announced some days earlier on June 28, 2017. The market didn't take kindly to the news and punished the share price of FENX.SourceThe first thing to hear in such situation is ‘don't panic’. Shareholders doing it will lose much more money. In this piece, we will provide more information, so that shareholders can be properly informed on what to do.Will the business be the same?Will the company operate normally? Yes, of course. Shareholders can be sure that the company will continue providing the same services and operating, as it has done for the last 25 years. Let's review the business. The Fenix companies recycle and resell automotive products from 16 locations throughout the Eastern U.S., and Ontario, Canada. The company focuses on "components and systems reclaimed from damaged, totaled or low value vehicles." FENX explains on its website who the main customers are and how it operates.
"Customers include collision repair shops (body shops), mechanical repair shops, auto dealerships and individual retail customers. The company provides customers with high-quality recycled OEM products, extensive inventory and product availability, responsive customer service and fast delivery. Upon receipt of vehicles, which the company primarily purchases at auto salvage auctions, Fenix employees inventory and then dismantle the vehicles and sell the recycled components. The company operates a hub and spoke distribution network allowing it to efficiently move products among its locations and expedite delivery to customers." Source
What's the story of the company? Fenix was founded in January 2014, as eight companies operating in the sector decided to create a network offering the same services in regional areas in the U.S. and Canada. We believe that it was a great idea, as the group could obtain cheaper financing as a collective.SourceNASDAQ - What happens now?On June 19, 2017, the market got to know that the NASDAQ decided to provide the company some more time to file the annual report for the year 2016, and its quarterly report for the period ended March 31, 2017. It seems that the time given has not been enough.
"The Company’s continued listing on The Nasdaq Stock Market is subject to, among other things, the Company filing with the Securities and Exchange Commission (the “SEC”) its 2016 Form 10-K by June 23, 2017 and its March 31, 2017 Form 10-Q by July 21, 2017. In addition, on or before August 14, 2017, the Company is required to file its Quarterly Report on Form 10-Q for the period ended June 30, 2017." Source
Finally, on June 30, 2017, the company noted that the stock was about to trade on the OTC Markets.
"The Company's common shares commenced trading on the OTC Pink operated by the OTC Markets Group Inc.under the symbol "FENX." For more information, please see www.otcmarkets.com. As previously disclosed, the Company recently received a letter from the Nasdaq Hearings Department notifying the Company that trading in its shares on the Nasdaq Stock Market (the “Nasdaq”) would be suspended at the opening of business on June 29, 2017 and the shares will be delisted after applicable appeal periods have lapsed due to the Company’s non-compliance with Nasdaq Listing Rule 5250(c)(1)." Source
The OTC Exchange is simply another exchange like the NASDAQ, or the NYSE, where the regulations are not very strict. It will provide FENX the time to file its filings, which market participants will be able to find on this website.What may happen when the annual report is released?We checked whether, at this point in time, the company had released the due fillings here, but we cannot find them. That is the reason that the share price collapsed and did not recovere. Market participants are thinking: "the company does not want to release the documents because they are bad."It is well known in the financial markets that the market usually overreacts to bad news. In this case, market participants are pushing down the share price without even knowing the new data. It is quite possible that when the annual report is released and the financial situation is not as bad a expected. In that case the market may push up the share price. For this reason, we believe that being informed about the new developments of the company is quite relevant here.Sound financial situation and conclusionIn fact, there may be market participants profiting from the dip here. Have a look at the following financial statistics:
- Market capitalization: $9.47 million
- Book value per share: $3.17
- Revenue per share: $6.53
- Total amount of assets: $177 million
- Total amount of liabilities: $76 million
The share price seems to be very undervalued when you look at all the metrics. The company does not report a positive net income, but the reaction of the market is quite illogical, and cannot be justified. The company may need some cost cutting; that's all. To sum up, try to follow the company, as the release of the annual report and the quarterly report may make the share price go back to more reasonable levels. FENX appears to be a hidden gem that we don't find everyday.We will be updating our subscribers as soon as we know more. For the latest updates on FENX, sign up below!Image courtesy of FlickrDisclosure: We have no position in FENX and have not been compensated for this article.
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