xG Technology Inc (NASDAQ:XGTI) just announced that it has regained compliance with NASDAQ listing requirements, and the company is running up as a result. At market close at the end of last week, xG Technology shares went for around $1.60 a piece. The company now trades for circa $2.25 a piece, a close to 40% gain in a matter of days.
Sentiment has been pretty weak across the last few months, with markets concerned that a reverse split (which was necessary to bring minimum bid above the threshold) might not be effective in maintaining price per share above that which NASDAQ requires. We’ve seen it so many times where a company splits, and then short pressure pushes its price right back down to below minimum bid. That’s the major concern when it comes to a reverse split at this end of the market, but fortunately for xG and its shareholders, this one looks to have avoided that pitfall – at least for now.
As of now, it is all about looking forward, in an attempt to see if xG can put this trouble behind it, and pick up an upside revaluation on its fundamental operations, as opposed to being valued based on concerns surrounding its listing status and capital structure. So, let’s try and do just that.
xG Technology bills itself as a communications technology company. The company offers two primary technologies: a wireless imaging and data transfer service (which it picked up on the back of the takeover of its now subsidiary Integrated Microwave Technologies) and what’s called its xMax operations, which is essentially a network service that offers a full suite of communications and data transfer technologies, tailored to a client’s requirements.
In our previous coverage of this one, we noted that the company was set to acquire another entity called Vislink Communications Systems, and that the closing of this deal could serve up some near-term upside in its market capitalization. At that time, the closing had been delayed slightly, and was rescheduled as of December 29 to take place on January 9, 2017. We haven’t had any official confirmation that this has gone through just yet, but there has been no information suggesting otherwise, and chances are this is also adding to the recent gains seen from the company.
It is in this acquisition that we see the primary value argument going forward – especially medium-term. Vislink specializes in scene to screen technology – essentially the recording and parallel screening of things like sports, entertainment and surveillance. With the wireless communications capability of xG’s current product portfolio, Vislink looks like a great fit for the company, and should provide a springboard from which the freshly combined entities can both pitch to new clients, and upsell on xG’s current client roster.
A recent public offering of $10 million bolstered the company’s balance sheet, and should negate the necessity for any serious dilution throughout 2017. That is, assuming the company doesn’t issue to make more acquisitions, as it did with Vislink (as a quick note, a portion of the $10 million in net proceeds from the public offering went towards funding a part of the Vislink acquisition).
Bottom line on this one, we think that there is plenty of growth potential now that xG is out of the woods. The company has a solid balance sheet, and is generating just shy of $2 million revenues quarterly heading into the first quarter of 2017. The latest acquisition should build on these revenues, and push the company towards profitability. It has been a rough ride for shareholders, but it looks like there is going to be a far smoother path going forward.
Next major catalyst is the announcing of the Vislink closing, which we expect anytime now.
We will be updating our subscribers as soon as we know more. For the latest updates on XGTI, sign up below!
Disclosure: We have no position in XGTI and have not been compensated for this article.