$OPTX Short Report??
Yesterday a user on X posted why the thought $OPTX was 'uninvestable' and 'worthless'
It got some traction and (seemingly) impacted the stock
So I wanted to share some of my own thoughts as someone who is invested and is deep in the weeds as I write out my own deep dive on them.
It was mostly me talking to my phone as I read it so its a bit jumbled, so bare with me.
Let's dig in!
To start, I am going to do this as professionally and respectfully as possible. I am going to focus on the content rather than the user.
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I took the time to read through the short report, as anyone that is positioned/wants to be positioned in a company should do extensive DD on the bear case
I agree that there are PLENTY of bear cases and risks associated with Syntec. I don’t think thats disputable.
So what it really comes down to is if the upside potential is asymmetric relative to the risk. And this largely comes down to each individual investor and their tolerance, and is not something that can be decided for them.
That being said, let’s dig into the claims that were made in the short report
1 - "OPTX de-SPAC’s structure provides Kapoor with an asymmetrical upside for a single insider, who, in this case, is only him, creating a big opportunity to cash out now that he has access to equity markets."
It starts with this SPAC discussion and the fact that Kapoor owns >80% shares. Based on recent filings we can assume that that is still true. If he wanted to ‘cash out’, and his lockup period ended over a year ago, why do you think he hasn’t sold any shares? Also, it seems that you are familiar with the vesting schedule that is in place for him. Others might not be so I will lay it out. There are 3 tranches. Roughly 8.7 million shares at each. 1st tranche is at $12.5, 2nd tranche is at $14 and 3rd tranche is at 15.5. This represents a potential 70% increase in his already massive stake. In order for these to vest the stock would typically have to maintain the price for 20-30 days.
So, why would he want to sell his own shares, knowing it would suppress the share price, if he’s sitting on the option to make a few hundred million more dollars?
You make this sound bearish in your report, but I would argue that you are actually providing a case for continued upside. I could see how it could create a potential overhang right below those tranches if investors are worried about dilution. But thats over 100%+ premium to todays price.
Also, there are other incentives for Kapoor to want to keep the share price up and would also explain why he wouldn’t need to sell. Large insiders often use their shares as collaterals for loans. The lower the share price, the lower the lending power.
Lastly, there is the liquidity trap. Becuase he owns so many shares and the float is so tight, he cant sell a large block without significantly moving the share price. So IMO he would want to wait until higher prices and greater demand/liquidity and when they are further into their order fulfillment. But at the end of the day, this is all speculation and none of us know what he will do except him. But I know which way I lean.
2 - You then go into the financials. We are in agreement that their past and current financial reality is not strong. But it’s also important to put all of this into context and provide an alternative perspective, so thats what I will do.
Regarding your statement about cash flow being driven by debt and not profit. Well yeah thats how this goes. This is not unusual for a micro-cap tech company during a ramp up phase. We expect negative earnings. The .7mil in positive YTD OCF is a significant milestone, regardless of net losses. It suggests that the underlying business is starting to generate cash from customers even if the paper net income is dragged down by non-cash charges. Also, the 500000 in new debt is used for CAPEX. In the optics industry you need to invest heavily in things like high precision machinery to win lane defense contracts. Using debt to buy growth producing assets is standard work.
Regarding being over leveraged. Their total debt is relatively small compared to its EV. Obviously I would prefer they have more cash than debt, and this is one of the points that held me back from investing for a while, so I don’t underscore the issues here. But even without discussing their future growth potential, we should talk about potential liquidation value. Syntec holds valuable IP and specialized manufacturing capability to LEO satellites and military AR headsets. Assets that a larger defense prime (think Lockheed or Northrop etc.) might pay a premium for in an acquisition, regardless of current debt load
3 - Revisiting the share price engineering. You mean the CEO is going to do what he can to push the price higher, and this is a bad thing for bulls? I know im being facetious and you are digging at something deeper, but at the surface level, why would I not want the CEO to make me more money? If what you are insinuating is that the CEO will do things that are sketchy to manipulate price, I havent seen anything of that nature so it’s purely speculative, unless you have any concrete examples?
I think the price action that we see is more a result of the low float. An account with 400 followers put out a ‘short report’ and the stock dropped 20%. Just goes to show how volatile it will be. That volatility could be an opportunity for some, or just a non factor for others
4 - Board turmoil. In corporate disputes it’s not uncommon for departing execs to make noisy exits to protein their own rep or set up potential litigation. If there were substantiated fraud the company’s independent auditors likely would not have signed the subsequent 10-Q filings. The fact that they are still trading on the Nasqad (despite the delays) suggests that the auditors and the exchange have not found evidence of actual fraud but rather internal control weakness. But who knows?
They are in compliance as they have filed their outstanding 10-ks and quarterly reports and the Nasdaq closed the delinquency matter in October. Doesn’t mean they are out of the woods yet, but they are actively improving their situation. Also, they had a new independent auditor approved in January.
5 - You consider it uninvestable and worthless. I won’t belabor on the unprofessionalism here, as you are in fact an individual and not a professional institution, so it’s fine. But it also goes to show that you most likely don’t invest in this space as you are solely focused on the current financial situation rather than their multi million dollar defense contracts, supply chain integration etc. Also, did you think it was uninvestable when it was $1.4 two months ago? Or when it was at 9.00 this week? 650% in 2 months sounds pretty investable to me.
So to summarize all of this, I agree that the financial situation is precarious and that they will most likely raise at least 10m soon to fulfill recent orders. I expect significant volatility in the share price, regardless of dilution or not. And I expect lots of positive news coming out as well over the next few months. The filing of their 2025 10-K in March will also be significant. It’s their first audit by their new firm. If there are futher delays or if the new auditors echo the material weakness warnings, the bear case will gain steam and delisting fears might resurface. On the flip, a cleaner report will validate their administrative stability and potentially cause a relief rally
Ok moving on to the ‘financial summary’ section
Again, yes I agree that there are lots of concerning features of their financial history. But as an investor in a high spec, high r/r investment, I am forward looking. So this is where we should get into the good stuff.
You said ‘this report does not assess product legitimacy’. This is a big hole in your report. The entire report is so focused on their financial past and completely ignores the transformative stage they are in. If they clean up their financials, then what? Your report would have been much stronger if you actually showed a legitimate short thesis as to why they wont be able to fulfill orders, their tech isnt revolutionary, they arent in Anduril supply chain etc. Because anyone positioned here should be treating it like a call option where they could have visibility to hundreds of millions in revenue.
All in all, this report highlighted the correct risks but it overstated in many ways and was presented in a manner that solely focuses on the bad without giving credit to the upside, which makes it lose credibility. Also, the entirety of this report was focused on this current and past financial issues, so as soon as those clear up, this entire short thesis goes away.
Listen everyone, I don't invest in a company like this because I think they are safe and a 'set and forget' forever kind of compounding investment. I invest in a company like this because I treat it as asymmetric upside where there is serious risk of losing >70% but also potential to return hundreds of percent. Its an investment that I will monitor actively and be very dynamic with. And I size my position accordingly. If they are infact integrated into Anduril's supply chain (as I think they are) and they get real orders over the next couple years, we're looking at a completely different reality.
For anyone watching OPTX, I will be diving into all the potential growth for Syntec in my deep dive that is in progress, as well as highlighting what I believe to be the greatest and most legitimate risks.
As always, not financial advice or a recommendation!
