TLGT Stock: Squeezing Shorts Ahead of Shareholder Vote

Teligent Inc (NASDAQ: TLGT) is screaming for the top in the market this morning. However, if you’re looking for SEC filings or press releases, you’re not going to find anything. So, what’s the deal?

On Wednesday, shareholders will vote on a key proposal that is designed to allow the company to remove restrictions on certain Series C Convertible Notes. Here’s what’s happening:

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Skip to What You Want to Read

  • Special Meeting of TLGT Stockholders to Reconvene on Wednesday
  • What Shareholders Will Be Voting On
  • A Short Squeeze Commences
  • Risks to Consider Before Investing in TLGT Stock
  • Final Thoughts

Special Meeting of TLGT Stockholders to Reconvene on Wednesday

In a recent press release, Teligent announced that its Special Meeting of Stockholders was put on pause. Unfortunately, there were not enough investors that voted in order for the company’s proposals to be approved. 

As such, the company said that it would reconvene the Meeting on December 16th. Nonetheless, there’s clear clues as to how the vote will go.

So far, 94.49% of the votes that have come in have voted in favor of the company’s proposals. The reason the vote could not be finalized was that only 47.46% of the outstanding shares of TLGT stock have submitted proxies to vote. The company needs an additional 140,077 shares to vote in order to finalize the shareholder approval of its proposals. 

What Shareholders Will Be Voting On

Ultimately, the TLGT vote surrounds a remedy to the company’s compliance issues with the NASDAQ. Through the Special Meeting, Teligent asked its shareholders to approve removing a restriction on the number of shares a holder or group of holders of the TLGT 9.5% Series C Senior Secured Convertible Notes due 2023 may own at one time. 

In the invite, the company explained that the Nasdaq Marketplace requires that any issuance of shares that would result in a change of control be approved by stockholders. 

So, why would shareholders want to approve this proposal?

Well, at the inception of the Series C Senior Secured Convertible Notes, the company had until October 31, 2020 to receive a shareholder vote in favor of this proposal, or the investor has the right to substantially increase interest from 9.5% to 18%. While we are well past this date, approval of the measure would ultimately reduce the cost of these Notes. So, there’s a simple question, do shareholders want to provide these investors with more control of the company, or are they willing to accept increased cost associated with these Notes. 

A Short Squeeze Commences

With the measure having the clear approval of those that have voted, TLGT investors are excited, especially considering that the Special Meeting will continue Wednesday. 

As such, this seems to be what caused the beginning of the gains the stock is experiencing. The rest is technical. 

At the moment, TLGT trades with a public float of under 4 million shares. That’s an incredibly tiny float, or supply of shares. As the law of supply and demand tells us, when there is minimal supply and demand increases, prices increase. 

At the same time, the stock has traded with pretty high short interest. As the stock ticked up, it led shorts on a race to cover, further increasing volume and price appreciation. 

Risks to Consider Before Investing in TLGT Stock

Any time you make an investment, you’re accepting the risks associated with that investment, and no investment is without risk. When it comes to Teligent stock, some of the most significant risks to consider include:

  • Teligent Doesn’t Make Money. Teligent currently operates at a loss, and all signs point to more of the same, at least in the near future. As such, the company must rely on its balance sheet. Should it not have enough money to survive, it will likely look to the capital markets to raise funds, leading to dilution of existing shareholder value. 
  • Volatility Risks. As a penny stock, TLGT experiences quite a bit of volatility. This means that investors are at the mercy of wide fluctuations in value which could lead to significant losses. 

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Final Thoughts

All in all, there’s a major vote that’s taking place just days away. The excitement surrounding the vote is leading to gains which are being exacerbated by strong demand for a stock with a tiny float and the squeezing of shorts out of their positions. While any investment, including an investment in TLGT will come with risks, with the vote around the corner, TLGT stock is one to watch closely.