On February 7, 2008 the same day that Valence announced extremely disappointing quarterly results, they attempted to soften the blow by putting out the misleading press release of an order by Tanfield of “up to” $70 million. Reading the supply agreement between the two to see that nowhere does it state a minimum, nor does it ever say one word to affirm that the $70 million figure has even a remote chance of being realized as real revenue that investors can rely upon.
If one wanted to bet on the future of Tanfield, Valence is surely no way to do so. There is a company on the American Stock called Enova Systems (ENA) that develops hybrid drive systems that it is currently selling to Tanfield. It has significantly more revenues than Valence and 4x more cash. It has nearly zero debt, and currently sports a market cap of $66 million (just so you don’t think we’re only hard-line cynics).
On February 19, Valence announced that it was shipping additional units to Oemtek for its Toyota Prius add-on kit. Note: the deal is not with Toyota (TM) but rather with a small startup company which is trying to sell add-on kits for the Prius … kits, which cost almost half the price of the entire vehicle — new. But here is where it gets funky. In the press release we read that previously they have shipped Oemtek 300 modules and this is a follow-on order. According to the information on the sites below, Oemtek was initially funded by none other than Carl Berg, the chairman and largest shareholder of Valence.
- If Oemtek was funded by Berg, then all revenue from this transaction has been improperly recognized and should be categorized as related party transactions.
- It was never disclosed in the press release or in any investor presentation that Berg is financially involved in Oemtek.
- Even though the value of the transaction isn’t sufficient to benefit Valence materially, the announcement alone is misleading because it induces investors to believe that Valence was chosen for superior technology, not because of the subsidy of an investor who stands to benefit by the transaction.
- Whether or not this was an oversight of the company or done intentionally, investors have a right to full disclosure of Mr. Berg’s involvement in the funding of Oemtek.
