Osicom Deal a Windfall for Investment Firm
A New York investment firm that bought a 6% stake in a Santa Monica-based optical networking company, Osicom Technologies Inc., more than doubled its money in two days after Osicom reported its first quarterly profits in 18 months.
FIBR Holdings, a company controlled by the investment firm of Andersen Weinroth & Co., bought 679,483 shares of Osicom Technologies on Dec. 1 at $11.04 a share for a total of $7.5 million.
The price for the shares--42% below the stock’s market price Dec. 1--had been set Nov. 5, when the deal was agreed upon. The price was based on the average price of Osicom shares on the five days before Nov. 5.
A day after FIBR invested in Osicom, the company reported a quarterly profit of $1.5 million--its first profit in 18 months. The news sent Osicom’s shares to nearly $27 on the next trading day, Dec. 3.
On Tuesday, Osicom’s stock closed down $2.50 to $35.88 on Nasdaq after trading at a 52-week high of $40.44.
Osicom has been the source of considerable controversy in the past. In August 1997, Barron’s magazine alleged that the company’s chief executive, Par Chadha, was the subject of a criminal investigation in the U.S. and Britain for certain financial dealings. Chadha denied the allegations.
A December 1996 article in BusinessWeek said Osicom’s stock may have been manipulated by firms associated with organized crime without the company’s knowledge. The company disputed the claim.
And in April several class-action suits were filed against Osicom alleging that the company defrauded investors by misleading them about a two-year contract that Osicom estimated was worth $90 million, but generated only $68,000 in revenue.
Chadha has said that the $90 million estimate was accurate when the announcement was made 10 months earlier.
Osicom’s new investor, Andersen Weinroth & Co., was formed in 1996 and is headed by Stephen Weinroth and G. Chris Andersen, former partners at Drexel Burnham Lambert.
Osicom, incorporated in 1981, is the maker of equipment used in high-speed fiber optic networks. The company specializes in equipment used to increase the transmission capacity of fiber optics by dividing signals into colors that can simultaneously transmit information over the same fiber.
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Rocket Stock
Osicom Technologies’ shares have rocketed in recent weeks, following a strong earnings report. Monthly closes and latest on Nasdaq:
Tuesday: $35.88, down $2.50Source: Bloomberg News
