VirnetX Holding Corp (NYSE:VHC) Beating Back the Shorts

VirnetX Holding Corp (NYSE:VHC)

VirnetX Holding Corp (NYSE:VHC) shares opened at $2.40 – the same price as where they closed on Tuesday. However, within 30 minutes VHC shares shot up to $2.80 before retreating then hitting the $2.80 price once again and closing at $2.75 for a daily gain of 14.5%. Volumes were seven times normal. Average daily volume for the shares is listed at 213,800 but today almost 1.5 million shares traded.

VirnetX Holding Corp (NYSE:VHC) develops software and technology for secure communications. VirnetX features a secure domain name registry and proprietary connection technology branded as “Gabriel Connection Technology”. The firm’s technology is designed to enable secure real-time communications between consumers using instant messaging, VOIP, smart phones, eReaders, and video conference attendees. VirnetX owns over 112 U.S. patents and has 75 additional patent applications pending.

In 2015 VirnetX Holding Corp (NYSE:VHC) reported revenues of $1.56 million. That number fell slightly to $1.55 million in 2016. However the Cost of Goods sold plummeted from $5.27 million in 2015 to $884,000 in 2016. Accordingly, gross income was -$3.71 million in 2015 but improved markedly to $666,000 in 2016.

EBITDA for VirnetX Holding Corp (NYSE:VHC) was -$28.48 million in 2016 which was an improvement over the -$29.15 million loss in 2015. Share dilution has been minimal. In 2012 VirnetX had 50.93 million shares outstanding and that number increased to just 55.98 million by 2016. The diluted EPS has been rather consistent as well even if at a loss. For four of the past five years the diluted EPS loss has been between -$0.51 and -$0.56. The single outlier was 2014 when VHC shares had an EPS loss of only -$0.19.

Only one firm follows VirnetX Holding Corp (NYSE:VHC) and they rate VHC shares as a “Strong Buy”. However the percent of outstanding shares that represent short-sellers is at 21.78% which, given the thin liquidity, computes to short ratio of 51.84 – a large number by any measure.

4/19/2017
Ticker Symbol VHC
Last Price a/o 4:00 PM EST  $                      2.75
Average Volume                    213,880
Market Cap (mlns)  $                  139.54
Sales (mlns)  $                      1.60
Shares Outstanding (mlns) 58.14
Share Float (mlns) 50.90
Shortable Yes
Optionable Yes
Inside Ownership 13.30%
Short Float 21.78%
Short Interest Ratio 51.84
Quarterly Return -2.04%
YTD Return 9.09%
Year Return -46.07%

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Marc has a degree in economics and a MSc. in Finance. Over his 20-year career, Marc has worked for global investment firms in Europe and the United States as an analyst, fund manager, and consultant.

Author: Marcus Anderson

Marc has a degree in economics and a MSc. in Finance. Marc worked for global investment firms in Europe and the United States as an analyst, fund manager, and consultant.

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