Guest-Tek – Lessons Learned in Calgary

Excerpt from “Guest-Tek showcases small cap frustrations“

“All the frustrations that come with buying small cap Canadian tech stocks are neatly illustratd in the plan to go private announced recently by Guest-tek Interactive Entertainment.

This hotel broadband network supplier went public back in 2004 by selling shares at $10.25 each, on the back of a story that featured 200 per cent-plus annual revenue growth and 100 per cent-plus profit growth. BMO Nesbitt Burns led the Guest-Tek (GTK-T0.48-0.01-2.04%) initial public offering, and the stock’s best day was its first day on the TSX.

Guest-Tek failed to sustain strong growth, and the $44.6-million IPO never attracted much os a following. A dreary but familiar trend developed: There was little buying and selling, and the stock price price started to slide. The cheaper Guest-Tek got, the less it appealed to institutions, which need to establish a meaningful stake in a company to make it worth following. This became a classic orphan stock, neglected and unloved.”

Arnon Levy, Guest-Tek co-founder, President and CEO, is trying to take the company private for a share price of $0.50 per share, quite a way from the original IPO price of $10.25. As the current CEO, the deal is likely a good one for Mr. Levy, while I am not sure how will people who invested at the original IPO price and stayed on feel.