Call it the magical press release.
soared from 3 1/8 early Thursday to close at 12 1/4 Friday on extraordinarily high trading volume. The surge followed a product announcement from the Somerset, N.J. company in which it trotted out the enchanting phrase "high-speed wireless Internet access."
Friday the stock traded as high as 16 3/4. Nearly 21 million shares traded Friday, so each tradable Amplidyne share changed hands an average of seven times.
Amplidyne's two-day rise has left some traders flummoxed. "Man, early Christmas gift ... this one is a freebie," wrote Jon K. on the
bulletin boards as trading wound down Thursday.
Amplidyne's trading tells a story long familiar to this late-stage bull market: No matter its track record, a thinly floated stock can surge when the company issues a press release that includes the hottest buzz words of the hour.
"If you mention 'access' in anything, your stock gets attacked by the daytraders," says Craig Johnson, principal of
The PITA Group
consulting firm and frequent daytrader himself. Amplidyne, he says, hasn't made a convincing case for its technology in its press release, released Thursday. Johnson wasn't trading Amplidyne shares when interviewed early Friday.
When installed at a subscriber's home or office, Amplidyne's terminals would connect wirelessly to local networks and the Internet. Amplidyne says its transmission speeds approach 2 megabits per second, which is competitive with the increasingly popular cable modems. Spokesman Harris Freedman says Amplidyne will ship commercial units late this year, but he is "not sure" if the company has lined up customers.
There are risks in the technology.
"Terminals are only as good as the networks on which they run," says Jane Zweig, executive vice president with the consulting firm
Herschel Shosteck Associates
, who says she hasn't studied Amplidyne's business plan. For example, Zweig says, it's difficult to maintain a reliable "line-of-sight" connection between the rooftop and local network, as required by Amplidyne's system.
So far, Amplidyne has had trouble turning profits on its old line of wireless phone products. In the June 30 quarter, revenue shrank to $423,000 from $503,000 a year earlier, and its gross profits slipped to a loss of $2,900 from positive $127,000. The net loss nearly doubled to $485,000.
In a sign of the times, Amplidyne's reception on Wall Street has summoned criticism from at least one stock detective.
"Even though Amplidyne customers are being charged less than it costs AMPD to build products, the customers don't seem to be paying," writes Floyd Schneider, author of
The Truthseeker Report
, an online magazine he started last month. While Schneider has no position in Amplidyne,
recommends that subscribers short Amplidyne.
Say what you will about Schneider's zeal. The numbers lend support to his case. Amplidyne's receivables grew to $515,000 on June 30 from $441,000 on Dec. 31. On average, it now takes 110 days to collect a payment, compared to 89 last year. Inventories totaled $801,000 on June 30, up from $559,000 at year-end.