Saturday, September 6, 2008

What's Happening With Spectranetics?

Opinion:

Spectranetics, a high tech medical device company in Colorado Springs, rebounded a bit from their 47 percent Thursday plunge after announcing they were cooperating with federal investigators from the FDA as well as ICE.

The company did not give a detailed explanation, only that the investigation involved parts purchased from and payments made to overseas interests.

This may be a tempest in a teapot. We'll have to wait and see. However, this is a company I've been aware of for many years and never felt compelled to invest in for a simple reason. The company puts out press releases almost daily, sometimes several in one day. This can be an overzealous PR department, but it also enables the "pump and dump" crowd among stock brokers. Even if the company is not complicit in any kind of scheme, brokers love press releases and can overstate their importance to seal the sale and help drive the price. For some types of companies, frequent press releases are warranted. For example, if you have 4,000 stores across the country, something of note is probably happening at at least one of them on any given day.

Companies with a handful of offices or one central location that make a public pronouncement every time they have a relatively good day are a red flag. Whether by design or by poor judgement, the practice can lead to a price that is a total disconnect from the company's actual value.

Maybe nothing dishonest or criminal has occurred at Spectranetics. That's the best case scenerio. But even with that, any hype that was built into the stock's price is gone for the foreseeable future.

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