Giga-tronics (GIGA) Rally is Overdone

June 18, 2014 • Top News • Tags:

Giga-troinics is up over 175% in June (the last month) on news that the company received a $2.4M order from the US Navy for its Model 8003 Precision Scalar Analyzers equipment. To put this figure into perspective, Giga-tronics had revenues of $14M all of last year. So an approximate ~20% of additional revenue (a $2.4M value) added nearly $12M in market cap to the company.

Having a small float of about 4.5M shares, the news was certainly an overreaction. The company has traded over 20M in volume in the last two days, meaning shares have exchanged hands multiple times. With less than $1M in cash and burning about $500k/quarter, further financing will be required in the near term.

Due to the huge run up Giga-tronics has faced thus far in June, much of its dilutive securities are now in the money. An additional 2.9M common shares could be exercised at ranges in the mid-$1 which would give GIGA a fully diluted market cap of $30M, greater than 50% the current figure.

Giga-tronics is hosting a conference call to discuss Q4 results. It will be interesting to see what management has to say about the upcoming year, but I cannot imagine GIGA’s current price at $3 levels holding.

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