On Dec. 24, 2019, Ability Inc. (ABIL, Financial) received a letter dated the prior day informing the company that the Nasdaq Hearings Panel has decided to delist its common shares and will suspend trading effective at market opening on Dec. 26, 2019.
The announcement comes after the Nasdaq’s Nov. 6 announcement that Ability did not meet the requirement of having a minimum of $2.5 million in stockholders’ equity, market value of listed securities valued at $35 million or net income from prior year continuing operations of $500,000. This violates Nasdaq Listing Rule 5550(b).
About the company
Ability Inc. is a satellite interception company based in Tel Aviv, Israel. It specializes in the lawful interception of cellular and satellite communication networks for government-run agencies such as intelligence, military and homeland security. It also offers services such as decryption, cyber and geolocation solutions.
Ability’s common shares will still be traded on the Tel Aviv Stock Exchange (XTAE:ABIL, Financial), and will likely be available on the OTC market in the U.S. as well. As you can see in the chart below, share prices were not much affected by the delisting announcement, as the market had already factored it in.
Phasing out and legal troubles
Ability’s stock price has been falling since 2016 thanks to multiple factors, the most significant of which is its aging technology. In its beginning, Ability raked in the profits thanks to its Unlimited Interception System (ULIN), which allows silent and remote interception of cell phone calls, texts and location by taking advantage of a significant weak point in global telecoms infrastructure using only the target’s phone number. However, as cybersecurity tightens and technology like ULIM becomes more widespread, such weak points are becoming more difficult to exploit.
In addition to this, in June 2019, the U.S. Securities and Exchange Commission charged Ability Inc. and its top executives, Anatoly Hurgin and Alexander Aurovsky, with defrauding merger investors. Below is an excerpt from the charges, which were filed in federal district court in Manhattan:
“According to the complaint, if Cambridge had not consummated a merger by December 2015, it would have been required, without an extension of the SPAC term, to return all of the capital to its shareholders. To convince shareholders to vote in favor of the merger proposal, the defendants allegedly lied to SPAC shareholders about Ability's business prospects, including Ability's purported ownership of a new "game-changing" cellular interception product, ULIN, Ability's so-called backlog of orders from its largest customer, a police agency in Latin America, Ability's lack of actual purchase orders backing its backlog, and Ability's pipeline of possible future orders from customers. As alleged in the complaint, Ability and the two executives profited from the merger, with Ability receiving approximately $19 million, and Hurgin and Aurovsky each receiving approximately $9 million, plus $6 million each in put options, while Cambridge shareholders lost $60 million.”
As of Dec. 24, Ability has a market cap of $2.99 million and no debt, but most of the rest of its metrics have been skewed by plummeting net income.
Ability’s profitability relies on multi-million dollar contracts from various government agencies, and as its interception technology has aged, it has yet to secure ownership of new products or a merger. Thus, unless the company is able to modernize its offerings, it is not likely to provide value for shareholders.
Disclosure: Author owns no shares in any of the stocks mentioned.
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