If your stock was down more in the last year (89%) than that of MBIA (MBI) or Ambac (ABK), your shareholders are probably less than pleased. As a consequence, perhaps your investor relations department or management team might want to communicate to shareholders through a better method than, say, press releases notifying that your lenders are effectively seizing control of the company. Then again, you could just do what Syntax-Brillian (BRLC) does and allow the crisis of confidence to continue. Is this just another example of something the company has stumbled over dealing with, or a sign that the shorts were right this entire time and there is nothing worth saying to shareholders?

I don’t like to draw unwarranted conclusions, so I tried repeatedly to get in touch with Syntax-Brillian. No luck. This isn’t exactly inspiring considering that the stock has lost half its value in the last week - which brings me back to what I said just two weeks ago, when this was still a $2 stock.

“Has this company ever loved you back? What have they done to inspire confidence? The growing pains have been immense, and completely unrewarded…”

There is not a reason in the world to believe that this company is going to turn itself around. They have shown a complete inability to execute the minimum requirements needed to be a publicly traded firm, and everyone who believed in them has paid. If anything, I believe that the strict weekly budgeting requirements being imposed by Silver Point will at least help create value for the debt holders by forcing some added degree of accountability and responsibility. Unfortunately, things are looking very tenuous for the equity holders - and that problem only looks to be exacerbated by the inability for BRLC to catch any institutional support. Institutions, remember, like to see their companies filing financials with the SEC, filling board seats as needed (I guess I’m still available…), and generally maintaining a stock price above $1/share to avoid Nasdaq delisting.

While I don’t want to completely write off Syntax-Brillian, I think it is prudent to think about two takeaways. First, you need to be exceptionally careful when investing in no-moat businesses. Television manufacturing is a very low-to-no moat business, but even so, startups in a field dominated by manufacturing giants like Sony (SNE) are going to run into some walls. There were several specific factors that have really hurt Syntax-Brillian - the lack of credit to subprime borrowers being one of them - but also consider that a small-cap tech stock is likely going to perform very poorly as the economy enters a trough. In short: wrong sector, wrong time.
Next, when there is a huge short position and the analysts like a stock, the shorts tend to be right. This is especially true when the underlying company is undergoing very rapid expansion and promotion. Usually, this is because the analysts have missed some key problem that will hamper growth and will lead to the stock price, if not the business as a whole, getting whacked.

I seriously doubt anyone at Syntax-Brillian will want to grant an interview after what I’ve said here. But if this does filter back to Arizona, I’m encouraging management there to talk with someone if Syntax-Brillian is going to emerge from this default mess with the equity base in tact… maybe they should talk to Bill Foote & Co. at USG.

The alternative, it seems, is to stand by and silently let shareholders continue to get wiped out - a process which has been ongoing for several months now.

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