LECG Gets Crushed, Stock Down 80%

Feb 28, 2011
J. Webster
Comments Off on LECG Gets Crushed, Stock Down 80%

Update: Here’s Whitney Tilson’s response to why he bought LECG and how they were more or less just unlucky.

If you’re feeling bad about something, say a bad stock trade you made, where you lost a few thousand dollars, there’s usually someone out there feeling much worse. For example, take a look at Yahoo’s message board for the stock LECG Corporation (XPRT), where one user had this to say after XPRT dropped nearly 80%:

The title of the message board: I just lost $50k in this TODAY

I am so depressed right now
Bought at .30c, sold at .14c, will NEVER touch a stock EVER AGAIN

Another person who feels pretty bad I’m guessing is Whitney Tilson and Glenn Tongue, whose hedge fund, T2 Partners filed an activist 13D with the SEC regarding shares of LECG Corporation (XPRT) this past week. Due to portfolio activity on February 14th, T2 now shows a 5.24% ownership stake in the company with 2,001,148 shares.

But it doesn’t look good at all for Mr. Tilson, who took off his short in Netflix recently, I guess he should have gone short XPRT instead of going long. I guess it’s not a huge loss for Tilson though, as it’s only got to be around $2 million. Still, that’s got to hurt.

From the LECG press release:

LECG will initially use the majority of the proceeds from practice group transitions to repay the $27.8 million in principal outstanding under its credit facility. The Company does not believe there will be any value remaining for the common stockholders after taking into account the expected net sale values of these transactions in the aggregate, and the use of the proceeds to fund payments to the Company’s lenders and unsecured creditors. Contractually, the remaining value available to equity holders, if any, would be first allocated to the Company’s outstanding preferred stock.

So the moral of the story is stay away from risky penny stocks, always use stops in stocks you’re a bit unsure about, and if you’re feeling bad about something, take a look at the Yahoo message boards after a stock tanks, there’s bound to be someone out there who is much worse off.

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