ZAGG (ZAGG) makes covers and other accessories for mobile devices. This is a highly competitive area where for the most part products are not differentiated.
ZAGG stock continues to levitate because the company issues higly promotional statements to investors. ZAGG’s promotions are helped by a brokerage firm that may have vested interested in promoting ZAGG stock.
The fact that works against our short position is that lots of other astute investors also have a $3 target similar to ours and such investors are short. With abundance of shorts, short squeees occur helping the stock price defy gravity.
On January 16, ZAGG management determined that a material weakness in the company’s internal control over financial reporting existed as of December 31, 2010. ZAGG said that management determined the weakness largely resulted from the company’s rapid growth during the year ended December 31, 2010. Management also determined that no changes to the Consolidated Financial Statements presented in the 2010 Form 10-K were required. On January 17, the Audit Committee of the Board of Directors, concurred with management’s conclusion that the company had a material weakness in the company’s internal control over financial reporting as of December 31, 2010, and determined that neither management’s report nor KPMG’s report regarding the effectiveness of the internal control over financial reporting contained in the Annual Report should be relied upon. ZAGG intends to file an amendment to the Annual Report.
Those in the stock may continue to hold.
Those not in the stock may want to wait for an upspike on short covering before entering a position.
We are closely following ZAGG on the ZYX Short Sell Change Alert Real Time Feed.
