WebTech Wireless Inc. (TSX:WEW) founders Anwar Sukkarie and Cameron Fraser have offered to reverse the sale of a million company shares following the 50% plunge of WebTech's stock price over the past week.
The company's stock began its freefall in heavy trading on May 10 when news surfaced that it was being sued for copyright infringement by LunarEye Inc., a Texas-based competitor. WebTech's per-share price fell to $5.33 from a close of $6.05 on May 9.
Its stock, however, really started to nosedive Friday when the company announced that Crown Telecom, WebTech's exclusive Brazilian distributor, had defaulted on payments for WebTech's GPS vehicle location units.
The company did not say how much Crown Telecom was behind on its payments, but said if the company was not paid for 60,000 units Crown had sold, it would have a significant impact on the company's results for its third quarter ending April 30, 2007.
The news spooked shareholders, and WebTech's share price fell to $4.29 on Friday and to $2.96 on Monday. More than 4.5 million shares traded hands before the stock price rebounded to $3.90 on Tuesday.
Sukkarie and Fraser offered to reverse their share sale made on April 12 in an attempt to convince shareholders that the shares had not been sold in advance of the company's recent negative announcements. The two had sold their stock at $6.70 a share.
WebTech had signed a 20,000-unit deal with Crown Telecom in January 2006 and a 490,000 unit order in January 2007. The deals have played a growing role in the company's fortunes, with almost two-thirds of its revenue in the second quarter ending January 31, 2007, coming from South American sales, mainly in Brazil. That amount grew from less than a third in the same quarter in 2006.
WebTech's revenue had more than doubled to $8.5 million in its second quarter from $4 million in the same quarter in 2006. The improved sales increased the company's net income to over $1 million compared with a quarterly profit of $334,000 in the second quarter of 2006.