The Asensio investigation of Pegasus Wireless Communications exposed one of the most ridiculous companies ever listed by NASDAQ. Asensio documented the company’s irregular transactions. Since its public offering in 2000, Pegasus engaged in activities that blatantly damaged its shareholders interest, including the cancellation of 7,125,000 shares without payment of consideration. In another instance, Pegasus agreed to issue 9,000,000 shares only to cancel the agreement. The list of Pegasus’ problematic actions goes on and on. It is no wonder that that company employed three different unknown auditors to review its questionable transactions. One of the audit firms belonged to Pegasus’ CFA, posing an obvious conflict of interest that did not sufficiently interest Pegasus.
Asensio quickly noted that Pegasus’ problems affected its shareholders’ interests. The company’s unwillingness to provide reliable disclosures prevented its shareholders from knowing the value of their investments. One of the Asensio core investment values is the absolute necessity of total disclosure from publicly held companies. As a dedicated short-seller, Asensio worked to reveal the information that fraudulent companies attempt to conceal from investors, thus facilitating accurate price discovery and helping to foster a fair marketplace.
The Asensio research reports also revealed additional problems with Pegasus. For example, Asensio uncovered unsavory links between Pegasus and a Taiwanese national accused of embezzling more $525 million. Asensio initiated coverage in 2006 and first reported on the wireless company in July. This report focused on the questionable professional record of Pegasus’ CEO Jasper C. Knabb and was a response to NASDAQ’s invitation Mr. Knabb to ring its opening bell on July 21, 2006. It was difficult for Asensio to see how a company with Pegasus’ problems could receive such an honor.
According to Asensio, one of Knabb’s other questionable business activities involved a small scale internet service provider called Beach Access. The company never managed to live up to Knabb’s promotional propaganda claiming that Beach Access provided connection services that were 100 times faster than rivals. Rather than admit defeat, Knabb sold Beach Access to Biofiltration and took a position at the new company in order to run the subsidiary. Biofiltration soon learned that Knabb’s technology did not work and fired him. The company also sued to recover the shares it gave Knabb in exchange for Beach Access.
Similar to Beach Access, Pegasus is a technology company that relies on Knabb’s promotional skills and possesses no commercial products to justify its existence. The Asensio reports on Pegasus benefited the investing public. The following publications prevented investors from being duped by NASDAQ’s decision to let Jasper Knabb ring its opening bell.
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