All is fair in love, in war, and on Wall Street, and the results of the three pastimes are about equally predictable.

So we have Chatsworth-based Capstone Turbine Inc., a company with a solid product the gas-powered microturbine sinking nearly 90 percent in the past year, from nearly $100 a share to $12 last week. Capstone is even trading below its IPO price of $16 last June.

Microturbines can be installed in commercial settings, and since they run on natural gas, they can keep a convenience store or gas station running even when the main grid is kaput. The company has lots of coverage on Wall Street, from heavy hitters like Merrill Lynch and Credit Suisse First Boston, and most of it favorable.

But to no avail. Race to the other side of Los Angeles County, and you will find El Segundo-based Aura Systems Inc., the province of Chairman Zvi "Harry" Kurtzman. Aura Systems has had more incarnations in the last decade than a cat has lives, making everything from stereo speakers to vests used by video action-game players. Aura Systems has rarely made money, and has had scrapes with the Securities and Exchange Commission on the way it reports its earnings.

In its latest revival, Aura Systems is selling the "AuraGen," a portable electrical power generator which is hooked up to automobile or truck engines, and which Kurtzman has touted as a solution to California's energy crisis. In the last 52 weeks, Aura Systems stock is up 190 percent on the over-the-counter bulletin board market, to a recent price of 64 cents.

So what gives? Why the differing tales of two energy-related stocks, both with partial solutions to rolling blackouts?

Capstone's chief financial officer, Jeff Watts, said a limited supply of Capstone Turbine stock after its June IPO, plus the sudden appearance of a serious energy crunch in California, combined to ratchet Capstone's stock upward. "There was a lot of restricted, or (SEC Rule) 144, stock, which couldn't be sold for six months," said Watts, referring to stock held by corporate insiders, and which by federal securities law generally cannot be sold until 180 days after the IPO.

This supply constraint, occurring at the same time the energy crunch hit, set the stock in motion. Traders got in, and Capstone's surge rivaled that of Internet stocks of the late 1990s. But then came the energy crunch, along with the sagging stock market and economy, and insiders started selling. The stock crumbled.

Ironically, said Watts, "prospects have never been better for Capstone." Sales are "ramping up nicely," he said, while overseas markets are blossoming. "We think there is a likelihood that many nations will jump right over big grid systems with large power plants, and use microturbines instead, just as they have used cell phones to avoid heavy land-built phone systems," said Watts.

Yet at Aura Systems, a spokeswoman said the decision last year to concentrate on energy has paid off nicely. "We are targeting (for AuraGen sales) industrial companies, utilities, (and) we have been working with (General Motors Corp.)," said Cipora Kurtzman-Lavut, a company spokeswoman.

Aura Systems is no longer trying to market speaker systems, or video vests, or devices to improve automobile engine performance, she said. Aura Systems is working on several models of the AuraGen, some of which are designed to be installed under the hood of a truck or car, said Kurtzman-Lavut.

When utilities shut down, homeowners or small businesses could just fire up the truck, hook up the cables, and keep running. Too, businesses that need power in out-of-the-way locations, such as oilfields or construction sites, could use AuraGens instead of bulky, gasoline-powered generators, she said.

In its last reported quarter, ended May 31, Aura Systems reported a loss of $3.4 million on revenues of $2.9 million. There is no analyst coverage of Aura Systems, and the sole report to come out of late on the stock was in a Massachusetts-based newsletter, said Kurtzman-Lavut. Still, Aura Systems has more than doubled in the last year, and Capstone is at a dime on the dollar. That's Wall Street.

Growing Presence

Even with commercial banks unwilling to finance corporate buyouts, the Los Angeles office of Goldsmith-Agio-Helms, a New York-based investment bank that focuses solely on representing middle-market sellers, is planning a major expansion.

Goldsmith-Agio-Helms keeps four bankers in Los Angles, but by early next year once new offices are dressed up 15 bankers will be here, said Lisa Goldman, managing director and formerly with Greif & Co. downtown.

Though financial buyers, such as leveraged-buyout shops, can't get financing to acquire middle-market companies (those selling for between $25 million and $500 million), strategic buyers are willing to pay up, said Goldman.

And many sellers need to get out. "Sellers can be looking to retire, or they know that their business is not going to grow without merging with a larger partner who can take it to the next level," said Goldman. "The timing of the sale is not necessarily dictated by general market forces."

It's a good time to buy. Business prices are down by about 25 percent in the last year, estimated Ed Villeneuve, also managing director. "Where a good middle-market business might sell for seven or eight times EBITDA (earnings before interest, taxes, depreciation and amortization) a couple years ago, now they are selling for five or six times EBITDA," said Villeneuve, who holds an MBA from UCLA's Anderson School. Public companies are buying, however, spurred by lower prices and the incessant demand by shareholders for growth. "Public companies need to show growth, and if they can make a good strategic acquisition, that can propel the merged companies forward," he said. European buyers are keen on getting a foothold in the New World as well, he said.

But public companies do have to pay, not swap stock, for acquisitions, he noted. "Many sellers do not want stock right now, with the market soft, and buyers don't want to give their stock away, as they think their stock is undervalued right now. So a lot of these transactions are for cash."

Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. His new book is "The Pied Pipers of Wall Street: How Analysts Sell You Down the River," published by Bloomberg Press. He can be reached at

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