In afternoon trading CryptoLogic Ltd. rallied 16 percent on the Nasdaq, and although the company announced a software licensing deal Wednesday, investors, one analyst speculated, could be buying in anticipation of a possible sale.
Recent weeks have seen the company's former chief executive, Javaid Aziz, compel CryptoLogic's executive board to justify a preciptious decline in share value since May 2008.
"All I wish to see is a determined and focused program to staunch the red ink, conserve and grow cash, and then grow the revenues profitably," Mr. Aziz told IGamingNews Wednesday in an e-mail. "This is not an unreasonable request from a major shareholder!"
Mr. Aziz's filings with the United States Securities and Exchange Commission -- dated Dec. 5, 2008, and Jan. 9, 2009, respectively -- have been unambiguously critical. Among other demands, Mr. Aziz is calling for CryptoLogic to reduce headcount and development costs, as well as review the terms under which it outsourced poker operations to Gtech Corporation.
He is also seeking two seats on the board, one of which he intends for himself, the other, for a shareholder to be named later. Should this demand and others not be met, Mr. Aziz, who holds an activist stake in the company, has threatened to launch a proxy contest to replace the board at an extraordinary general meeting for shareholders.
So far, CryptoLogic has refused Mr. Aziz's demand for board representation, and Todd Eilers, an analyst with Roth Capital Partners, thinks that trend will continue on tomorrow's conference call with investors.
"The board opposes giving him a couple of board seats but I doubt they'll change their mind," Mr. Eilers told IGamingNews Wednesday.
Mr. Eilers expects, moreover, that Mr. Aziz's request for board seats will continue to be denied -- and in the event that it is, he said, Mr. Aziz will likely leverage his shareholding position to call an extraordinary general meeting.
"Maybe you have some people buying based on the expectation that this (Mr. Aziz's disagreement with the board) could lead to an eventual sale at some type of premium to where it's trading now, which is in the $2 range," Mr. Eilers said.
CryptoLogic, which inked an agreement with Gaming Technology Solutions Wednesday, could not be reached for comment.
Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.