2025's unexpected loser - ProDex Inc.

I believe I wrote about Pro-Dex once before in 2023. Robin Van Kampen made the introduction to me when the stock traded around $17 USD. New capacity to manufacture their products was coming online. Orders were made by their customers to fit their new manufacturing capacity. With a dramatic increase in their backlog the additional sales would result in operating leverage. This happened and over the following ~18 months, the stock ran to about $70 USD/share when it peaked in May. Yesterday the stock hit a 52wk low of $23.52 USD. This is just 2 weeks prior to their next report which was quite surprising to me given current day circumstances and what management is saying. When I wrote about Pro-Dex last time, they were carrying/investing in two publicly traded securities. Air T Inc and Monogram technologies. This has since changed as Monogram was recently bought out by Zimmer Biomet Holdings, Inc.

WARSAW, Ind. and AUSTIN, Texas, July 14, 2025 /PRNewswire/ -- Zimmer Biomet Holdings, Inc. (NYSE and SIX: ZBH), a global medical technology leader, and Monogram Technologies Inc. (NASDAQ: MGRM), an orthopedic robotics company, today announced they have entered into a definitive agreement for Zimmer Biomet to acquire all outstanding shares of stock of Monogram for an upfront payment of $4.04 per share in cash, corresponding to an equity value of approximately $177 million and an enterprise value of approximately $168 million. Monogram common stockholders will also receive a non-tradeable contingent value right (CVR) entitling the holder to receive up to $12.37 per share of common stock in cash if certain product development, regulatory and revenue milestones are achieved through 2030. The respective boards of directors of Zimmer Biomet and Monogram have unanimously approved the proposed transaction.

The buyout will leave Pro-Dex with a large gain for the quarter and the CVR leaves room for Pro-Dex to earn out about ~26% of their present market cap should the device perform well for Zimmer Biomet over the next 5 years. What Van Kirk plans to do with the excess cash I do not know, but he has a history of utilizing debt for share buybacks.

In terms of forward risk, I’ve seen speculation about the short interest which recently appeared as a bet on a failure to renew contracts with their larger customers. This is definitely a real risk because of the customer concentration Pro-Dex has, but it seems unlikely in the context of the events of the last few years.

The PR released yesterday clarifying Pro-Dex as not being Polkadex seemed a bit like a meek flag signaling that they don’t know what’s going on with their share price either.