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Pro-Dex Invests In Stocks Its CEO and Board Directors Own

Half the medical device maker’s net income is derived from investments using company cash and leverage.

February 9, 2024

The CEO of Pro-Dex (PDEX), a manufacturer of multi-function surgical drivers and shavers for medical device firms, and two non-management directors appear to spend much of their time trading stocks.

The Pro-Dex Investment Committee is comprised of CEO Richard Van Kirk, Ray Cabillot, and Nick Swenson who invest the company’s surplus cash— as well money the company borrows— in assets that include publicly traded stocks.

In the latest quarter Pro-Dex had $7.3 million invested— or nearly 10x what the company spent on Research and Development.

The company assures investors their cash and borrowings are in good hands:

“Both Nick and Ray are active investors with extensive portfolio management expertise…”

Investing has paid handsomely in recent years, and significantly boosted Pro-Dex’s bottom line.

Over the last three years ended June 30th, Pro-Dex’s has reported investments gains (unrealized gains plus sales of investments) of:

—$3.3 million which accounted for 53.7% of net income in 2021
—$0.95 million which accounted for 20.9% of net income in 2022
—$3.9 million which accounted for 55.2% of net income in 2023

The last six months have not been as lucrative.

In the six months ended December 31, 2023, Pro-Dex reported an unrealized loss on investments of more than $2.5 million, turning $2.6 million in operating income into a $0.1 million net loss.

If the timing of investments is equal, Pro-Dex investors can rest assured the Investment Committee has suffered personal losses as well:

“Additionally, many of our securities holdings include stocks of public companies that either Nick or Ray or both may own from time to time either individually or through the investment funds that they manage, or other companies whose boards they sit on.”

Notably, Pro-Dex recently restated its financials after inaccurately accounting for its investments in the calendar fourth quarter of 2022. The company did not account for a $2.5 million unrealized gain on warrants it holds in a company called Monogram Orthopaedics.

The misstatement resulted in Pro-Dex understating operating income in the quarter 319.9%.

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