bigpike. Welcome to the board. Here's my thought on the whole thing in two points.
1) Short sellers are in this to make money. I'm okay with that.
It's a whole other thing to write about alternative facts. The trick to alternative facts is you include just enough real ones to make the "false facts" seem plausible.
The short seller's main point being, are the new customers who will generate a 35% increase in revenues really real?
What the shorter is really accusing TIS of is knowingly falsifying an 8K filed with the SEC.
Do I believe TIS, whose executives could go to jail if they are deceiving the investing community, or should I trust a short who is motivated by immediate gain?
2) That said I'll explain something else that's directly related.
I was also amazed that TIS was raising so much money to build a new mill at such a disproportionate cost to existing revenues. They were betting the farm so to speak.
I already owned a position in TIS. I first bought because of the rising PPS and the terrific dividend. I liked ownership, and the financial controls.
When TIS announced the new mill and the equity raise along with bank loans, the PPS tanked on dilution. It was just math at that point.
I thought the dividend was in jeopardy. I thought it would have made sense to cut the dividend, use the cash to expand, and then reinstate the dividend.
But on second thought, I realized the dividend was like bringing a grain of sand to the beach and saying it would make a difference. It would not have in comparison to the size of the loan.
TIS reaffirmed their commitment to the dividend. Their deed has been that they've paid it.
Immediately after announcing the equity raise I talked to a few related "industry insiders".
One of those groups were buyers for supermarkets. Three of them coincidentally knew TIS, the paper industry, and how some favorable deals were made for them personally.
To a "man" they all said TIS would never have gone ahead with the mill without having customers lined up. They had to be in TIS's pocket.
Moreover, they noted that the banks would have never gone ahead with making the loans without some form of letter documentation to that effect; that they had some commitments.
The loan was for an extraordinary amount of money compared to the size of the company. The lenders had to be wary. They needed to be reassured.
Before speaking with these people I was assuming something like that had to be in play too. Otherwise the analogy of betting the farm was analogous to going to the casino and betting the farm on "red". The owners would have needed to be "crazy insane". The banks too.
TIS has salespeople with customer relationships. The expansion wasn't going to be a shot in the dark with their eyes closed. Something had to be in the works.
I increased my position by a factor of 4. I agreed there was no way this was a crazy bet by TIS.
Then fast forward. It made perfect sense when TIS announced an existing customer was increasing their purchases. It would be a national company who was already happy with TIS, but buying from another source in the S.E. based on "price".
They made an agreement that when TIS could supply them at a predetermined price, and TIS was ready to deliver, they would formalize the agreement. It's exactly what my "industry insiders" told me.
In the same 8K announcing the existing customer's increased purchases, TIS announced the new customer. Combined they would raise TIS's revenues by about 35%.
The announcement confirmed "my buyers" opinions, and my gamble to increase my position. TIS wouldn't gamble the entire company on a new mill and expansion. Neither would the lenders. What would they do with a paper mill?
For the time being it will max out the Barnwell mill until all the lines are running.
So the shorter who wrote the article was at least transparent declaring they were shorting TIS.
But writing the article and profiting from it when others were panicking because of what the shorter wrote really seems like a slimy move.
Since I am not an insider I cannot guarantee a 35% revenue increase from a new customer, and an existing customer.
However, there are too many things that have fallen into place to think it really is not going to happen.
I am a long patient enough to continue collecting my dividend while they finish the mill.
Thinking all of this through led me to increase my position again yesterday. Why shouldn't I take advantage of the Shorter's article. I think it's based on false facts.
The story will be told over the next twelve months.
I'll have to wait and see if I'm right.
I hope this explanation helps you.
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