I edited this post and left only the great DD in it that is relevant to GEQU.
Posted by: alexbridges In reply to: None Date:5/22/2017 12:00:08 AM Post #88673 of 88714
Myth 1. Poor timing of 10Q release Truth 1. GEQU had to file within 45 days of quarter end to stay current. I really don't get a lot of people's complaints about 'poor' timing. Whether they would file one or two days earlier or not, it wouldn't change the actual results. They filed when they did -- on time. If you check their filings, they've been consistently on time in the last few years.They don't jump between 'current' and 'non-current' status like some companies out here -- hats off to management at least for that.
Myth 2. GEQU is management's own piggy bank. Truth 2. Management exchanged their common shares last year into preferred, thus eliminating O/S by about a half. If they really didn't care, they would sell their shares in the open market and try to salvage as much as they can. They are not in the habit of doing it. Frankly, they get some or all of their salaries in shares, not in cash -- with no guarantee that those shares would be worth anything in the future. Also, if you read their report, you will see there is a provision that some or all of the salaried owed by company to management can be forgiven. That's kinda opposite of piggy bank.
Myth 3. Client IPO is the only revenue-generating activity Truth 3. IPO is only one of the services Gequ offers to it's customers. IPO is externally-facing step for some of the customers. However, there are other services/efforts that Gequ provides to customers that generate revenue to Gequ. Gequ doesn't have too many people, and the ones they have are extremely busy constantly meeting with customers/prospective customers and building their brand. Stop measuring GEQU success by the number of IPOs. There is no need by GEQU to produce IPOs every quarter.
Myth 4. DUUO is worthless to GEQU. Truth 4. GEQU owns 3.5M+ common shares of DUUO. They were non-trading at $1, but these last few days the bid and ask are thinning and the true PPS value is emerging, at about 30-40 cents/share. While it's not as great as $1/share, IMO it's much rather to own liquid paper at 30 cents than illiquid $/shares without any chance to exit. Even at 30 cents, GEQU ownership equals or exceeds their book value of DUUO (which is about $800k per 10Q) and that's not even including any preferred shares. In two years it took GEQU to IPO DUUO, they (GEQU) made $300k+ in revenues + another $1.5M in shares. That's approximately $75k / month from DUUO only, well exceeds the salaries management got in the same timeframe. (Bonus feature -- I'm surprised nobody ever talks about another great company that's in the process of getting through IPO, namely Primesite). Their book value on GEQU books doubles that of DUUO)
Myth 5. Fund acquisition is all talk. Truth 5. If GEQU can attract $2.6M loan to purchase $200M fund that would be an impressive effort by management. Fund manager will charge client anywhere between 0.5-1% fee, which in and of itself will cover any required interest payments. This is huge news. There was a 6M share spike on the day the news was announced -- and I expect PPS to go back to those 0115-0120 shortly and build 0115 as a base for all future growth.
Myth 6. Note conversions. Truth 6. There is a huge difference between default and technical default. If you don't know what it is, look it up. It's essential to understand why and how those notes were converted. Also, it's essential to understand why I refuse to call this a bearish event. If anything, those notes get converted (diluting about 10% of O/S) but the company doesn't have to worry about those notes any longer. DUUO took longer to IPO so there was no cash at the end of the quarter to eliminate the note. But the cash will come soon enough. Also, I don't get sudden claim that company has been defaulting on their payments. While true that there are two disputes regarding older loans, those are from 2013-2014, the company hasn't defaulted on anything in the last couple of years. While true that there were some conversion in april (as mentioned above) it's is the only net new item, everything else on the report is not new. Did anyone claiming to be bearish about those older defaults even read previous 10k? It's been a public information for a long time. Then, suddenly, lots of 'concerned individuals' after 10Q release -- and concerned with what, some 2013 item? Please give me a break. If you have to go back to 2013 to even attempt to find some fault with management, that's reaching.
Myth 7. Company is heading to "0005" Truth 7. SMH. Again, at some point fundamentals will collapse with reality. GEQU has multiple catalysts in play -- I've outlined those in some of my previous posts, company lists those as milestones in their most recent 10k -- and the ownership in Primesite and DUUO itself will easily elevate price back to 2-3 cent channel, even without the fund. With the fund (and Kingsman James division, which should be profitable this year) I'm looking at 3-5 cent target. --- significant gain from current levels. Major rebranding coming in the summer, this should help to improve the company's image.
Myth 8. Peter and Enzo don't care about PPS performance. Truth 8. Peter and Enzo are among major shareholders -- it's in their best interest to try and increase the price. The more sustainable long-term approach is to increase PPS via hard work, increase in the number of clients, fund acquisitions, relationships etc. That's the approach taken by Peter and I commend him for it.
