Will AETI insiders take the company private again?
There are significant ideas behind my question. I pose it because I never quite understood the reasons behind the M&I merger with AATK in the first place and, being a naturally suspicious person, I try to look for the angles.
First fact: The M&I insiders who now control AETI did not gain any real or particular commercial advantage by merging with the old AATK. Certainly it wasn't to buy into the old business model of zone cabling. And it wasn't in order to buy the factory - while Keystone does contain some valuable high tech machinery, M&I could have expanded closer to the Houston headquarters for less money - when you consider the cost to purchase AATK "goodwill". The M&I management does not strike me as stupid businessmen, and I don't think they would overpay for a plant 1,000 miles from headquarters in a backwater like Keystone Heights.
Second fact: So far they have not shown that they need the cash that is provided by the equity markets - evidenced by their balance sheet and ability to close substantial working capital lines of credit that seem to mirror their growth.
Third fact: M&I, which was a private company for 30+ years is now in the public eye and not very happy about having to file to comply with SOX, let alone the cost of being public.
So, why did they do the merger? One theory that I have is it brought liquidity and an exit to the AATK insiders while unlocking liquidity for M&I with certain tax advantages.
What's the risk going forward for the common shareholder? If not an insider than we won't benefit from the generous director and employee option plans. If they use their new found public shares as currency, we'll get diluted. If they raise capital (that they don't need by the way), then we dilute also.
Back to my theory - M&I takes the company private again - below the price point that they paid for AATK by the way. I submit that it may be in M&I insider's best interests to let the stock price continue to slide down. At some point they'll offer a premium (say 25%) on the traded price and quitely go back to a private company. They will have made money, AATK insiders got out, and the common shareholders will have held the bag.
This is why I think an investment is foolish at this point until these "unknowns" are put to bed. I don't see any catalyst for huge share appreciation at this point and if the stock does start to rise, it will be slowly. Plenty of time to buy later, let the stock price continue to sink.
JMHO mind you - but I think, chillingly accurate!
EOM, Chili
AI
