TMI: There are 24M shares outstanding in the common right now. Only 700k of that is in the float, the rest is all locked for 6-12 months from TMI/CME management.
There are 10M warrants outstanding as well, with a $5.5 strike price, and they are publicly traded. They are currently trading at an intrinsic discount to the common, so you can buy the warrant and wait a bit till they are exercisable (Should be soon) then get into the common at $9.75 that way.
There has been some pressure on the common from ARB players, partly due to people who own warrants and are able to short the common. Personally I checked 3 brokers and could not find a broker who would let me short TMI due to its tiny float, so no idea where they are coming from. The valuation spread between the common and the warrants has closed significantly in the past few weeks, partly due to this i'm sure.
Anyway, so 24M outstanding, 10M warrants with 5.5 Strike price...Total dilution is 34M shares, but you then gotta add 35M cash to the balance sheet (Would be more but some goes to CME as part of agreement) for a total of 75M cash on hand and no debt at TMI.
You then have the 'earn outs' for the old CME owners if the company performs very well. If the company makes 42M net income in 2009 (They are very confident they will hit this according to my sources), they will make 14.5M+ in Q4 2009. They get 1M shares if they hit this earn-out and the total fully-diluted jumps to 35M. For 2010 the earn-out is 83.5M (Double that of 2009) and if they hit that, they get 7M shares to raise the total to 42M. The 2011 net-income earn-out is 130M and if they hit that they get another 7M shares to bring the total to 49M.
Assuming they hit the 2009, 2010 and 2011 earn-outs exactly, the EPS each year would be: $1.68 (I am not counting the 10M warrants since they will NOT be exercised in 2009), $1.99 (Counting the 10M warrants as exercised), $2.65 for 2011.
Ideally for us of course, they come close to the earn-outs but fall slightly short...The EPS each would would be significantly higher if that happens. For 2010 for example, if they hit the 83.5M earn out, the EPS is the same as if they failed and only hit 70M net income. Anything in between is 'gravy' and could raise the EPS to $2.4+ for 2010.
-Fernando
AI
