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Lookin' good....
By: stervc
26 Oct 2005, 10:58 AM EDT
Msg. 272783 of 272931
(This msg. is a reply to 272662 by majordan44.)
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Majordan44, Here’s That RWNW Dialogue…
The day before yesterday I tried to call to speak again with the CEO of RWNW. Unfortunately, I was not successful this time. Fortunately, I made a few more phone calls from furthering DD-ing some other phone numbers and had a very interesting conversation with one of the affiliated attorneys.
He was very very conservative in all of his responses he shared with me. Here are some key notes I gathered from our discussion.
* The company must file its 10Q before 14 Nov 05 to meet the filing deadline and to keep the SEC off of their backs for not meeting their reporting timelines and for completion of some kind of due diligence time frame. I did not ask for more details so I do not know more of those details.
* The numbers for revenues and profits are correct from what Recab is giving them to file in their upcoming audited financials. The numbers appear to be too good to be true to them too.
* The profits are still being discussed and further verified. He gave me a number higher than the $25 Million number for profit than what was in the PR that is supposed to be filed. He did tell me again that those numbers seem rather too good to be true. He told me that they have done mergers in the past that actually had generated the amazing numbers they were told and that they have done some mergers that when all was said and done, they did not have the amazing numbers that were initially given to them.
* There is a team of accountants and attorneys that are currently verifying the conversion of the Saudi Arabia Riyal into the American Dollar of financial information to be put in the 10Q, 8K, and/or etc. Once done, it will be immediately filed with the SEC.
* The attorney I spoke with on the legal team would rather like to see an 8K filed first to reflect the revenues and profits and then file the 10Q.
* Other attorneys and accountants want to file everything from all of the merging companies in one 10Q. Either way, all of it would be done before 14 Nov 05. So I guess it could still go either way until the audited financials come out before 14 Nov 05 for final confirmation.
* The 14c will be filed after the 10Q giving us the new name and the reverse split ratio.
* The attorney I spoke with first said that he believed that the reverse merger/split ratio was going to be about 1 to 200, but he was not sure just yet as they had not officially sat down to come up with the ratio.
* I asked if the ratio was going to be 1 to 10. He said that he felt that the ratio for some reason was going to be higher than 1 to 10, but that shareholders today still should do very well if they numbers that they are verifying turns out to be true from the merger. He said that he can’t say the same for those shareholders that had bought into RWNW many months ago back when it was at much much higher prices.
* He did inform me that the team has not sat down to officially derive what the exact ratio for the reverse split would be, but that they will soon. However, after I explained to him logically as to how I derived the ratio to be 1 to 10, he did tell me that my math was correct from how he now sees it. Heck, hopefully he explains it to his team the way I explained it to him.
Majordan44, please understand. By all means I am not saying that RWNW is legit or not because please, I do not know as it appears that the ones that are making this happen legally are still completing their due diligence along the way while they are generating the filings to come out. If you need phone numbers to the CEO in Saudi Arabia and to the attorney that I had spoken to here in the US, email me. I will give it to you after I talk with them again to see if it is ok for me to do so. Heck, then you can call and see what they tell you.
I expect a regular increase in price daily as we near 14 Nov 05. Maybe even a huge increase and price stabilization if someone internal knows for the profits reporting to be true. Or maybe they have already bought in from judging from some of the previous volume considering they wouldn’t want to raise any red flags during this current due diligence period that they are going through with the SEC. The volume must not look like any kind of insider manipulation has been transpiring. Maybe that’s really why the S-8 was issued to mask such. To help to keep the price suppressed from any kind of major spikes. That’s another theory though that I don’t have all of my thoughts organized for explaining.
To answer a question from someone who called me, keep in mind too that in one of their previous PRs they stated $25 Million in “profits” which is the same as Income. Know too that “Revenue – Expenses = Income” so when they stated the $25 Million as “profits” and not “revenues” I would have to assume that they know the difference because of the lawyers and accountants they have involved and because of how in some of their other PRs they stated “revenues” when they deemed appropriate.
Majordan44, again, please I recommend that everyone do their own DD and to not rely solely upon everything that I am posting because I have no idea what is fact or fiction. I say this because I have been through this many times and when things turn out to be good, everyone is happy. When things turn out to be bad, then all of a sudden I was part of the bad guys. As with any stock that I post on, I am simply a shareholder just like you who is sharing and looking for DD.
I personally do believe that RWNW is real and the merger will be something awesome for us little guys, but it’s up to the company to prove me to be correct.
All is well!
http://www.sterlingsclass.com/
Sterling
RWNW**Understanding the Potential…
I have broken down this post into three parts. Please make sure you really understand everything in “Part 1” before going on to “Part 2” to fully understand everything in “Part 3” and to help make sure that I am not seeing something that is too good to be true. Part 3 will be the most powerful part, but again, understanding Parts 1 and 2 will help in understanding how I got to Part 3.
Part 1
Before the merger info, the outstanding shares (OS) for RWNW were 385,185,321 as indicated in the latest 10Q link below:
http://xml.10kwizard.com/filing_raw.php?repo=tenk&ipage=3665156
Then after filing the form S-8 in the link below with the SEC for 112,500,000 shares, the new OS should be considered being 112,500,000 + 385,185,321 = 497,685,321 shares.
http://xml.10kwizard.com/filing_raw.php?repo=tenk&ipage=3666824
The company has made it known that current RWNW shareholders represent 2% of those 497,685,321 shares outstanding. At first thought this sounds horrible, but it is quite the contrary. It tricked me a bit too if it makes you feel any better.
The remaining 98% of RWNW shares going to the new reverse merging company equates to 487,731,615 shares.
That shareholder’s 2% equates to 9,953,706 shares. This is the maximum amount of shares that should have always been in the Float for the public to buy.
The share structure must remain as has been filed with the SEC because of the consistency required for reverse merger purposes to establish official accountability of shares from all merging entities.
This means that only 9,953,706 shares should have been allowed to transact as the “total” amount of buys between the Depository Trust Company (DTC), our brokerage companies, and the Market Makers (MMs).
Let me better put it like this; this means that after all of the buying and selling of RWNW shares, at the end of each day, only 9,953,706 shares should be the total that’s in all of our brokerage accounts combined. Well, since the announcement of this merger, hundreds of millions of shares have been bought and held in all of our brokerage accounts well above the legitimate Float of 9,953,706 shares.
Imagine if only 10 of us bought 1 million shares to total 10 million shares bought. That would mean that the Float would be gone and that somebody probably has some naked shorted shares. The MMs can’t have naked short shares sitting in other peoples when the time comes to transact the shares by the distribution ratio.
The MMs will have to buy those shares that have been naked shorted to account for them as they have been fictitiously and electronically created. This is the covering that should take place until enough shares are sold by us current RWNW shareholders to assist them in covering.
Under section 3.5 of the 8K previously filed with the SEC below, the 98% of shares going to the newly merging company will equate to 47,200,000 shares. This means that from doing some quick math, 47,200,000 shares equates to 98% of 48,163,265 shares. This means that the complete outstanding shares post reverse merger equates to the 2% (us) + the 98% (them).
http://www.pinksheets.com/quote/print_filings.jsp?url=%2Fredirect.asp%3Ffilename%3D0001144204%252D05...
Unless I missed something, the OS for RWNW post reverse merger will be 48,163,265 shares. This means that there will be a reverse split ratio of 497,685,321 ÷ 48,163,265 = 10.33 shares. So the ratio will be a 1 to 10.33 reverse split ratio.
Another way of looking at it is that for every 10.33 shares of RWNW that we buy now, we will get 1 share of the newly reverse merging company. So when you go through the filings and all of the PRs, the 2% and 98% breakdown of distribution percentages really only equate to a 1 to 10.33 reverse splitting of our shares as a worse case scenario.
The 48,163,265 shares minus the 47,200,000 that’s listed as what the 98% equates after the reverse merger equates to 963,265 shares. Multiply this by 10.33 to verify to see if it matches what 2% of the current OS and you get the a very close 9,950,527 shares which are only slightly off by a few decimal places falling short of less than 3200 shares pre-split. This is a normal margin for error.
When I called Saudi Arabia to speak with the CEO, Dr. Faidl, I didn’t understand why he was telling me that this is a great deal for the current shareholders of RWNW, but now I do.
Now, before going any further, please go back and review what I have mentioned thus far because the next two parts I reflect upon will seem too good to be true. So please review to make sure that I am thus far making sense.
Part 2
Review some key points below that were brought out in previous PRs to help see why I like this reverse merger scenario better than any of the other ones I previously mentioned:
http://www.knobias.com/individual/public/news.htm?eid=3.1.728e84966cba5977e27259de76b8db7d276a261e90...
* The merging company generated $29 Million in revenues for the year ended December 31, 2004.
* The merging company is a well established Saudi Arabia Transportation Company that has been around for 25 years.
* The Auto & Equipment division imports and sells commercial passenger vehicles from Mercedes Benz, Toyota, Mitsubishi, Hyundai and Volkswagen.
* The merging company has contracts with sole agents of Toyota, Nissan, Mitsubishi and others to transport new vehicles throughout Saudi Arabia.
* And more…
http://www.knobias.com/individual/public/news.htm?eid=3.1.df78a71909a905766455c2d17a8f19cfa7e2b803f5...
* The merging company anticipates generating $7 million of annual revenue from this acquisition.
* And more…
http://www.knobias.com/individual/public/news.htm?eid=3.1.6b2e85d6f97ba42364c37b62ca51e7a829de8ea217...
* The merging company anticipates that expansion of ARCO TEL will result in 24 sales outlets throughout Saudi Arabia and profits of $25 million per annum within a 12-16 month period.
* And more…
Part 3
Let’s now apply some fundamentals from the facts from the revenues we know that have been and will be generated. From looking at the amount that was publicly given to us in previous PRs, it appears that RWNW will be generating $29 Million to $61 Million per year. It was mentioned that the company expects to clear at least $25 Million as profits which still could be on the low end. For our purposes, I will consider RWNW only making the low end of $25 Million per year as profits as a worse case scenario. This means that RWNW would net $25 Million as Income to be filed in their financials post-reverse merger/split. From this, observe below to get a feel of where RWNW should be trading at post-reverse merger given the post-reverse merger OS of 48,163,265 as we derived from above:
$25,000,000 ÷ 48,163,265 = .519 cents EPS (Earning Per Share)
Multiplying that .519 cent EPS with a conservative PE Ratio of 12 and you get:
.519 x 12 PE Ratio = $6.22 per share post reverse merger
But wait… 12 is a very conservative PE Ratio that many use to keep from hyping a stock. If you were to use the PE Ratio for the industry that RWNW will be trading under after the merger, the price used could have been 2 to 4 times more than the $6.22 post-reverse merger share price.
From the thoughts I shared above, the reverse merger/split ratio will be about 1 to 10.33 so we will round off by saying that for every 1,000,000 shares you buy pre-reverse merger, will be converted over to 100,000 shares post-reverse merger for simplicity sake.
This means that if you bought 1,000,000 shares at yesterday’s closing price of .0026 cents, you would have paid $2600 for them. From the above logic, your 1,000,000 shares would convert to 100,000 shares and have at least a fundamental value of $6.22 per share as I had shown above. This means that your $2600 investment could potentially bring you back a return of:
100,000 x $6.22 = $622,000 (Back in return from original $2600 investment.)
The key is to find the current pre-reverse merger price of equilibrium to know where the price of undervaluation for buying RWNW no longer exists. I would want to know the equilibrium price for pre-reverse merger versus a post-reverse merger potential fundamental price to know where the price increase in RWNW would reach a type of “law of diminishing returns” to where the market for RWNW shares would be over saturated from a particular price level.
I will use a post-reverse merger price of $6.22 per share and the 100,000 share example as retrieved from the info I posted above. The new value of your new position would then equate to $622,000 as from above. This means that you must determine the price for when buying your 1,000,000 shares now in RWNW would be worth $622,000 in value to know when the market should stop buying shares of RWNW. To figure out such, observe below:
$622,000 ÷ 1,000,000 shares pre-split = .62 cents per share
This means that right now from the due diligence that I posted above, RWNW should currently be trading at the .62 cents per share price range pre-reverse merger. This is still conservatively speaking. I know this does seem to good to be true, but this is what I have come up with thus far from doing my DD.
I think when people see the 2% going to current shareholders versus the 98% going to the company, immediately anger and confusion as to why is created. I see it as being given shares of MSFT at $2.00 while it is trading at $25.00 per share. I could care less the ratio as long as me buying a million shares of RWNW now would convert over to that 1 to 10.33 ratio for getting those Microsoft shares as I have just hypothetically mentioned.
Now with all that I posted above, consider again that there is a naked short existing somewhere in the hundreds of millions of shares from researching the volume history. I am guessing that the MMs need to cover RWNW before RWNW actually goes to a market such as the NASDAQ from guessing at the reasons why a 25 year old multi-million dollar company would reverse merge into an already NASD OTCBB trading company.
Again, the above is what I have derived from doing my DD on RWNW. Please make sure you do your own DD and please feel free to correct anything you find that is in error. I really believe that we have something here with RWNW to bring about huge prosperity to many as I have always hoped for.
All is well!
http://www.sterlingsclass.com/
Sterling
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