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Possible option that Stephenson might be pursuing
Stephenson might issue warrants to existing CLHI shareholders at a strike price above the market price. The warrants might not be exercisable for a year (or until the company uplists, whichever is sooner) and then have a five year term.
I suggest this might be his thinking for a couple of reasons:
1. He's indicated that he's trying to find a "long-term" solution to appease CLHI shareholders. This would be one way as the warrants would strike above the current price and wouldn't be exercisable for a certain period (similar to what you see with SPACs). If he does this, I hope they register the warrants to make them freely tradeable as they are for SPACs.
2. It would take some time for lawyers to draft the documentation for warrants and get them filed with the SEC. It's obviously taking longer than expected for them to announce the corporate action, so this might be the reason. The optimist in me hopes it's because they are increasing the AS and going to leave the existing OS alone, but that's most likely not going to happen.
I think this is unnecessarily convoluted and a simple reduction of the RS ratio to 1:2 or 1:5 would appease most shareholders and achieve a favorable outcome for all stakeholders. I would have preferred an increase in the AS and keeping the existing OS (float) the same, but it appears that's not going to happen.
Just a thought. Perhaps someone at the company is reading this and can consider this option.
I don't believe the price moves have been strongly correlated with BTC
There is probably a very loose association, but the price moves, IMO, have been more related to underlying business developments: funding, new product launches etc. The stock pulled back after a great run and a broader market correction in small-cap in my view.
I think the stock has been trading a great loading zone for the next leg higher.
Yes, assuming they communicate properly
They have a lot of shareholder goodwill to rebuild. It can be done, but they need to significantly improve the content and method of communication. Let's hope they learned some lessons.
Lumber prices ripping through the roof
US lumber prices have doubled in the past three months. This stock is a very cheap way to play the bull run in commodities that should last for a long time thanks to cheap money.
I've been in this stock for a few months and accumulating on dips. The risk reward is highly favorable and it seems like this might finally be the year when the stock has a nice run.
Poetic justice perhaps in store
There's a company called Phunware that's a digital ad company. It's hard to understand exactly what the company does, but that's not important for this discussion. It went public via a reverse merger with a SPAC (December 2018 if you want to look up the chart)- a bit of a trendsetter one might say. Anyways, the company released a number of PRs shortly after the merger was announced (not closed) and the stock ripped from ~$10 (typical level for a SPAC until a deal is announced) and peaked over $550 ($20bn market cap on a fully diluted basis). It had a small float (a few million shares from what I remember). Some insiders were locked up for six months so while they had huge paper wealth, they couldn't capitalize. By the time they could sell, the stock had tanked down to the single digits and now it languishes.
Why could a similar scenario represent poetic justice for CLHI shareholders? Let's assume TDS has a number of PRs and other information to release shortly after the RS and the stock spikes (let's hope close to Phunware's peak market cap, but I won't hold my breath). The CLHI shareholders like us actually have a huge advantage over Stephenson, insiders and TDS private placement investors- their shares can't be traded for several months! This is a problem for the company having an ultra thin float, but it does give the public shareholders the ability to exit at considerably higher prices if these guys get their act together on the PR and IR fronts (probably a dubious assumption, but it can't get much worse).
Stephenson has to get the stock price up as much as he can to effect his acquisition strategy. We should benefit from that, but one has to remain cognizant of the fact that low float spikes usually don't last. Take advantage would be my advice.
I'm normally not a vindictive guy, but I would take some pleasure in seeing a similar scenario play out here. If Stephenson had good advice and understood the capital markets, he would have left the float alone and let the stock run its natural course. Nature has a way of getting back at you when you mess with it.
Understood
Based on what I know now (ie. the reverse split), that price seems attractive to me too. I hope they reveal a lot more, like the detailed assumptions behind the projections, so a much higher price can be achieved. We still haven't received any information on the US B2B database and Creditsafe acquisitions either.
Corbett's compensation is great for shareholders
Based on the most recent prospectus, Corbett's salary was $49k in 2019. I haven't found any data for 2020. The boost is justified in my view given the market cap increase and new funding. He is also the interim CFO, so he's got additional responsibilities, at least for a short period. I would consider the boost partly a form of catch-up compensation for prior services rendered although it wouldn't be explicitly stated as such.
With respect to the warrants, they have a 5 year duration. They were struck just slightly above the most recent funding round (investors bought shares effectively at $0.23 I believe). I think this is a great signal to investors that management is here to create value well above recent prices.
The warrants can also be exercised on a cashless basis. This means Corbett would forfeit a certain portion of the warrants to cover the exercise price (so he doesn't have to actually pay cash to get the shares). This creates additional incentive to get the stock price well above the exercise price to minimize the forfeiture (ie. shares that he will have to give up to cover the cost of exercise). It's a win-win for shareholders in my view.
"In lieu of cash exercising this Warrant, the Holder may elect to receive Common Stock equal to the value of this Warrant (or the portionthereof being canceled) by surrender of this Warrant "
The unfortunate part
Is your $30 post RS price target is merely a break-even price for someone that bought on that fateful day the bombshell was released in the filing. Still something to celebrate if we get there, but hardly the optimal outcome.
Lost the battle, salvage the war?
I think the RS battle is probably lost. Best case, the ratio is reduced to preserve some liquidity (if they are smart, not making that assumption at this point). I think positive announcements will probably be saved for after the RS to boost the stock price and mollify CLHI shareholders. The stock will be tougher to trade, but easier to manipulate on the upside with news. If you noticed, based on the meeting notes, they tried to stress a couple of things:
1. No post RS dilution until Q4. They were seemingly trying to address one of the chief concerns typical of an RS- post split dilution crushes the stock price further.
2. Shares issued to TDS and its various stakeholders won't be freely traded for several months (up to 18 months in some cases I believe). That will keep the float very tight (unnecessarily tight IMO, but there are some positives that come from that).
As far as the projections go, they won't help the stock until management demonstrates evidence that they are achievable. This can be done in one of several ways: quarterly revenues, acquisitions, new contracts, partnerships etc.
Hope this helps frame the forward outlook for the stock a little bit for those that are disgruntled (as I am).
Like I said, amateurish IR
Blame the company, not the messenger. He's not a trained sell side analyst.
They should have released a prepared statement with items that they were comfortable discussing. First and foremost, some insight into the RS and what they intend to do.
Point of correction
The free float (ie. current CLHI shareholders) will be tiny, but the OS is going up by the amount issued to the company and its various other stakeholders (outlined in the meeting notes).
There are positive and negative ramifications of this. It will be up to the company to tell a good story to get the market excited and boost the market cap.
Trading will probably become more challenging, but if there's positive news, the stock price reaction can be amplified by the low float.
No worries
A lot of information to digest today. Drive safely (particularly given recent events that showed the importance of being careful on the road).
Q4?
The RS seems more imminent than that. You sure?
Advance notice on RS
Anyone know how much advance notice we should get before the proposed RS gets executed? I've been looking on the FINRA calendar and don't see anything on there.
Thanks.
If only the IR effort weren't amateurish
No PR, rely on a third party (not even an actual sell-side firm) to disseminate information...
Totally bungled the coming out party, but let's hope the numbers and opportunity overcome the self-inflicted wounds.
They are big numbers
Not sure exactly how to interpret them given there's minimal context (as usual), but they should support a much higher valuation.
All the more reason why they should have just released all of the information and let the stock price run. Raise the AS and give the company more shares instead of the idiotic RS. Stock price would have easily risen above listing requirements organically.
True
To the best of my knowledge, merely possessing material non-public information is not a crime. Acting on it certainly would be.
At the very least, they should have put out the update that Tommy alluded to before having a 1x1 conversation with any investor. If the dude were a sell-side analyst, it would be a different story. He would obviously be precluded from trading and would then have to publish his findings to the general public.
Fix the share structure
Perhaps this is me being too optimistic, but I think delaying the release of PRs given the overhang from the RS debacle (RS having two references in this case) was actually smart. They need to address the share structure issue before business related PRs can have any impact on the stock price.
As for them holding a 1x1 call with this guy on Twitter, that's not the right approach, but at least we might get some answers.
I'm happy Tommy isn't opining on the stock anymore. He was further eroding shareholder goodwill with ill-conceived and poorly timed comments.
Strong numbers from one of the comps
ZoomInfo had strong numbers and guidance. Revenues were up 53% in the most recent quarter and the company guided ahead of consensus for 2021. Stock reached the high $50s in the after-hours, but then pulled back a bit this morning. Not surprising given the multiple (>30x forward revenue) and market cap (~$21bn).
I hope for all of us remaining shareholders that the company acts in our best interests soon. I guess (low confidence) we'll find out something today and post whatever meeting they're having with the guy on Twitter.
Understand the lack of faith
They've lost the trust of the investing public. That said, the company has never been prompt in responding to information requests and clarity on any issue to this point. I could argue that if the status quo were going to prevail, they would have already said something.
At this point, it seems like the worst case has been discounted in the stock price.
Tommy said there'd be an update from management this week too
Let's hope we get a positive resolution to the debacle that management created.
I don't put price targets on high growth stocks
I look more at technicals and other factors. I do think it's a highly compelling investment. If it achieves a more reasonable fraction of T$NP's valuation, it's easily a multi-bagger from here.
What matters is the ability to execute
I've seen lots of claims in the crypto space. What matters is the management team and their ability to execute. I think this is a solid team and has a great chance at success. The institutions that have invested provide further affirmation of that.
I'm trying to setup a call with Corbett. Hope to have more to say after that.
I don't underestimate the power of Elon..
Particularly when it comes to swaying the masses, but the stablecoin is merely a method to facilitate the remittance and payments businesses. Lower costs (avoid Swift, wire transfer fees) and reduce settlement time. Necessary, but not sufficient for building their main businesses.
Perhaps at some point IPSI's stablecoin will be used as a settlement coin for crypto trading like Tether. That would help broaden adoption and further facilitate their business plan. I could see this happening as part of their payroll business where employees receive the IPSI stablecoin (pegged to the USD) instead of a bank deposit. This could be particularly attractive for ag workers in CA and AZ that want to send money back to their families in Mexico and Central America.
My current thoughts
I doubled my position from the original post that I made. I think the valuation relative to T$NP makes it a highly compelling investment opportunity. Moreover, I have a lot of experience in crypto and view the remittance market (ie. the one that Stellar and Ripple are also going after) as a great initial market opportunity to gain traction and build the business. I know some are critical of the company just going after the Mexican market, but that's a big market opportunity and one that they understand based on their SoCal roots. It also means less upfront capital raising as they can prove the business concept, let the valuation expand and then raise more capital as required.
I also like the fact that institutional investors were willing to buy stock at prices very close to the current trading price. You don't often see that in the OTC. Management buying back notes with conversion prices well below the current trading price is another great sign. There is every indication that this is a highly shareholder friendly management team.
Think you meant "interviewing"
I only wish they could intervene and correct the absurdity, but alas, I don't think they have the power:)
Let's hope some sanity returns next week. Self-inflicted damage that could have easily been avoided with some common sense.
Looks like one of the stock guys on Twitter
Will speak to Stephenson and Gorridge on Monday. If you have questions, I'd suggest sending them to him via his feed. You can find it on the CLST stock page.
It would make sense for them to share the update that Tommy talked about on Monday as well, but nothing about their IR effort has made sense recently.
Did they remove the tweet referring to a smaller reverse split?
It looks to me like they did, but someone please confirm. I have a feeling that Tommy stepped out of bounds and RS told him to delete that?
I think "Tommy"'s social media privileges
Will be revoked. Unbelievably tone deaf and inconsiderate of shareholders' interests.
They are out of their element
They should really get the IR firm to oversee that page. They're bound by confidentiality agreements anyways (effectively insiders), so let them communicate with shareholders.
"Tommy" is not particularly impressive
But at least it's a place for shareholders to voice their concerns separate from the corporate/branding feed.
That's what an advisor probably suggested
As I've previously explained (and others have as well), targeting an ownership % through a RS was the worst possible decision. It would have been much better to increase the AS and issue shares to TDS to achieve the targeted ownership % (ignoring what the right split would be). This is particularly true given the multitude of comps that have done well with much larger share counts and after having abandoned reverse splits.
I think the problem is they got the list of requirements to uplist and an advisor told them that a reverse split was the way to get the share price to the required level. That logic is completely wrong. They should focus on the market cap and the best way to increase it organically. It's quite likely, as most of us know, that the stock would have organically risen to well above the minimum threshold. If it didn't and they had to uplist, determine a ratio closer to that event and get it done.
One would think they are somewhat rational
Any sane person would look at the stock price reaction and realize what they proposed was wrong. I just can't fathom a rational management team ignoring the market's verdict. The market reaction isn't always right, but when it's wrong it's usually when there's significant information asymmetry (ie. with an acquisition). Reverse splits have been proven to be disastrous for shareholders repeatedly, particularly ones this large and before all relevant information has been released.
Preaching to the choir I know. Just thought I'd reiterate this view in case the moderator is reading this board. Maybe mikec can follow up with the moderator since he seems to have a good relationship:)
Shareholders can't negotiate at this point
Not sure whoever is moderating the account understands that. The only leverage shareholders have is by selling the stock and driving the price down. They've obviously done that. I suppose there is reputational damage that can be inflicted via Twitter as well. Blocking people is not a long-term strategy.
Perhaps I overestimated the value of the new board
The moderator seems to be a lightweight, but hopefully comments are relayed to RS. At least the discourse is civil and not filled with an arrogant overtone on their side.
I do find it amusing that they think their plan is so unique. It's not. There's ample precedent to abandon an RS and follow a better path that includes growth through acquisitions and geographic expansion.
I will say that the new board is leading to...
Some constructive dialogue. That's a positive even though we aren't getting the answer we want and the uncertainty is hurting the stock.
Baby step in the right direction, but we obviously have damage to fix.
Better poll question
Kudos to whomever suggested this on the new board:
"Perhaps a reverse proxy vote instead on RS, knowing what we know now and SHOULD have known then...."
I can't believe someone gets paid to create silly polls about whether there should be another board. RS, we have important issues to straighten out!
I saw that they posted some sentimental tweets in the past couple of days as well
Shaking my head, but still clinging to the belief that sanity ultimately prevails. The proposed RS has been completely self-defeating.
I'm sure they care
They're probably a little shell shocked that the coming out party has been a disaster. They got bad advice and have to reconcile that with what needs to be done. Couple that with little public company experience at the management and Board levels and it's taking longer than it should to correct the obvious mistakes.
The sad part is this has nothing to do with the fundamental story, but management allowed this to become a time consuming and unnecessary distraction.
I'd like to think it can't get much worse and it's only an upward move from here.
I agree too
It doesn't help that there are still holders (I assume they are) applauding management on Twitter.
I thought that the tweet last week showed some recognition that they made an egregious error, but the delay in communicating a solution is puzzling. Disappointed, but still HODLing.