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I disagree - you don't know that they used cash to pay down the debt. It could have been a cash-free deal the same as the bonus deal in the least qtr. Why would they use cash on paying down debt and then leave themselves in a position wherein YAGI has to convert due to default?
Mind you I think the dilution we've seen is something other than YAGI - probably executives.
"WAs Greenshift paying with earnings"
OK one more time for the road. earnings do not pay debt/interest, this is done with CASH. Cash flow lags earnings. There, got it now? Please? I was saying this last week before the split but some of you didn't want to listen then or now.
My guess is that the dilution was to compensate Carroll and Winsness - remember the big, previously unannounced bonus to Carroll at the last qtr. My guess is this is something to do with that. Also remember relatively small amounts will cause major dilution as the stock price is so low.
My guess is that the dilution was to reward Winsness and Carroll (not the usual YAGI coversions).
Anyone still think there'll be a buyback? LOL!
In among all of the nice people that have arrived to advise us to get out now one thing has eluded them - KK has to have an exit strategy. According to them his strategy is to dilute everyone else so that he owns all of the shares. Meanwhile he loses all credibility and no-one will buy so the markket cap stays at sub-one million. Far better for KK to do this the right way, hang in and let the revenues and licences drive the market cap. If he retains investor confidence without diluting the hell out of everyone else he has a company with a bright future and many investors and a market cap in the hundreds of millions.
Conclusion - it's in his interest to own a smaller piece of a huge pie than all of a miniscule pie. He's not stupid.
Mixed feelings here. It's funny to see the zealots suddenly realise that everything in GERS land is not smelling of roses, and I'm a perturbed by the level of dilution since the last qtr. Anyway here's my view of the positive aspects of this:
1) the time between the announcement and the r/s gives time for things to settle down, new positive announcements etc. So it may not necessarily be damaging.
2) KK may well be using dilution as an excuse to do the r/s and get the sp up to a level which would potentially open it out to a whole new raft of investors.
3) As I've said here before a r/s by itself changes nothing, it's what happens after that counts and most things are pointing green.
Overall I'm not too upset about this.
Some of you should see a doctor though as you seem to have a problem with schizophrenia
Thanks Jim,
You're one of the good guys here. Like any of these Boards there are some that don't want to hear any negative, but to me it's important to try to come to the right answer, irrespective of whether it's good or bad. It's the only way to be better informed.
Freedom,
Despite what others think are negative posts from me, I'm very hopeful of making big money out of this stock. It doesn't hurt to speculate what could go wrong as well as right though.
Thanks for the respectful response.
(Note a "wash sale" doesn't make sense to me, if I understand what you're trying to say, as it's merely passing the parcel and no-one is better or worse off and the creditor is still not paid)
"Why would their payment in shares to YAGI be larger now then anytime in the past?"
Jim,
As I said before, the payment may not be any larger, but the dilution in terms of number of shares would be larger as the sp is lower. When they paid using dilution in the past it was at a higher conversion rate so the dilution was therefore multiple times lower.
"Why are you convinced that....GERS would have to repay ...with shares, not cash?"
I'm not convinced of this, but I think it's disctinctly possible given that cash balance was virtually zero and cash flow from operations negative in the previous qtr, even though they had over $10m revenue. There is a lag in cash following revenue (and that cash when it does come in may well be uneven) and I'm suggesting it's possible that cash ran low causing the dilution.
I agree, however, I'm not sure why you think a restatment of the ability to convert in the event that debt interest is unpaid is lazy thinking? Surely it's fact?
The creditors are agnostic about the sp if:
1) They are YAGI
2) they already own 4.9% of the stock (which they probably do)
3) they have to sell the stock immediately because of 2)
In the scenario which I think is most likely ie. YAGI converting I think all of points 1), 2) & 3) will be satisfied.
Just trying to understand....
Here's my best guesses in order of likelihood as to what's going on:
1) Dilution
2) Naked short selling
3) Regular trading, albeit at larger amounts and packaged by the MMs to fit the bid/ask availability
4) Buyback
Come on guys please think this through:
"Those creditors who have converted .. are allowing GERS to buy some back becasue creditors know they will make more money on few shares etc"
1) If the creditors are converting it's because they've not been paid on time because GERS has no cash. If GERs has no cash, how can they buy back stock?
2) The creditors don't really care about the sp when they convert as they get the amount of stock that equal the amount due them.
There's too much lazy thinking here.
I think we need to step back here and consider what we're trying to say:
"has anyone ever seen so much dilution ...in any given period"
If YAGI is converting based on it's loan agreement, and as conversion is done at the market sp, then dilution would be higher than ever as the sp is lower than ever. Even relatively small amounts would end up with a large number of shares being dumped on the O/S
The 4.9% limit on YAGI
As I explained before (and I think I'm right), this limit refers to the amount of GERS that YAGI can hold. There is nothing to stop them converting additional debt due and payable into shares. However, if they do so they will have to sell. Ergo, rather than support the proposition that the recent transactions could not be dilution, it actually does the opposite. If YAGI converted they would probably have to sell any newly converted shares.
I think the recent activity is MUCH more likely to be dilution than a buyback which, for reasons I've stated previously makes no sense at the moment.
Rather than be so smug why not engage the brain before you speak. The fundemental flaw in your reasoning is that it's probably not GERs that is doing the diluting it's YAGI. They have the ability to do this under the loan agreements. If they do this, they don't care what the price is when they dilute because they get their $100,000 (in this case) regardless.
Skribe,
I think most of us are similarly focussed, but that's not the point. If manipulation is going on in t eh way I described so that prime brokers can effectively print unlimited shares for shorting, the share price is never going anywhere. I am very concerned about that. Naked shorting is illegal and it happens on small caps like this where few people are watching.
My main concern with all the small trades going through is whether they are manipulating the bid to facilitate shorting of the stock and possibly naked shorting. My understanding is that an uptick is required in order to take a short position. Were there low volume trades sending the sp down then up? If so then this would lend itself to setting the stage for shorting. LArge blocks on the short side would then suggest possibly naked shorting. When this happened in the past with other stocks I followed it was facilitated by a prime broker issuing options on the Chicago exchange for a matching amount. They were then able to "wash" the short trade by matching it with the options. Anyone have access to Chicago or Philly exchanges to see whether anything like this is taking place?
I'm not sure that's right. I believe the limit of 4.9% refers to the holding by YAGI. If I'm correct then any conversion over and above 4.9% will have to be sold. Hence if they converted $100,000 of interest payments and they already held 4.9%, they'd have to sell the rest.
Shane,
It's people like you that make reading this board worthwhile.
Jim,
You keep forgetting that revenue is not the same as cash flow. We don't know the timing of revenue well enough to be accurate, but it's clear from the previous qtr that it lags revenue. Previous qtr had negative cash flow from operations.
Shane,
I agree with you 100%
"Spend a fraction of their money"
Up until the end of last qtr operating cash flow was negative so what money are you referring to?
"it may make sense to have a certain percentage of ......buyback.."
Not if it leaves them at risk of diluting to pay bills due to cash flow shortfall.
What you say is correct for a person with a steady job, predictable income and regular cash flow to support regular payments into the future. Even then, some people (me included) do pay off their mortgage early and there is advantage in doing so. It is a far better return at the moment to do this with spare cash and save the outlay of (in my case) a 7% interest payment than investing the cash elsewhere and the uncertain (and low) returns that will accrue. GERS is not a person with a steady job, it is a business in a new and developing field surrounded by uncertainties. Many things could happen to derail the company's growth - lower corn oil prices, legal issues, patent issues, performance problems etc. I think directors will open themselves up to law suits if they go the buyback route and then have to dilute to pay bills (interest etc) because one of these factors intercedes. Clearly this is risk at the moment.
Jim,
Neither you nor I have anything to support our claim as we just don't know - it's all speculation. My opinions are based on my investing experience - progress with a micro cap, development stage company is never as fast as one would like, and legal maneouvres always tend to drag on longer than one would hope. I hope you're right and I'm wrong, but at the moment I see nothing to support any speculation of a buyback because it makes no sense.
What "proof" do you want. My numbers are my estimates based on the last qtrs results and what I know about contracts they have in process. Make your own up and you still won't get enough cash flow to pay off debt and buy back shares any time soon.
Jim,
What I can say for (reasonably) certain is:
1) Revenue probably at best the level of previous qtr as no bonus this qtr ie. revenue say = $10m
2) profitability at best 70% of revenue (probably less) = $7 million
3) Debt still in excess of $25 million (not sure of the exact numkber and can't be bothered to look for the purposes of this exercise)
3) Cash flow less than revenue due to lag in cash payments of revenue, so assume free cash flow for qtr (after payment of interest) = $5million.
Now, tell me how or why they would use scarce cash resources to buy back shares when, at best at current cash flow level they will require another 5 qtrs to pay down debt.
Apologies for the rough numbers, but I'm just trying to illustrate why a buyback makes no sense until cash flow is at least CAPABLE of eliminating debt. Then they have a choice of whether to reduce debt or to buyback, but until then it would be madness imo.
Err...no. If you're referring to the 10B shares that were retired, that was a cancellation of shares not in circulation, not a buyback. If this was what you were referring to, it underlines my point about people not understanding the nuances of investing. If there was indeed a buyback I apologise (doubt it)
Finally someone asking the right questions.
It amazes me that some of the posters have enough time and interest to bid watch yet you don't understand basic concepts.
Also those of you that think the company can do a buyback because it is profitable - profitability is not cash flow. Look at the previous quarters results - $10m revenue, $5m profit (I think?) - cash flow from operations = negative. No buy back will occur while cash is scarce.
Jonathan,
For reasons I've previously stated this won't be a buyback. There is insufficient cash flow to support it imo. It also is not a cancellation as cancelled shares are not in circulation, so would not have a corresponding trade. To me it's most likely to be more dilution, otherwise why would the price not spike upwards if it was a regular trade?
Jim,
Could be doesn't pay the bills. I hope the law suit is settled fast as I think it will be a game changer. My knowledge of the US legal system, however, leads me to be concerned that ICM et al will drag this out as long as possible. I will be pleasantly surprised if there's any cash settlement this year. In the meantime a buyback makes no sense imo.
The jury is out imo. Winsness is definitely the key to this company and in that regard KK has done well to tie him in. KK was not, however, a "wise businessman" in the way he engaged in a shell game with various group companies around 4 to 5 years ago (if you weren't around then - go back and try to make sense of all the different reporting group entities and you'll see what I mean). He's hung in there and may be on the cusp of turning the company around, but the mistakes made in the past are still impacting the valuation through reputational damage.
I think a few of you here are engaging in wishful thinking regarding a buy back. Share buy backs are done with spare/excess cash flow and GERS doesn't have any. Look at the previous Qtr's report. Despite revenues being $10m for the quarter GERS net cash flow from operations for the qtr was still negative. Revenue growth takes a while to generate cash flow, and when it does GERs needs to use that cash flow to pay down the debt. It would make no sense for them to buy back shares at the same time as they were issuing new shares to pay debt interest due to lack of free cash flow.
Although if the licensing agreements are made with GERS, I'm not sure it will make a difference. At least not until licensing deals start to be cut with ADRN, though I'm not sure how that will help KK. Perhaps it's protection in case GERS is bankrupted or otherwise taken out?
Although...where I think Nobody is right to be distrusting is in the corporate governance. The history of the company is littered with opaque share structures, labrynthine group relationships all serving to obfuscate the real IP and financial picture. A lot of that has been cleared up now and the structure is much simplet. However, I still have a nagging doubt, based on previous experience, whether KK and his families will have the power to move the goalposts with respect to the minor shareholders such as you and me. If they do, will they allow the minority share holders to share in the gains, or find a way of consoidating those rewards within their own shareholdings. The fact that I have to ask is either an admission of my own ignorance (possible) or a real concerthat everyone else here should share. Overall, I think KK's success is aligned with ours as credibility and the absence of self-dealing will be pivotal going forward with the investing community .
I think you're wrong on this one Nobody. A favourable judgement will transform GERS from a compnay weighed down by debt to one with collectible assets and fast growing annuity-type revenue and cash flow. Even the doubters among the investing public will be swept along in the resulting momentum.
This thing is priced for bankruptcy. If its current market cap is deemed to be wrong then it's way wrong. It won't be a 5 bagger - a $10m cap is no more defensible than a $2m cap. No - it's either dead money or it's many multiples from where we are now - probably a cap in the hundreds of millions. I think it will adjust very fast once the tipping point is reached - which a settlement would almost certainly be.
Loop,
To be clear (as I can't tell from your various opaque messages), are you a GERS shareholder or just a disinterested observer?
Thanks
Nobody,
In my personal experience as manager of a company owned by pref shareholders, but with ordinaries as well, I'm not whether the real market value for KK is in the prefs. As I understand it the prefs remain valued at par on redemption, in which case there would be no value for KK other than the par value of those shares. If so, then the real future value for KK, in tandem with the rest of us, is in the ordinaries. Hence our interests are aligned. And if I'm correct then I would anticipate a conversion of the prefs to ordinaries (assuming such a mechanism exists). Let me know if you think I'm way off base here.
....and what it doesn't say in the text is that most of those in the list are at best, unethical, and at worst illegal. Various parties, including Market Makers, Prime Brokers and, unfortunately, the DTC appear to have been complicit in allowing naked shorting to happen with impunity. At the same they've all being denying there's a problem. That's why I don't trust what's happening with GERS stock being unavailable by Ameritrade etc. It isn't beyond the realms of plausibility that someone is trying to suppress the stock, for reasons that are unclear. I doubt that it is being naked shorted now, as there is little left to gain. However, it could be to delay the unwinding of the short position and therefore delay the evidence of the naked short. Usually with naked shorts, the company goes bust and no record exists of the naked part of the plot. GERS looks like it may be different and if a turnaround happens, as it looks like it might, the illegal acts become more manifest.
Strategically I don't think GERS will be bought by a producer until the patent position is settled. IF GPRE, for example, ended up buying GERS and owning the patents this would encourage GPRE's competitors to ignore the patent and fight it any way they could. Noone in business wants to be beholden and cede an element of control to a main competitor.
A few random comments:
1) I think the settlement strategy will be to entice one weak opponent to settle with advantageous terms which should have a domino effect. A bit like giving immunity to the first informant that squeals in a criminal case.
2) Regarding settlement, some are worried that ICM has inserted itself via indemnification of the transgressors and they may not have sufficient assets to settle. This should not be a concern as they are not the party that is infirnging and therefore cannot assume all liabilities. To the extent that they cannot indemnify, the real infringer will have to settle, which will be much deeper pockets. If anything, this gives another pocket of funds to complete settlement and is therefore a good thing (btw I'm not a lawyer so may be worng in this).
3) I think Nobody's description of GERS as an undernourished plant is very apt and they have a mountain of history to overcome. Unlike Nobody though, I think that the turnaround, when it comes will be swift and sharp. A combination of greed and momentum will propel the share price forward rapidly until the risk becomes "irrational exuberance", which I can live with until I cash out.
4) A few posters have referred to increasing revenues and profits. While this is true, it will not necessarily be the case for the next qtr as there was a $4.7m uplift in the last qtr due to a one time bonus from YAGi that will not be apparent in next qtr results. Their income may not be sufficient to make up for this. Don't be surprised if revenue is down.
5) does anyone have a clue what Loophole Lawyer has in mind? To me he's talking in riddles.
I've finally managed to buy some stock, though more than I intended. I gave up with Ameritrade so tried my other 2 brokers in turn. The first one tried and got the same DTC message back, so the third broker tried and bought for me 10m at $0.0002 a couple of weeks ago. I though that was it, but the second broker misunderstood my intentions and instructions and kept trying. They ended up buying another 20m at $0.0001 on monday. Although not quite what I intended, I'm more than happy to be sat holding a total of nearly 47m shares with a much lower average price.
Nobody,
At least one of the other board members has an interest in proper English usage! Good to see...
You're right regarding cash flow. Without having access to the incoming cash profile, we have no idea what the cash flow position is at any given time. Clearly, the more cash that is generated, the stronger the company's negotiating position, since they have more options in terms of short term financing to bridge the peaks of cash outflow. However, we cannot know whether this is enough to avoid the "nuclear" option of share issuance/dilution.