I've been on this board for years. I very rarely posted, but I saw exactly the same things as others have. It was an incredible potential opportunity, but with no financial statements, it required a lot of guesswork and assumptions.
It's easy reading the UGSI quarterly letters and being bullish on the company's prospects. UGSI is comprised of the old management team from US Filter, which was very highly regarded and which was running a multi-billion dollar company at its sale. They joined an innovative company with what looked like a very disruptive product and service in the pipe space. While the quarterly letters share some numbers like tremendous growth in revenue the last 10 years (25% annually), EBITDA growth of close to 50% last year, and a backlog increasing by 139% at year end, what they don't tell you is the starting base, (which may have been minuscule), or the corporate structure.
Well, the Riverwood financing answered one of those questions directly, and indirectly answered the other.
Hope is not an investment strategy, so it will require you contacting the company and reading the specifics on the Riverwood convertible preferred (it's a public document.)
I wrote the following before on this board, but it was ignored, so I'll do it one more time. I actually think UGSI's management would prefer the posters here buying with their eyes at least half open. We aren't privy to all the facts, but there are enough dots to connect to not totally remain in the dark.
Outstanding shares doubled last year if you count all the convertible preferred shares that could be exercised at 6 cents.
The Series C Preferred carries a cumulative dividend of 6% per annum. So it provides Riverwood with a minimum annual return of 6% which they would realize when the company is sold. Riverwood does not invest funds for 6%, so they would want at least 20% annually. They are allowed to convert their preferred shares into shares of UGSI common, so the outstanding share count would double if they provide all the contracted funds (an additional 700M+ shares at $0.06/share).
So the way I'm looking at it is Riverwood has to get another 14% annually to make their 20% hurdle rate. In 5 years, the stock price has to double, so the stock has to sell at $0.12/share - remember there would now be ~1.5 billion shares outstanding (that's with a "B").
Shareholders aren't getting that 6% yield, so I believe they should pay something less than 6 cents a share today. If you have a minimum 20% hurdle rate, (which you should have in a stock like this), than the recent rumored $0.04/share sale sounds about right.
I know this is information that nobody wants to hear, some of you have been in the stock for over a decade, but take the step to contact the company and read the Riverwood docs. That financing transaction was done by 2 knowledgeable parties that had to agree on the company's value. Extrapolating the numbers in that transaction tells you what they believe the value to be.
Good Luck
