It's obvious that stocks that choose to undertake reverse splits brand themselves with a red flag. Given their reputation as wealth-killers, reverse splits simply drive away many investors from ever considering a given stock. We can see by the last couple days that this has occurred here at INMG. Here's the one the one point that many investors are unaware of when it comes to a reverse stock split. If the stock selloff proves to be irrational -- that is, if investors abandon the stock for dead, even after its business prospects revive -- then it can be potentially quite lucrative for those who keep their eyes open to the opportunities it presents.
The one common denominator in the very few companies that have successfully gone through a capital restructuring by performing a reverse stock split is that their financials were improving before the split. The companies that saw their pps plummet after the split had all been experiencing either no growth, or a decline in their business growth and were trying to get the pps up to attract institutional investors when the company's business was not successful. That is where examination of the financials of the company are crucial.
In the case of INMG, the financials have been improving ever since the reverse merger with GBGM back in July. It's all in black and white in the last quarterly report and in this annual report. If you look at the balance sheet on Page F-1 we see the following:
Assets (not including Film Assets or Sports Fantasy holdings)
2014 Assets: $149,194
2015 Assets: $310,652
If you then include the Film and Sports Fantasy Assets:
2014 Assets: $329,507
2015 Assets: $2,760,652
It's obvious that the business model has been successful and the financials are improving. This is the earmark for a successful reverse split. The capital restructuring is a setup to attract institutional investors. The reverse split will more than likely not be instituted until after the second quarter financials are released and the effects of the marketing of the H.P.Lovecraft channel premiering the Mountains of Madness web series can be seen. Also expected are the release of the VOD Search Engine with it's potential for a Google-type advertiser base as income and the New Broadway Cinema and it's use of VR film techniques for audience immersive Occulus headset viewing of broadway plays.
None of the successful business plan has changed. The only thing that has changed is the one statement regarding capital restructuring as a part of that business plan to prepare for the future growth of the company.
Everybody is bashing Tom Coleman right now and it's easy to understand why. There is no pr or explanation of the capital restructuring statement in the annual report. Maybe he'll explain it and maybe he won't. He hasn't explained any of his business activity since his interviews. But the fact is, the business is successful and it continues to grow.
No risk, no reward, as they say. I'm going to hang on through the second quarter. If I can pick up more ones, great. If not, I've got enough already. This has gone to no bid so maybe Tom will speak up. But if he doesn't, it doesn't change the business.
