All -
I am an active investor; I am in everything from pizza parlors to microcaps to actively trading secondaries and IPOS via the syndicate calendar. As a result, I am quite knowledgable when it comes evaluating investments and to the public markets.
However, I am not very active on these boards. Though, when I am interested in a name a do take a moment to review over a morning cup of coffee or a beer on the patio.
I don't plan to take a left-side or right-side of a debate but I find it necessary to understand everyones point of view and provide clarity, as needed, by providing simple elementary facts.
First, DILUTION seems to be the trend on this board. As I noted in my previous post, anytime a company issues a share they dilute a stock yet it should not be the sole focus when deciding to invest or exit a position. For example, if a company has $0 earnings but raises $5m via equity offering (i.e. issue common stock) to ramp up revenue via marketing, distribution, etc and ultimately create earnings, their Earnings Per Share (EPS) by default increases.
If a share price is falling because an investor, or in some instances a consultant, service provider, etc, has no cost basis it can certainly be unsettling. In this case, the investor appears to have a cost basis and the company appears to control the timing, amount, etc. and at the end of the day receive cash for their business in exchange for selling equity. If anything, it seems similar to the most prevalent, effective, and efficient means of raising capital utilized by the likes of every life sciences company on the nasdaq in that of the At-The-Market offering. In fact, I just read BOA raised $15B last month off of a shelf - certainly dilutive by definition but if they increase their EPS as a result there is no arguement.
Next, a start-ups biggest problem is having ample cash to run the business. If they don't raise capital (primarily via equity family/friends/seed/Series A) there is no company. As a shareholder, we want them to raise cash.
Lastly, 500,000 shares seems to be a big talking point as well. These shares appear to be restricted for at least 6 months (unless registered), are for the $25,000 Kodiak agreed to pay for the S1, and half will be returned if the company walks-away for whatever reason. It is a non-issue.
Also, I keep reading on various message boards about "toxic deals" - can someone explain to me what this is?
At some point this week, if I have a moment, I may offer my number to a few of the most active guys on this board to talk shop - Toxic Avenger, Alan Brochstein, and a couple others seem to have a very strong view and I would like to further understand why they believe what they do. I don't know anymore than the rest of you (hoping Q this week provides some insight on Vegas going recreational and its effect on the bottom line in the coming months) but want to know why betting on one of the more active names in the space (especially at these prices) seems so wrong*.
*if the company has 250m out x .07 = $17m and they don't plan to DILUTE until .18 (.18 x 330m = $50m) it seems like a pretty accretive transaction to me; if they are able to raise cash pre-earnings at those levels and utilize the money to grow their earnings its a no brainer. You have to be comfortable with management and their ability to execute if and when they can raise capital to do so - I am in many names and the biggest problem I see with them all is mgmt ability to exucute - they all seem pretty good at raising cash however after they spend it on the expenses of being public they seem to have very little left over to run their business and even produce a top line. Given that PNTV has an active license in NV I believe they are well ahead of the game especially if they are able to raise $5m+ between the equity and warrants.
