KM,
I have some bad news for you. Sometimes newsletter writers, even reasonably good ones, will put their names on a stock in order to attract interest subscribers to their newsletter. Read the fine print. Are you a subscriber to his newsletter and have access to his model portfolio? I'd be shocked if CFUL shows up there.
Now, let's review some facts.
1. CFUL is issuing preferred stock to UPDA that converts to 500mm shares. According to the 10Q, UPDA effectively owns 77% of CFUL
2. At the current CFUL price, the value of that stake is $1.5 billion.
3. UPDA, according to the recent 10k, has roughly 500mm shares outstanding. UPDA currently trades at 6c but has traded as high as 16c in the last year. That gives is a market cap of between $30mm and $60mm even at the high.
Now, if Brownsville was worth <$60mm when it was owned by UPDA, why should it be valued at $2 BILLION when that ownership is transferred to CFUL?
Or look at it this way. If you're so bullish on CFUL, just buy UPDA. You get ownership of the same assets and it's more than 50 times cheaper.
One more sanity check. According to the filings, the value CFUL and UPDA placed on the transaction is $7.5mm--$2.5mm in cash and the rest in convertible preferred stock. How can something fairly valued at $7.5mm suddenly be worth $2 BILLION?
It can't. It isn't.
"The things that will destroy America are prosperity at any price, peace at any price, safety first instead of duty first, the love of soft living and the get rich quick theory of life."
--Theodore Roosevelt
