OK Evans,
In regards to our conversation on Friday, NOT the conversation Sat morning:
Like I said, I understood what you were saying and how you got your numbers when we were talking, but I could not reiterate what you were saying, so it is still a bit foggy. This post is in regards to what you think NTWK is going to give in the deal with SSI, here I go:
You said you think they are going to value SSI in the same manner as NTWK themselves are valued in the market, at 3.64 x book (rougly). When we talked, I remember you going through all the numbers and coming up with why you say 15M shares for the deal, but I have no idea how you got there now. Let me do my math, and see if you can point out where I am straying from your line of thinking.
SSI did 5M in revenues last year (from some source posted on the Yahoo board, but don't remember who or the source).
3.64 x 5 = $18,200,000 that NTWK will give SSI to close the deal IN YOUR MIND. WOW!!! I already think this is WAY TOO MUCH!!!!
If NTWK values their shares at say Friday's closing price of 2.05 (I know it will be an avg of 30 or 60 ds, just using this to make it simple), they would have to offer SSI 8,878,050 shares.
If value shares at $1/share, they would have to give SSI 18,200,000 shares
OS is 7,880,000:
SO, they would have to issue, say about 20M shares at $1/share,
OR say 10M shares at $2.05/sh.
I do not get the 15M you are coming up with, and I have no idea why you would think they would go down to $1/share????
So, as you can see, I lost a number or a few in the translateion which means I still do not understand.
Now here is what I was thinking. Shoot holes in it for me:
SSI valued at 5M (1 x last years sales or revenues). IF NTWK was valued at $3/share in the original talks and they are offering 10% of the deal in cash (from CC) that brought it to $500,000 in cash and $4.5M in shares. $4.5M/$3= 1,500,000 shares.
7,880,000 x .2 = 1,576,000 which is why they thought they could do it for less than 20% of the shares. However, I bet SSI said no, we will not value your shares at $3 (because they knew they could pressure the price down BIGtime), we will only value them at say $2.65
4.5/2.65 = 1,698,000 shares required to close the deal which they KNEW would put NTWK into needing to offer a PROXY vote to dilute to have more shares available. This would cause the price to FALL, (and in SSI's mind hopefully even further than 2.65, which it did) and they would get an even better deal.
So now we are at $2.05, so we get $4.5M/2.05 = 2,195,000 shares that NTWK will give SSI.
I really think the deal will be $500,000 cash + 2M shares valued at 2.25. I also think NTWK will proxy for 5M shares and, like you said, they will stupidly enough undervalue them at $2.25/share. JMO. Let me know what you think of my calculations.
One other thought: Could they issue 2M at 2.25 for the deal and another 3M at say 3.25 for other funding instead of issuing them all at today's current market price?
See, this is how I think: Very detailed, EVERY step, and s-l-o-w, LOL.
You just need to take your Northeast SPEEDTALK and ratchet it down several notches to my Arkansas (where I am from) slow twaang)ang)ng)ng)g)g)g)))) 8>). LOL.
I get dense when it comes to talking numbers. I like to understand where they all come from.
