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Re: snakecorleone post# 19859

Thursday, 11/13/2008 2:04:00 PM

Thursday, November 13, 2008 2:04:00 PM

Post# of 346917
Snake,

You think that's good? Try this pipe dream:

The outside party spends 300M * 3 cents = $9M acquiring shares.

What if this outside party then finances not only the buyback of RM shares, but also the payment of a $0.10 per share dividend?

This would entail a loan of about 12M for the RM buyback and then perhaps $20M for the dividend on the remaining 200M shares.

They would be in the hole $41M (=9+12+20), but they would have the following assets:

- $30M in dividends on their 300M shares
- credit for $32M (the loan to SPNG)
- 300M shares now worth perhaps 20 cents each ($60M)

(Total of 120M on a 41M investment...)

But wait, it gets better. They can keep financing the issuance of dividends as long as they want, because each time they loan (or heck GIVE) the company $20M and get back $30M.

Given this leverage plus improved fundamental (on RM buyback) plus momentum, the shorts would capitulate. SPNG and the outside party agree to let them off the hook for several bucks a share. This recapitalizes SPNG and it creates a mammoth windfall for the outside party.

We end up with some great dividends, profits from shares we sell for over $1, and remaining shares in a company with zero debt, cash on the books, over 100M per year in revs, and 10 cents per share in earnings.

That is my dream scenario. Not betting it will happen, but it might.

Of course, this all assumes that (a) the NSS are collectively stupid enough to let this happen and (b) there being an outside party willing to play hardball. I have no doubt that (b) can be found in a market such as ours. It is (a) that I have the greatest problem with. Some here would say that NSS do not exist. Some say they exist, but not for SPNG. I think they exist for SPNG, but how could they be that dumb?

Wadi Rum


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