I agree with your dilution concern. When I was speaking with the CO-CEO Mr. Byrd at the shareholder vote yesterday, he did mention that they have a number of funds wanting to get in...They were just waiting for the acquisition to go through. He *did* mention the possibility of a secondary. I'm not that worried about this though, since it won't be distressed financing and the company already has alot of cash. The new owner and CEO from China owns a huge chunk of the company and won't want to dilute his position either.
Regarding the performance targets, I thought they were aggressive as well until I spoke to Mr. Byrd. He indicated that they plan to go from the current 16k bus network to 32k by the end of 2010. When he said this, I remembered reading something in the proxy about the estimated payouts to their bus-partners for 2010/2011 going WAY WAY up from the 2009 numbers...This is why, they are simply adding alot of buses to their network.
Something else to keep in mind, they charge 1/60th as much for a 15-second ad as television does (For the same audience, which for CME is roughly 60-70M people per month). They have kept this fee abnormally low to attract advertisers over the past couple of years. Looking at their client list, it has certainly worked. Mr. Byrd indicated that if it was necessary, they could easily raise their adventisement fees a bit and that would go directly to the bottom line. He did not believe their targets were that aggressive based on these facts.
Oh, and one last tidbit which he told me before the lawyer next to him interrupted with a "You have to be careful what you say now that your a public company."... He told me that 3Q was looking very good. I think they are very much on tract to hit their 42M net income for 2009, or at least get close to it.
-Fernando
AI
