The following question represents a common theme being asked regularly,
"rock, you have followed ACT and their financing/shares for a long time now, can you please explain where we are at now and how it will affect anything going forward?. thanks"
I can say without any hesitation whatsoever that ACT is in the best "shape" I have witnessed in the last 5 years. This is due to the following 3 items.
1)CD Financing: This toxic financing started in the fall of 2005 and we signed up for more in 2006, 2007, 2008 and some in 2009. Money was received up front and paid off monthly in shares. The lower the pps the more shares that were issued each month causing constant pressure on stock. Eliminating this debt was by far the most important and beneficial to Company and shareholders.
2)Lawsuits: Most or all lawsuits of the past and during default period are now over with. Yes, many shares again were issued but removing the liability is huge.
3)Fairness hearing settlements: What these amounted to were pre-settlement agreements with 3rd parties to pay off debt obligations. These settlements accounted for a boat load of shares at very discounted prices.
All of the 3 above made it near impossible for the pps to move upward and sustain itself. These are the very reasons ACT has been a trading stock for the past 5 years. For those who mail me and say they "never have sold a share", well, consider yourself very lucky. To have held everything when ACT was in default tells me some had no idea how close we were to shutting down. I give Caldwell credit for giving the CD holders enough incentives to agree to move forward. That was a very big deal.
How does this change things? Shutting down the continuous flood of shares into the float will eventually make a huge and noticable difference. As each day goes by we will chew up the discounted shares and at some point will mostly deal with buyers/sellers who purchased on the open market. This doesn't happen immediately and will take time to change.
Summary: The cleansing of the toxic financing, lawsuits and debt problems has ACT looking very good right now and light years ahead of how we looked only a year ago. Whether ACT is looking to move to a big board, cut a JV deal or eventually have a buy in partner, this cleansing gives ACT the look of a company that can now move forward which translates into leverage if and when needed. So yes, on all fronts, this was critical for the Company and shareholders in order to move to the next level.
