Huge Positive IMO
After 650:1 Reverse Split
3,846,154 Authorized Shares
3,527,178 Outstanding Shares
They predicted the stock price to be: .0053*650 = #3.45 per share
The current stock price would be: .0059*650 = $3.835 per share
Notice that they did not spell out how many shares would be sold - this is
because they do not know... all they know is that they plan to raise $20 million
with the offering.
This means 5 million shares if the stock is trading at $4 per share at time of offering.
This means 4 million shares if the stock is trading at $5 per share at time of offering.
I think this is HUUGE! Here are my thoughts...
The reverse split is irrelevant - your current value in the stock does not change.
Uplisting means it is likely that some funds will invest in the stock, and they will not
allow for constant dilution - I think this move will limit future dilution.
They will remove all debt from the balance sheet, and replace it with working capital - huge.
Let's assume that they issue just over 4 million shares - putting total outstanding shares at 8 million.
There is no doubt revenue will increase and COGS will decrease now that they can pay their bills and
negotiate rates with vendors...
Let's assume 2013 has Total Revenue of $150 million with COGS of 80% (still high). This is a gross profit
of $30 million. Now, let's assume SG&A raises all the way up to $10 million... This leaves an operating
profit of $20 million. Removing their tax rate of around 35% should give a net profit of $13 million.
I assume it will be a while before they have to pay any taxes due to their carried over losses, but I am
assuming a worst case scenario of a Net Profit of $13 million.
Now, let's assume the NASDAQ gets them up to a P/E ratio of only 10... this puts the enterprise value of
around $130 million.
Divide the $130 million enterprise value by the 8 million shares outstanding gives a per share price of
around $16. I assume the underwriters will purchase the additional shares, so there will more than likely
be around 10 million shares outstanding... which would put the share price around $13 for the above scenario.
The current post-split price is $3.835 as stated earlier, so the $13 price means the price is 3.4 times higher
than today...
So... even under this scenario of an extremely high dilution, the current share price should be 3.4 times higher
than it is currently trading - or almost exactly $0.02.
I expect the price to jump pretty quickly, as this is the holy grail of penny stock investing - the uplist.
The news is WONDERFUL for those who purchased below $0.02 or so, but terrible for those who purchased over $0.05.
As always, my opnion is worth about the same as a share of MSLP, but I would be interested to know your opinions
on where you feel my numbers or assumptions are flawed.
