I've only posted twice here for reasons that I A)I'm not here to argue B)not here to pump or bash C)I rarely have anything of substance to contribute. That being said, I felt the need to clear up some questions or misconceptions for those who are new and/or have not done their Due Diligence.
The question of "the market cap is too high".
* This is true if you believe a stock only trades at current valuation, which they don't. TSLA, FB, TWTR, AOL, ext. are all "over valued". Hell, some of these companies still don't report a profit.
The question of "This is a pump and dump" , "not a real company", "this is a classic category xxx scam" .
* GrowLife has very real, respected, and well known products in this industry. They have a growing number of brick and mortar stores and the strongest online presence as it relates to the sale of said products. The leadership at Growlife are respected and reputable business individuals. To tout that they would simply "cash out" and tarnish their names forever is disingenuous or foolish.
The question of "Why won't they release the G.I.F.T / Acquisition / Guidance / Ext." ?
* GrowLife has shown time and again that they are being very careful as to when and why they put out a PR. If you were here in Nov. when we received the Quarterly Financials and the panic sale began, over missed estimates. You will remember that two days later they announced the 40 million dollars of available financing. When interviewed, GrowLife leadership shared that they desperately wanted to announce the news during the release of the financials but could not at the time for legal reasons.
Is this the case again? I cannot say, but history does show me they are looking to tread carefully. Otherwise, why hire a law firm (Crowell & Moring) that has Fortune 100 companies as part of their clientele?
If you look at all the Micro and Macro data available, how could anyone come to the conclusion that this is not a solid investment for, at the very least, the next 52 weeks?
* Why do they need two billion shares?
Like all of you, I have been asking myself the same question. I don't know why. But let's first be clear as to what GrowLife is asking for.
Growlife is asking to increase the authorized shares from one billion to three billion.
What are authorized shares?
Simply, "Authorized shares refer to the largest number of shares that a single corporation can issue. The number of authorized shares per company is assessed at the company's creation and can only be increased and decreased through a vote by the shareholders."
What are outstanding shares?
"Outstanding shares refer to the number of stocks that a company actually has issued. This number represents all the shares that can be bought and sold by the public as well as all the restricted shares that require special permission before being transacted."
At this time GrowLife has 711 million shares outstanding of the currently authorized one billion shares. Increasing the authorized shares does not in any way mean that they will become outstanding shares. As you can deduce yourself, GrowLife has not placed the remaining 289 million authorized shares it has into the outstanding pool.
Back to the question at hand, WHY?
There are several reasons and I want to be clear that this is pure speculation, even if it's an educated one.
1. To prevent a hostile take over. We all cannot deny the MJ industry just begun. In one state alone we have product sold out with industry studies being released stating it will take a minimum of three years for supply to catch up to demand. This is for a single state. At least a dozen states are either on the fast track to legalize or vote for some form of MJ sale (medicinal or otherwise) in 2014. It is not unheard of for large companies to buy up a majority of shares and take control of a company. Authorizing such a large share count would protect GrowLife from being acquired in such a manner and force any buy out to be negotiated for top dollar.
2. Acquisition of one or more companies that would justify increasing the authorized shares which would eventually become outstanding as the acquisition becomes complete. GrowLife leadership has said on more than one occasion they are looking at acquiring one or more companies. This could be manufacturing, kiosk development, financial services, ext. All of which are very real possibilities. We know they want to have kiosks in stores by Q2, we know they need more manufacturing capacity for they products that are selling very well, we know they want to be a financier for this fresh industry. How else best to do this if not through acquisitions and acquisitions cost money, or shares.
3. Dilution, the need for financing. At this point I think the board all knows what Dilution is. Good or bad dilution, dilution is still dilution.
I in no way believe that they need money to keep the lights on. The financials just don't swing that way. Sterling has said that they are focused becoming cash flow positive in 2014, I see no reason this won't happen. It was also said that there is a self imposed hold on dilution until further notice. Do I believe and have concerns about dilution? Yes. As every investor should. But if there is dilution to be had I believe it will be for reason number two. If that is the case, I am cautiously optimistic that it will be a positive thing in the long run.
And that's the real point for investors in all this isn't it? Do we care more about January 16th 2014 or do we care more about January 16th 2016 or 2020? If you are here for the swing trade? Then by all means, swing away. There is no shame in that. I am an investor, I care about the big picture. I play chess, not checkers. The shame is on the people who pump or bash. It's a dishonest and shallow trait. Furthermore, I see absolutely no reason for a person who does not like a stock to enter said stocks message board and bash it repeatedly. They are not being heroes, they have a selfish agenda. That being said and out of the way, the macro and micro data lead me to believe that option one and/or two is more likely.
I share the same concerns as investors of GrowLife have. Do not mistake my position on the company as relaxed or forgiving. Although I am bullish of the company, I am not married or in love with it. There are flaws that need to be and some are being addressed. My eye is on a reason being given for the increase of authorized shares. But so long as I am well into the green of profits, I see no reason to rush my vote or the sale of my shares. Just as easily as we went up, we can go down, and back up again.
Disclosure: I purchased in the .03, .04, .05, .06, .07, .09, .12, and .14
