BVR - the long wait Timing an entry into BVR is tricky.
Shlomo Greenberg
Last Thursday, BVR Systems (OTC BB:BVRSF.OB) announced that a group of investors headed by Nir Dor paid $3.6 million for 20,000 shares, which will give the group a 17% share in the company at a price of $0.18 a share. This, so it would appear, has been the share price for quite some time. BVR also sweetened the Dor Group share acquisition by throwing in $18 million in three levels of convertible options to exercisable within three years. The agreement details a mechanism that will require the new investors to exercise the options at different times. The options are to be converted at prices of $0.36, $0.64 and $1 a share. The dilemma arises when the investor who has no shares in BVR but is nevertheless eager to get hold of the stock, has to decide exactly when to make his entry. It is assumed that new investors get a good deal, since not only do they enter at market prices (and sometimes even less) but they also come away with options which, should the plan succeed, will enable them to take over the company at a good price and make a tidy profit into the bargain.
By the end of last Monday, BVR has risen 20% or $0.05 on Thursday’s price. A week earlier, the company posted its results for 2005 which revealed that last year indeed was a turning point. Sales rose 51.3% to $19.2 million, while profit totaled $121,000, against a loss of $1.2 million in 2004. Results like these require accurate estimates on the part of investors who need to gauge the stock’s progress if they want to see a profit on their investment
This begs the question as to why investors should be entering at bargain basement prices if things are so good? Could the real reason for the price be the acquisition of US company Blue Ridge, which BVR has committed itself to? Having said this, the investor group will have certainly checked out BVR’s real value before they dug into their pockets and came up with $3.6 million in cash. That says it all, does it not?
I quoted the case of BVR, solely because this was the deal that I knew about. I wanted to highlight the problems investors face but BVR is a very small company battling for a developing niche market so it is especially difficult to assess a company of this kind.
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