Market Cap/Issued Shares HHSE-Chart: No Dilution 2.5+ Years
1). Hannover House has Not Issued any Shares in 2.5-years - See the chart below. For the company's first two years as a public equity, the stock structure was quite stable. For the past 2-1/2 years, the stock structure has also been stable. But in 2013 and 2014, the company got involved in some ugly predatory lender situations, most notably TCA Global and JSJ, which precipitated a rapid growth in share issuances. The business model for both TCA and JSJ - as exercised against HHSE and many other borrowers - is to make repayment with cash as difficult as possible, in order to force a "conversion of the debt" into freely trading shares of the issueer at a dramatic discount-to-market. Such returns grossly exceed the legal usury law limitations in all states, and this general business practice is operating in a legally dubious space. JSJ, for instance, refused to accept repayment from HHSE via a bank wire transfer (including all applicable, legal interest per the note), preferring instead to file a lawsuit (in Texas?!), in order to try to force repayment via shares at 200% or more interest. These predatory lenders generally prey on companies that are unable to defend themselves, and therefore are forced to allow the lenders to squeeze out profits far in excess of lending laws through toxic-conversions; most of the time, these small borrowers are ultimately forced out of business. However, this was not the case with Hannover House - as the company has a operating business that is unaffected by fluctuations of our stock price and not dependent on the issuance of shares for capital. These toxic dilutions from 2013 and 2014 definitely hurt our shareholders, and hurt our "market cap," as demonstrated in the charts. So, the Board voted to cease such forms of borrowing, and as a result, HHSE has not issued any new shares in 2.5-years. Anyone predicting on a chat board or anywhere else that a "big dilution is coming" is mistaken. 5). Thoughts on the HHSE Stock Chart -The chart below is divided into two sections. The top section shows the "approximate market cap" at six-month intervals beginning in June 2010 and continuing through to this week. The Market Cap was calculated by the total of all shares in issue, multiplied by the closing price of the stock during a one-week period during the stated month. The bottom section of the chart shows the total SHARES IN ISSUE for the company during this same time frame. The dark-blue shares represent those that are "restricted" from sale, and the light-blue shares represent the total share count of restricted plus unrestricted shares for that time period.
Perhaps the most visible trends to see on this chart are that the company did very little in share issuances for the first two years... and none for the past 2.5-years - as seen by the flat-line of total shares in issue.
The next interesting item of note is the tremendous PPS Spike that occurred earlier this year, at which time the Market Cap jumped from $5.4-MM to $24-MM in just a few month's time. What's interesting about this result is that the company was functionally frozen from new releases during that time, so the sudden shareholder enthusiasm cannot be attributed to improved revenues... it can only be viewed as a reaction to the prospective merger with Crimson. The current Market Cap of $12.4-MM has been stable for quite a few months now.
A third observation can be seen during the "heavy dilution" time-frames of 2013 to the end of 2015, when TCA (via MAGNA) and JSJ were flooding the market with toxic-conversion shares. What is interesting about this? Well, the market cap stayed surprisingly stable during this dilution... meaning that the average PPS went DOWN while the total float went UP, but the overall Market Cap remained steady. HHSE Management believes that the Market Cap remained relatively steady during these dilution times due to Investor Relations / Stock Promotions. As the toxic-lenders dumped their HHSE shares onto the market, some effort was being expended (by them or third parties) to create an investor market for their share dumps... which is another reason why HHSE management hates the concept of these toxic-conversion notes. It also answers the question that some shareholders have posted to HHSE management over the past few years about "why aren't you doing IR / Stock PR now?" The answer is that we are are focused on building the fundamentals of the business rather than on creating a momentary spike in PPS interest while some third party lender dumps out shares. We are not philosophically opposed to I.R. and new investor outreach. We just feel that the cost of such promotions would be best utilized after our Registration and other major events in the works.
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