Thoughts on dilution/company conduct (Rocket's repost)
Heres a comment that i constantly find myself repeating to people that try to use dilution as a method to cause fear/panic...
"Companies go PUBLIC for the sole purpose of raising cash... The focal point of an astute investor is on the accomplishments, not the fact that they needed cash."
When a honest company raises funds (dilution) and uses that money to position itself. They're making investments on behalf of the investors... We dont always see the whole picture from the back of the car, but the driver (CEO) sees many opportunities in front of him and can take advantage...
Now heres a quote from Eric...
"Our retail investors know that we need to raise capital from the market. They will accept and support this as long as the capital that we obtain is put to good use and grows the value of our brands through marketing methods. This increases the value of Winning Brands by a greater amount than the investment itself. That is true growth."
I cannot stress how often ive heard "No more dilution" from a penny CEO, only to find them continuing to sell shares quietly/corruptly behind the investors back.
The difference with WNBD is that the CEO does not talk about dilution as being a bad thing and ITS NOT!.. He talks openly and honestly about it and provides proof as to how our cash is being invested... To me, this is refreshing... IMO when a CEO fears talking about dilution, its because THEY are using the $$$ for greedy purposes.
When a CEO says, "Yep, we're gonna sell shares and here is why...", i have a great deal of respect for that. This tells me a) they understand the equity markets and purpose (diligent CEO)... b) They sincerely feel in their mind that they can do some great things with the $$$ (ambitious).
The MAIN thing tho, is the effect a CEOs WORD has on the PPS of a stock... If a CEO promises "no more dilution" or "we're buying back shares", then shortly after starts diluting and/or increases the A/S, the investors are holding a house of cards... Who wants to invest in something when one common action can deplete the value of your investment within minutes of being posted on a message board?... Credibility is EVERYTHING in pennyland
Business deals fall through, customers might leave ya, etc. These are all negatives, but are NORMAL/COMMON actions in business... When a customer leaves, its forgotten as soon as you land the next one... but when you say "no more dilution" or "we're buying back shares", that sticks with ya! A basher is always there to remind the folks of your credibility, right?
When WNBD dilutes (files 504 amendments) or updates the O/S on the website, the stock does not see the negative PPS action like so many other pennies... IMO this is due to the CORE holders here (longs) doing the research and verification to feel secure in the fact that this company has the potential to increase revenue/profits "by a greater amount than the investment itself."...
We also get a TON of proof from the company as to how the $$ is being used... When i look at how they are placing expensive full page ads in the all the trade magazine, creating different commercials, test marketing in new industries/sectors, shelf talkers, display racks etc, etc, etc... i think about myself and how I would try to build this company if i were CEO and it would not be much different.
Winning Brands CEO, Eric Lehner, points out that with this strong interest in the company's products, there is much detailed work to perform: "We are not careless about explosive growth -- that can be short lived and followed by a downturn unless it's well managed. We prefer solid planning, sound business relationships, long-term vision and massive capacity; not just a lucky turn of events. Our style is to create conditions in which success is a natural outcome and is sustainable. Growth in shareholder market cap depends a great deal on attention to operational detail behind the scenes that builds real net worth. News releases don't build a $100 Million dollar company -- but real business developments do, like this one.
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"It will be obvious to watchers of Winning Brands that we have real products, they are on sale in real stores, with real customers and a growing following. Other brand success stories in our generation may have appeared to come out of nowhere when they finally hit the limelight, but those “overnight” successes were actually struggling and uncertain during their own formative period until key events became tipping points catapulting them onto the national stage. This is what I expect will happen to us."
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