STKO Acquisition Means Real Upside Value Regardless of Restructuring Last Updated: Aug. 11, 2013 - 7:00pm EST
(NEW YORK)--Stakool, Inc. (OTC:STKO), a supplier of natural and organic and health and wellness products, may have some real upside with the acquisition of their food processing company.
Food Processor Acquisition Worth Millions
On Aug. 06, 2013, the Company announced plans to acquire one of the largest high-pressure food processors (HPP) in the US. The first thing investors should look at is what is the value of this new acquisition to its shareholders. In their release they stated new acquisition was currently doing approximately $5 million in annual revenues, with an upward capacity for up to $12 to $15 million annually. If based on these current operations, and future growth potential, it would be very justifiable to label the value of this new entity at $5 million on low end, to $10 million+ on the high end.
Consumer Products Division
Based on this acquisition, plans are to acquire smaller health and wellness organic brands and products to develop and expand. Not only will it just be the acquiring and building of a product portfolio, but the goal is to utilize their new HPP technology to market these new products to organic consumers as a new non-pasteurized product, while extending the shelf-life and revenue potential of these products.
Expertise in Branding and Marketing Products
One of the key factors in considering this valuation projection is does the company have the skills to make this plan a reality, and the new CEO may be the key. Before heading up StaKool Mr. Quirk held a variety of senior-level marketing positions for The Coca-Cola Company, where he was initially hired into the Coca-Cola Accelerated Program, the company’s coveted management training program, from which he was charged with running the New England market. He also served as director of marketing for Minute Maid brands, and spent nearly a decade at Anheuser-Busch working in such areas as brand management, field sales and marketing, wholesaler development, strategic planning, and most notably as market development manager for the Wisconsin territory. www.forbes.com/profile/kevin-p-quirk/
For anyone that follows the micro-cap sector knows this is not your ordinary background for your typical CEO in this arena. Mr. Quirk’s ability and knowledge, in both marketing and branding, insures you are going to a see a top-notch and professional marketing campaign to establish these new consumer brands under the new division.
Post-Split and Potential Valuation
Now with a general idea of what sort of value potential may be going into STKO lets review a very conservative value projection for the company going forward. In their recent release the company also announced plans for a reverse-split of their common shares, and the question investors are asking now 'is there still any upside for investors at this price'? Well, if you take a very conservative review of the numbers it appears all is not lost for pre-split traders.
For the sake of argument in this discussion lets assume there is around 5 billion common shares outstanding. Now in our opinion we feel this structure may be on the very high end, but to be conservative for this discussion lets assume 5 billion are issued and outstanding. So if assuming this as fact, then a price of $0.0001 has STKO trading at a market cap of only $500,000.
In their recent 8K they mentioned the reverse split would be on a 100:1 ratio, or meaning for every 100 shares you currently hold you will be issued 1 share of new post-split shares. When you do the math nothing changes in your actual value of the shares you hold, only means how it is calculated in the open market.
So if this is the case, the shares outstanding will go from 5 billion to 50 million outstanding post-split, and the share price will adjust from $0.0001 to $0.01 per share. Based on the new structure of 50 million shares a price of $0.01 the market cap value would still only be $500,000.
So now lets assume the value for their HPP acquisition can be conservatively valued at $5 million, and their new consumer products division another $5 million, then the total value potential of this acquisition could be reflected with a $10 million market cap valuation. Now to stay on the aspect of being conservative in our review, lets cut that market cap valuation in half to say just $5 million. Based on that potential value, and a new share structure of 50 million outstanding, STKO could still be looking at a $0.10+ price target post split, or $0.001 per-split adjusted.
Risks to this Assumption
Obviously the main risk on any reverse-split, and our conservative projection on this acquisition, is the prospect of additional dilution and acquisition costs post-split. Well, this is why we cut the 'post-split' value in half from $10 million to $5 million to take into account any additional equity financing, or cost to acquire this new technology. So lets assume an extreme possibility of a reverse to 50 million outstanding, and then an increase to say 100 million for financing and closing acquisition. Even based on that number, which we feel is way on the high end, a market cap value of $5 million would still mean a price of $0.05, or $0.0005 pre-split.
Again, this is all mere speculation, but when you review the potential of a real operating and expanding technology, and a CEO who has a proven track record to deliver the goods, even at its current level STKO still shows some real upside potential for speculative traders.
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