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Harris & Harris Group, Inc. Message Board

  • stevep_x3 stevep_x3 Dec 4, 2007 12:52 AM Flag

    Downspin spiral timeline

    During the last couple of months TINY stock went into a tailspin. The pyramid that TINY was based on for years required a constant inflow of free money from foolish investors through issuance of new stock.

    With the stock price around $9 and falling they are not able to use this trick anymore. What remains is about $50M of cash. In the past they managed to waste about $1 on the salaries and other expenses for each $1 invested. Having this my estimate is they have about $30M to support the portfolio companies. Of this amount, probably only $20M can be spent before the panic starts. Having the burn rate of the existing portfolio companies, this $20M will last for less than a year. Remember that they also need to show new companies from time to time - the news buzz which supports the stock.

    In the past, when a portfolio company would need more money TINY would bring an outside investor. The outside investor would normally require TINY to coinvest to show TINY's confidence in the portfolio company. With no money available to coinvest, TINY will either not be able to bring an outside investor, or would need to accept a terrible dilution. To put this in simple words, TINY is now a lame duck, other VCs know it and will be happy to eat TINY alive. Those of you that dealt with VCs know they are mean mean people. Nobody is going to care about TINY anymore.

    I expect TINY to be finished in less than 12 months. The intrinsic value of a TINY share is therefore $0. Since TINY management understands this too, we will probably see TINY executives jumping the ship in the near future. Mr. Harris retires soon anyway - he does not care, especially after having made millions in 2007. The younger ones are probably already starting job search.

    And one more thing - having the past actions of TINY management, they could not care less about the shareholders. I fully expect that when the panic starts internally (and it probably already did) they will decide to issue stock one last time to continue this agony a little longer. This is when you will see the real crash.

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