Bothersome when mgmt owns little to no stock and gives it away freely.
But, at the same time, lower rent in exchange for some upside if PSUN survives & thrives is not totally unreasonable from a landlords perspective. ----- On August 19, 2011, the Company reached an agreement with a landlord to amend approximately 80 existing store leases. As partial consideration for the agreement to enter into the lease amendments, the Company entered into a Stock Purchase Agreement (the "Agreement"). Pursuant to the Agreement, upon the execution of the lease amendments and satisfaction of other customary closing conditions, the Company will issue to the landlord an aggregate of 900,000 shares of common stock of the Company, par value $0.01 (the "Purchased Shares"). The closing of the issuance and sale of the Purchased Shares is expected to take place in September 2011. The issuance and sale of the Purchased Shares are exempt from registration under Section 4(2) of the Securities Act of 1933, as amended and Regulation D promulgated thereunder, as such issuance and sale does not involve a public offering.
this is trading just like a typical pink sheet pump & dump. beware when the management starts paying everyone with shares. Expect dilutions and a dump when the restricted shares vest. The outcome does not look good.
i dont know what to say. 900000 is a lot. this is a drastic move for psun. there is only 2 ways out of this mess. hold till they turn a profit in late 2012 early 2013 or go down with the ship. with moves like this only one thing comes to mind the perfect storm.
It sounds like a lot of shares, but I actually don't think it's a lot. The CEO said that this negotiation would yield $9M in cash savings in fiscal 2011 and 2012. Even though we're already part way into fiscal 2011, let's assume (conservatively) that the annual savings are $4.5M. And remember that that's $4.5M every year.
900,000 shares are worth only about $1.2M today, and even before the most recent decline, they were only worth $2-2.5M a couple of weeks ago. Even at $4 per share, they're only worth $3.6M. Assuming the 900,000 shares is a one-time grant and not a recurring annual event, that's a heck of a bargain for securing $4.5M in annual savings.
Net net, I'm not concerned about the 900,000 shares. If PacSun can turn around its fundamentals, longs will be plenty happy. If they can't, then of course we're in serious trouble.