"Eric Langan said that the real estate alone was worth 70-80 million"
And he said that only about half the debt is real estate related. So there is probably $40M of equity in that real estate. Outside investors would love to pay for some of that action. The IPO would easily be worth over $100M, so 10M shares for $10/sh would be low. With the NYC property paid for (or a healthy down payment from the IPO proceeds) the property value is already at $100M with cash to on the books.
Them future growth gets real easy. Eric sees a great location and the REIT buys it. Can be a new building or existing club, doesn't matter. The REIT buys the property, and RICK can remodel or wahtever and be in business quickly. The REIT grows and can offer SPO's if needed down the road. RICK grows because property is never an issue anymore.
You didn't get that from me. I'm all for keeping RICK one and building value hand over fist with nothing but cash. The $3.6M convertible wasn't a wise if you ask me. They had the cash on hand and they will make another $3M this quarter. I'd be happy with an ordinary dividend and seeing the cash grow $10M+ a year for the next 5 years.
I don't care for the REIT, even though you make it sound great. I'd rather see RICK pay off their properties with their earnings. Then the earnings go up with no mortage or lease. That's the whole idea of buying the property in the first place. Let the earnings and cash snowball for awhile, THEN look for a great deal with cash in hand.
I could see this happening - a great way to extract value out of the assets and burn all of the shorts. Eric Langan said that the real estate alone was worth 70-80 million, so a $5 pop would be justified since the whole company sells at around 80 million now. A higher stock price would help with future acquisitions....
This would be easy to do. There's equity AND income with the current real estate. They could issue 10M shares of a REIT with a $10/sh IPO. The current 9.53M RICK shares could get 60% of the shares, or .60 shares per each RICK share owned, and the remaining 40%, or 3.81M shares sold to new investors for $38M. That pays of NYC property, maybe pays down a few high interest mortages, and gives a little cash to shop for another property.
RICK shareholders could opt to keep their REIT shares or sell them on the open market. So, if you owned 5000 shares of RICK in this senario, you could end up with;
5000 shares of RICK and 3000 shares of the REIT. The RICK shares could actually appreciate because about half the debt is real estate related. With less debt expense, the earning would rise (plus they will rise anyway due to all the recent growth). The REIT shares have value in that they have a steady income from a reliable tennant (rick's clubs) and real estate value. It's a win/win for everybody.