8% growth in 4Q and guidance at 10% is a disaster. They are losing money so they will need a stock offering. At least they got that note money in december. The stock is heading to $9. What a mess. I am out!!!
Sentiment: Strong Sell
I conclude that they need $700MM for debt $150MM for maint capex, and $500MM for growth capex. Cash flow is $500MM/year = no distribution increase for at least 3 years.
lawsuits will be filed today. we have not seen the asset writeoffs that will drive down book value. They will need to leave unused pipe in the ground and writeoff $250MM of goodwill in addition to hard assets. Disaster.
They are just a middleman--they make nothing. The whole thing is driven by TV advertising. Good quarters when they do not spend so much like last Qtr and poor quarters when they see the slowdown and up advertising. No value added and CMS is watching these direct to consumer companies.
They have a convert that pays installments to them so could last 3 more quarters. Without orders, they will go bankrupt. So far, no orders.
You are missing the fact that there is $16MM of interest payments each year and that Oaktree gets 68% of the company from you. There is no upside.
looked at 10q again. Oaktree now has rights to 68% of the common through the preferred conversion right. In addition, the company is proposing offering shares to Cv note holders instead of cash. IF so, that is further dilution and Oaktree is protected from such dilution as they get 68% no matter how many shares outstanding. The real debt is $132million with $110MM owed to Oaktree and $22MM to cv holders. Oaktree also owns an additional $22MM preferred that is convertible. Interest is growing at a 12% compound rate as PIK interest accrues. The value of the company at 6.5 times adjuted EBITDA is $105MM. That is less than the debt, let alone the preferred--making the common completely worthless except as an option.
The good news is cash flow is neutral to slightly positive last quarter. If Ralph can keep things going in the right direction while continuing the remarkable job on costs, they could muddle through. However, Oaktree and the convert holders (current CV holders are being offered new debt and stock to forebear) could own as much as 80% of the company plus all the debt that is now over $132MM. At todays price of $3.80, and with the Oaktree pref. converted into shares, the market value is $150mm plus $150MM in debt. The company would have to have $46MM in EBITDA just to equal todays stock price. EBITDA today is $16MM. To get there, sales would have to be 225% higher than today.
The warrant model for the common says it is worth $.45 using a 4 year term and 50% std. deviation. You really own a warrant.
I am sure PULS is praying the stock will stay put until the Cv is exchanged. Then it is watch out below. The cv holders will be in line to sell and will demand registration rights.
Make a case for upside. As long as I can borrow stock I will continue to be short. Please lend me yours and I will pay you back in 4 years.