Assuming the divestiture report is true, and it would appear so given their comments on the CC, then it would seem 1 of 2 options are at play
1) The whole company is at play - selling Telair would be too costly from a Tax Perspective
2) They have a massive acquisition simultaeously planned that would mitigate the gains.
Either way, very good news for shareholders.
What I said is that we cannot get $14+ in a buyout offer because of the converts, yes. A $14 offer would equate to about $11 for shareholders.
Doesnt affect the buyer at all. He can offer anything he wants. Its the current shareholders who get diluted. A buyout of $10-12 makes sense but that would only be $9-11 for us.
??? Do you think before you type? Thats my point. I am positing that the reason they arent buying is because they are precluded from doing so. What other explanation could there be considering the basement value of this stock currently?
The lack of insider buying almost has me believing a deal could be in the works. Why else would mgmt not buy when there company is trading at 4x EBITDA and they are having their best Xmas in years? If not, they should all be replaced with people who have conviction in the company.
I am holding. I do not see how this thing stays below $9. Its trading at 4x EBITDA. There is $52m of EBITDA and probably $20m of synergies to a MAT/HAS or a PE firm who takes it private. $10 and above only happens once the mgmt team is ousted.
JR - The point is they should have a known they were going to have a good Q3 and Q4. The cost of issuing this debt is far more expensive than a few extra points. The debt could be paid off right away - the equity will cost far more to retire. They signalled to the market by issuing this debt they didnt think they would get to $9.50. Very poor mgmt. And that is what keeps this thing down. Mgmt.
It seems at the end of the day much of the investment community is simply reading the tea leaves. Why on earth would a Mgmt Team who has so much going for it - as we all have advanced - go out and issue convertible debt with conversion at $9.50ish if they really thought this company was going to do well.
The fact that they issued this debt means MGMT has no faith or knows more than us.
Whats interesting is that the stock gutted through all that and got to the $8's but then crashed on the Earnings Call when the call actually was pretty good.
Still mind numbing stupid of this Mgmt Team to issue convertible notes in this interest rate environment and the fact that sales are so strong. Shockingly bad.
Ideally, the Analysts simply ask "Why did you issue the Convertible Notes vs. Fixed Term Debt?" Unfortunately it will probably highlight the ignorance of mgmt. The worst thing is they probably didnt even need the debt with their revolver untapped.
The company is currently worth $1.6b. If they sell off the European division they get $1b but lose $100m in EBITDA. Which leaves $160m of EBITDA valued at $600m or less than 4x. Seems very cheap.
Obviously, the sale is a risk. but seems unusually cheap.
I just looked at Piper's model and they have the company with 22m shares outstanding in Q1 and Q2 2015. Both quarters are losses so the EPS is far worse than it would be if they used 45m as they should. For some crazy reason, they have 45m shares in Q3 though when they make money.
They are the firm with the low estimate too of $0.52 next year. So once someone wakes up there and fixes their error, EPS will go up as well. Thats what I mean in that these models are very inaccurate.
These analysts have all sorts of errors. Look at the share counts too - they are way off. We know that $39m of the Converts are due this quarter so the share count will go down by 2.65m shares because of these notes being paid off. Nobody has that reflected either.
Correct - their net debt should be about $90m after this quarter. Putting a whopping 5x EBITDA on this puppy currently. $155 Equtiy + $90 Debt / $52m = 4.7x Shockingly low.
While you blame it on tax selling, others may blame it each year on the lack of PTC resolution.
Orders and more specifically last year the communication about + EBITDA caused the rise in stock price.
We could get a $20 offer too. But the $20 offer will be based off of our 23m shares outstanding. When in fact, there are 45m (prob 41 now) shares outstanding. So you arent getting $20, you are getting less than that. Then you need to keep in mind there is less debt to payoff as well. So while there are 45m shares now there is also 215m less in debt.
The offer will need to take all of this into account. Thats why I say a $12 offer is really a $10 offer. But they would be getting the entity debt free. So the buyout price will need to be even higher.
Also, should there be a buyout there is a premium paid to convert holders.
Despite PTT's claims of the BE point being $7.70 for convert holders, the Convertible Notes in June were issued at 103.76 shares per $1000 notes. Divide that out and you get $9.64.
Scary how inaccurate all of this conjecture is. So there is zero dilution happening below that.
And as I said earlier, the other $100m has a breakeven of $8.74 I believe.