yeah, so all that work Burton et al and money paid to "make the market" for CVO to get its Beta closer to 1 is all for not. Now, our stock price is under $1, our beta is back to 1.5+ and getting worse everyday. nothing but boutique and index funds will be able to but this trash.
I agree, but the rules also say that remedies like this must be approved at the next shareholder meeting. CVO bylaws may not require the vote/notice, but NYSE does. It does not address the market cap issue. It also doesn't address the bond issues this will cause due to the fact some bonds are convertible. BTW, NYSE does the math when determining adjusted market cap to include those conversions. So this is now a much more complicated issue. I bet there is someone out there that would buy the shares, but it would have to be at SIGNIFICANT dilution to the existing shareholders, which then includes bondholders (with the convertible bonds.) I doubt they will not only NOT sign on for that, but will probably just call their bonds due to the fact that CVO is now potentially NOT a going concern (meaning likely operations will cease.) Everyone gets a haircut, and this will be painful for many people. Its increasingly likely that the general market will not rebound anytime soon, and it will be a real hard sell to prop this puppy up. Every fund manager has their analysts doing the math. 2014 operations generated $24mm in cash. The last 3 years have averaged over $30mm in CAPEX to keep the plants running. The debt will never get paid down because the choices are keep machines running to generate cash or pay down debt. You are at -$6mm now, and machines don't get younger. Short version is there is no upside risk, just downside risk. That's not an investment, its a handout. Pretty sure Wall Street is gonna be done with the handouts very soon
with the market up slightly, and this stock down 15% as of this comment, I have to think the larger institutions are dumping their holdings. Last thing anyone wants is to have a stock get delisted and then have it in their listing. Especially since all the "investments" seem to be in value or microcap funds. those guys have to be looking at the SEC filings all the time. Total rebalancing. Yahoo's BETA of .80 on this stock is a joke. I am Team Burton probably has been working with market makers to try and engineer the right BETA, but overshot it dramatically. Good luck to everyone. I still have my 50 shares that I bought years ago so I could stay plugged in...I have lots of friends that are hoping this ship doesn't sink before they retire. Here's hoping for them that Burton gets a surprise boot at the next Shareholders meeting. Wait...that should be soon shouldn't it?
I have long postulated that was his goal. There is nothing stopping him from convincing the capital structure ownership that being public is more hassle than its worth. As a private company, the PE investors get paid FIRST and quarterly similar to bondholders. If done properly he can make a lot of money for a lot of people. Except common stockholders. He boasts about stock ownership, but they are purchased AFTER shares are granted for $-0- and then sold. Those funds are then used to purchase shares on the open market. So yes, they all did technically buy the stock with their money. But it was gifted "money." So there is -0- risk, other than their contracted compensation packages not being worth what they thought. Do not be deceived. Its been a plan in the works for years. That's why the kids are in on it, along with their buddies and college teammates and roommates.
It wont happen quick enough to save them from delisting. I think their goal is to be delisted, allow bondholders to call "default." Then they can file CH11, get relief and take it Private as the solution. The bondholders get another crack at cashflow in the form of quarterly equity paydowns, and the "kitty" gets opened up to anyone else who wants in.
The returns in Private Equity can be quite attractive, and when you aren't "pandering" to the common stock public you have a lot more wiggle room. He can then dabble in all this #$%$ to his hearts content. His kids get to learn about finance from the top and then run a large company. Great legacy plan if you are a Burton. Not so much if you are employed at CVO.
Like I said, I have called this plan since 2009. Just watch. Its an old game, just new players. There is no growth to fix this problem of debt. It was either going to be a default on interest payments due to cash flow or a default due to technicality.
And if this isn't his plan, then he truly is the worst CEO in history and should be shamed ala Madoff.
It would all be litigated, but the end result is shareholders get-0-. This exact thing happened when I worked for Nashua back in '08/'09. The gurus at corporate decided to play hardball with "rebates" and pricing. Basically played games with where and when costs showed up on the P&L. This included the dreaded end of quarter payment holds. Last half of every quarter saw vendors pushed out to build the cash balance. We had to literally beg to pay our bills, and they would only let us pay material vendors if they threatened to hold shipments...and even then we had to go the exercise of "well, do you really need that material?" and prove that the orders needed to be released. Like we were out here just buying material for ya know, fun. Then some vendors got hip and raised our prices. That's the problem with niche business with special customers. Paper is technically a commodity, but specific paper isn't. You really don't have a leg to stand on. Burton has missed the boat on this. I remember my office groaning that year when on the calls he hailed the purchasing department as world class, best in the business etc. Yup, wicked smart. #$%$ off vendors, lose discount terms, let vendors raise prices 10% and then rebate it back. WICKED. SMART. Good luck with that.
Makes me wonder what the bonds that are convertible to stock will do? will they automatically have to be renegotiated? Can't imagine the reverse dilution is in anyone's interest since the original dilution was not in anyone's interest (other than the bondholders) Also, I wonder what other covenants this breaks?