You're killing me with that $210 purchase today at 3 cents a share. What kind of commission did you pay on a 3 cent stock? A $20 buy and then a $20 sell commission would add $40 (or more than .5 cents) on top of the 3 cents just to break even.
You cannot be serious!
I figured the minimum would be 100k shares for $3000 risk at 3 cents. A pop to 5 cents makes you a quick $2000 less commissions. Of course, on the other hand, announcement of BK wiping out shareholders will likely get you back about $1500-1800 with share price dropping to 1.5 to1.8 cents right after announcement.
Not even worth a 25% pop unless you are able to buy/sell a couple hundred thousand shares at a time.
Walk, I pretty much agree with everything that Nelson stated in this thread. OTT shareholders were wiped with the common portion of their shares effectively cancelled. Management has not shown any desire to own the new equity. Cerberus has no interest in owning equity. Did you see them agree to a convertible option with a lower interest rate?
Think about this. Over next four years, Cerberus will receive close to $30mm in interest from OTEL. Without any payment towards principal, they only need to recover about $55mm to cover debt (without interest consideration.) Even with positive cash flow, OTEL could end up in a Chapter 22 if 1. Cerberus does not renew debt and 2. nobody else replaces the debt. Why pay for equity now, if you can get it for absolutely nothing later?
In other words, it could be to Cerberus's advantage if OTEL revenues and cash flow slightly contracts. When debt matures (or some covenant triggers default), OTEL could end up in the hands of Cerberus at a huge discount to OTEL's real value.
As a shareholder, I would be cringing at each successive quarter hoping that revenues and cash flow do not start contracting. On the other hand, can shareholders really expect any real positive move in revenues without something dramatically changing for OTEL? Back to my risk/reward evaluation. Even at $4 per share, there appears to be limited upside and quite a bit of risk to the downside. This is not based on the fair value of OTEL, but the way the market has valued OTEL and the way the market will continue to value OTEL going forward.
OTEL needs not only a strategy and plan, but the actual implementation of that plan to provide a return for shareholders. I fully expect the banks to dump their shares as soon as feasibly possible.
Like Nelson, I do wish everyone well here. I am just not comfortable that they outcome is going to be a good one. Hope to be proven wrong.
And, to your point, the difference is about 2.5% based on what KMX and you are stating. I was just using 4% as an example. That is still $10mm more a year on $100mm of debt. If you are comparing to debt in 2014 or over a year ago when principal was higher, then the difference in interest expense would be much less. So, Q2 2016 at 2.5% more will not be $2.5mm more than Q2 2015 because of the higher debt. Maybe it's only $2mm more.
The point is that pay down of debt will be constrained due to the higher interest rate and the market will need to look further down the road before OTEL is able to really return value to its shareholders. I believe the drop in PPS is indicative of sellers that are not willing to wait and have decided to cut their losses. I fully expect the banks to sell their shares at the first opportunity as they will also see this as dead money.
I tend to linger around a few boards on stocks I used to trade or own. With Otelco, I had a vision similar to Walk. Just have been more cautious. I did very well on day of BK emergence announcement when stock ran from like $1.80 to $3.00. Kept some shares, added some, and then ended up losing a portion of those gains I had already locked in when I finally sold out.
I thought, for a long time, that the market was unfairly penalizing Otelco for the debt load. This is especially true, as Walk tries to make very clear, that the debt has been dramatically reduced through BK emergence and the years since.
I became more cautious as the debt maturity started creeping closer because management would not give any clarity on its ability to renegotiate with the banks. A warning sign.
I have stayed here (in background) waiting to see how the bank debt was handled actually hoping for a point of re-entry on the way back up. Heck, I was willing to buy at or around $7 if I felt that $10-15 was in the near future. The CF announcement did not produce the terms that I anticipated or expected and I do not see any immediate upside now. Still keeping an eye out to see if those bank shares come to market and really push down share price. May be one last opp to make some money here short-term. Otherwise, this continues to be a long-term hold at best.
No, not short, but did sell out of my position a while back.
I did not confirm the effect on interest expense going forward, but it will be higher than it was the previous quarter considering the higher interest rate (full quarter of interest expense at new rate versus old.)
You cannot argue against the fact that the interest expense will increase. If the effective difference in rate is 4% higher on $100mm of debt, that is $1mm more per quarter and $4mm more per year that is now gone and cannot be used to pay down debt. This means that if OTELCO had targeted paying down $30mm in debt over next 3 years ($10mm in principal paid each year) based on debt level and interest rate on previous facility, that target would be reduced to closer to $18mm ($6mm per year.)
Where did that $12mm go over 3 years? To the note holders and not to shareholders as this money was not used to pay down debt and improve market capitalization and was instead paid to note holders as interest expense. That was the point of the argument, I believe.
This was a good topic and is appropriately bumped for its relevance to what is happening here.
Pamjeffnelson makes some very good points. With the terms resulting from the new credit facility, it is more apparent that the note holders and management are the winners.
Hard to believe this stock was trading above $20 in May of 2013. Sold my last shares in July of 2013 as it looked like it would break $15 as a result of the poor digital revenue growth from Q2 2013 which is the point where I went negative on the company and warned others that print customers were not switching to the digital platform and those that were on the digital platform were not being retained.
Now it's trading for a mere two to three pennies a share. Complete shareholder destruction ... again!
I have to agree. The only thing that has changed is that interest expense will rise from preceding quarter. The higher interest rate will eat up cash flow that could have been used to pay down debt. Now, Otelco is under additional pressure to keep costs down and maintain revenues. The higher interest rate will slow the principal payments towards debt which means that it will take longer for the company to improve its leverage ratio.
The banks were unwilling to provide debt at a better rate because they have become increasingly concerned about Otelco's ability to pay going forward rather than considering how much Otelco has paid to this point. This is alarming for investors.
Like I said in another post to Walk, I am unsure what catalyst could take the stock higher in the next several years. The market only seems to be paying attention to the pile of debt that will still be there another 5-6 years from now How much debt is dependent on Otelco's continued stabilization of its operations. If there is any contraction in revenues or cash flow that affects their ability to pay down debt, OTEL stock will crater and likely move down to $1 area.
I do not like the risk/reward here. No upside without a buyout or capital raise through a preferred offering to pay down debt or some unusual material improvement in revenue generation. Downside is much more likely as time drags on and debt burden keeps rearing its ugly head with the bank mafia showing up each quarter to take their large bag of cash (in the form of interest expense.) Any downtick in revenues and cash flow is going to be devastating.
Company sold for $500mm. You would love that?
Management will be excited to tell you that they are getting you a 25% premium for your shares AND the opportunity to participate in the growth of Afrezza through your ownership of shares of the purchasing company.
Oh, one mistake. Geez. So nice of you to point that out. I was actually thinking about 1000 shares, but changed to 10000 to match the DXMM investment.
So, that would be $200k for MannKind. Still a far cry from the $3mm I will make on DXMM for about 1/3 money. The pumpers are going to make me $RICH$
Really? Rumor of a sale moved the stock all the way up to $1.20. Now, back to .90.
The PPS does reflect the value of the company. Better go back to Investing 101.
Over on the DXMM board, those pumpers think it is going from 3 cents to $300. LOL
I bought 10k shares for $350 (at 3.5 cents). I will have $3 million when it goes to $300 on a $350 investment. Gawd. It is easy to make money based on these message boards.
Should I buy 10k shares of MannKind for $1000. Shoot, that is only $20 thousand when it jumps to $20/sh. Guess I will stick with DXMM (that just got delisted as DXM and is default with its creditors and is ready to file BK - but, no, it is going to $300!)
I think your advisor knows more than you. At this point, he has proven to be "smarter."
If you actually put pen to paper and look at the reality of the numbers, MannKind's current financial condition, and what has happened over the past year leading up to Technosphere being handed off to someone else for possible future royalties and maybe $100mm at best in milestones and then hurdles still ahead for Afrezza, you will understand that MannKind is not worth more than about $500mm at best in a sale which is about $1 per share.
Look at Martens, he has been selling loads of shares to the count of over $2 million in profit over past two years. Has he been buying? No.
Selling at $2.41 looks smart, very smart.
I have never seen so many shareholders in a state of denial about reality.
If Martens did actually resign, then I think you know what is coming. Just think about why Matt ended up as CEO. He is not here to run this company for the next several years. If Martens is gone and Matt takes on the COO role, then it becomes quite obvious where this is heading.
MannKind's handing its Technosphere platform to another company was another piece of the puzzle.
MannKind, by name, will cease to exist within next several months. Another company is going to be taking ownership of Afrezza and the possible royalties from Technosphere. Problem is that the shareholders here do not understand that this does not mean $20 and does not even mean $2.
I am sure Al is at least trying to get a share swap so that shareholders here could at least possibly benefit from Afrezza's success in the future. Better to get shares in a small up and comer than a big boy that will only grow in small percentages. Deal at $1.20 conversion may even be too much to ask. If he could work out some kind of royalty consideration for shareholders, better yet.
In other words, MNKD could just be a royalty holding of Afrezza and Technosphere without any operations. Matt, some staff, and manufacturing facility would be part of the new company. MNKD share price would likely trade at a mere pittance until royalties actual developed which could be years from now, if ever.
Tell me when it becomes a bargain. $5? $4.50? $4? $3???
I am sure the banks will unload their shares. This will affect share price unless there is some arrangement made with a buyer to take on all these shares. That would be nice.
We likely will continue to see downward pressure with the knowledge that those shares are going to hit the market and more downward pressure upon the selling of those shares. Likely, there will be a small bounce afterwards.
Here is the problem. What catalyst is going to move share price back up? Paying down debt over past few years has done nothing for shareholders based on share price. Will it be any different in another few years all things being equal?
That is the problem with an investment here. No real upside unless management does one of three things:
1. Sells the company at a premium. Based on PPS of $5.50 and average market cap over past few years, hard to figure getting more than about $7.50-8.00/sh.
2. Merges or purchases another "growth" company for stock in OTEL that improves outlook. This could actually put downside pressure on stock short-term depending on how deal is structured.
3. Raises capital through preferred issuance with low interest rate and convertible option that would look good considering low market cap that will be used to pay off second lien and for acquisition/growth purposes.
I prefer number 3. Could be a very good move for common shareholders if done properly and management has a target that makes sense.
I was slightly biased negative when it broke $5 and maturity date on credit facility neared mainly because there was nothing positive from management. On the other hand, OTEL's financial situation had not really changed and had shown to be stable. It was nice to see the small run back up indicating that the debt would be refinanced in one way or another.
Positive: OTEL has the new facility and will continue to work down the debt.
Negative: Higher interest rate will eat up some cash reducing amount available to pay down debt.
Negative: Market appears to not like the overall debt load compared to the cash flow generated at this point which will continue to weigh on the stock.
Unknown: OTEL's ability to at least remain stable or grow without any capital injection. Could a preferred offering provide an opportunity without diluting common shareholders?
Unknown: Market appreciating OTEL's financial position. Ever since BK emergence, the reduction in debt has not improved OTEL's market cap. This is very disappointing. When will it change? If debt needs to get below $50mm before we see equity appreciation, that is a long time to wait.
At current share price, I am neutral or slightly short-biased considering all factors and overall market situation. If PPS drops to below $5 due to the banks selling their shares, then I will be slightly long-biased. Problem is how long will one still have to wait to see a 50% or 100% appreciation AND be able to unwind their position.
Telco - have not been around the board much and missed the info on ALSK.
I noticed that ALSK CF is structured with a second lien facility with higher interest rate similar in structure to OTEL's new agreement. That being said, it looks like the first facility is at 5.5% based on 1% minimum LIBOR and the second is at 9.5%.
Not sure how the facility rates changed over the three or four month difference, but OTEL is paying a much higher rate than ALSK for their two facilities. Similar dollar amounts overall. Not sure about a financial comparison between the two to merit such a higher rate for OTEL, but 14% for the second?
Still scratching my head. Otelco did a fantastic job paying down debt to the banks ever since BK emergence. Heck, they did a great job taking care of the banks during the bankruptcy. It was the shareholders that took the hit, even with their debt component.
So, those banks were not even willing to extend on similar terms? Based on Otelco's stable performance over past few years, you would think that those banks would like the stable return. As far as I can tell, the banks felt that their money would be safer elsewhere, like energy - LOL.
Otelco could not even find one group of lenders to cover the whole debt load which is very disappointing. A line of credit of only $5mm is equally disappointing. This new lending agreement screams high risk. What am I missing? Where is the high risk? If anything, Otelco has reduced risk by the non-reliance on Time Warner's contract and the major deleveraging while stabilizing revenues and earnings.
Will the market follow suit and determine that there is more risk with Otelco than meets the eye and continue to penalize the stock? The main catalyst for this rally has been the anticipation of the new lending agreement. While the new agreement eliminates the immediate risk of default (at maturation), it continues to put pressure on the company to perform.
I assume that once the new lending agreement is finalized, the banks will have the freedom to sell their shares. Is this correct? If so, I suspect they will sell those shares immediately. If they were unwilling to hold debt, they surely will be unwilling to hold the equity.
Telco, am I reading this correctly?
I have $85mm at annual interest rate of 8.75% based on the 1% LIBOR floor (7.75+1). Could not ascertain the rate based on the other option. I have the other $15mm at a whopping 14% with 2% paid in additional notes.
This is like having a second mortgage because the first lender is unwilling to give you all the money you need and the second lender comes up with the rest at a much higher interest rate. Very disappointing.