It's been like watching a slow motion train wreck. The end is inevitable. Everything is going to get #$%$ away.
The whole thing is a mess. Executives quitting. Almost as many quarterly pre-announcements as actual earnings announcements, when they actually have earnings. Forward expectations for new products being tempered. Acquisitions that weakened the Balance Sheet and added plenty of goodwill. Volatility that just never goes away despite near record backlog. Difficult currency exposure that probably lasts at least another year (Druckenmiller says major currency swings last at least two years). Outstanding litigation and foreign withholding issues. Weak global economies. Benchmark gross margin targets that are not hit, and pretty low relative to the competition (e.g. FARO) even if they are eventually hit. The company should be sold to a larger deep-pocketed entity that needs to expand its metrology exposure.
Where did this first trade when it came public 17 years ago. Like near $6.63/sh. or something close to it? What's that annual rate of return equate to? He'll end up leaving little or no legacy
meant debt at pennies on the dollar and assumes a 5-year cyclical downturn which are are not quite one year into. The rigs have been refurbished and maintained to last for quite a while longer.
In the last deep cyclical downturn for drilling 25-30 years ago, many, in fact I believe most, offshore drilling companies zeroed out. You want to own the debt in this industry not the equity.
Go ask the limited partners in that injection well venture how optimistic they feel. Go ask shareholders of the common stock how much they feel the management has enhanced shareholder value over the last two decades. Down to the sea in ships!
Balance Sheet has been obliterated. $12.5 million net cash swing (cash-debt) in 15 months w/nothing to show for it but continued losses on the P&L, including a big first quarter loss. Not sure what real estate is worth in Ohio. They have a fair amount of it in acreage, buildings, resort, golf courses, tennis, swimming, banquet facilities. But they are not making money and are now in a net debt situation to the tune of $2.5 million. The company is being run into the ground. The unwind and ultimate outcome seems almost inevitable. $3 per share is a gift if you can get it. $3 per share may soon be but a memory. To realize the RE value you cite, someone has to want to buy it and more importantly someone has to want to sell it. The latter is my concern as it may not occur to that someone until he is in a forced sell situation. Then your RE value drops drastically. JMO. BTW oil is in a multi-year cyclical decline. Even if you disagree, look at the cash burn rate of this company over the last 15 months. How much longer can they hold out until oil recovers? The CEO wants to put even more money in the hotel/resort. More debt or more dilution, certainly more risk, maybe more potential reward but they might run out of time.
They need to conserve the cash and suspend the dividend. Obviously paying the most recent dividend did nothing to help the share price. All it did was create a taxable event while investors lost money on paper.
div going ex a couple days ago accounts for only $0.50 per share of a $1.30 per share decline as of early this morning. The volume is rather small so it is likely someone who wanted to stay for just one more dividend payout and then close a position, or a player(s) stripping dividends in a high payout situation. Best move would be to eliminate the dividend along w/the dividend strippers and conserve cash from here forward. Kind of depends on the company's decision of what they perceive as a "prudent cash buffer" and how long they see the drilling downturn lasting ( a couple years versus five or more years).
CEO has blown through the vast majority of the company's cash and taken on $5 million of revolver debt in 15 months. Investors, especially institutional investors who should know better, are just sitting by and watching the debacle. For most retail holders, well, they will be like frogs in a pot of water brought to a boil slowly. They won't realize it's over until its too late.
$1 per share is probably too low on a breakup value basis. Granted the injection wells are probably worthless unless they get regulatory or court approval to resume operations at well #2 and also oil prices rise. The remaining waste business doesn't make any money, so hard to value that at anything but a nominal amount beyond what a few backhoes and excavators are worth. The golf courses, hotel and resort facilities taken together are worth how much? In a still weak economy where they don't generate a profit could they be worth maybe $10 million? less net debt of $2.5 million would leave a couple bucks per share for shareholders. All depends on what you think the golf properties, hotel resort and associated underlying land value is worth. And that will depend on your outlook for those properties going forward. (present value of discounted free cash flow they generate). But the company's cash (although a Balance Sheet snap shot item) is a moving target and is being burned or invested wisely depending on one's point of view.
That's a $12 million+ swing in net cash in 15 months. They have $2.5 million cash left (and the revolver is maxed out). You do the math. Tick tock. What are they gonna do, leave the resort/hotel project not completely finished? Time to call a PE (e.g. Blackstone) firm w/ an interest in real estate/resort property and take it private. They will have to trim all the other stuff away as no one will want what remains. Someone may want an interest in golf courses and hotels--- even in Ohio, maybe.
from cash of nearly $10 million less than a year and a half ago to net debt of $2.5 million currently, and still no earnings. That about says it all.
I realize cash use from operations may be a bit front end loaded in the first quarter of the year, but the general view still holds that cash may be required depending how big they want this hotel-resort to ultimately be.
or increasing stakes on balance per the 13F reports for the end of the first quarter, w/the exception of Gruber & McBaine. But really there is never much volume here. You get a six figure share daily trading volume maybe once every month or two. It looks like a bunch of day traders pushing a few thousand shares back and forth daily for a dime or so and making a few hundred dollars each way. Probably the rest of the universe that isn't playing FanDuel. I suppose a couple hundred dollars a day pays tuition for your kid's college. Stock needs a breakout catalyst to take out the day traders, otherwise the channel remains low $3s to high $3s, back and forth.
Rick, I think you are not the only one looking at it as a "book value play". The stock looks like it sells at about a 66% discount to Book Value even if they were to take a 100% write-off on the injection wells. The wells are therefore not a huge consideration, but the company should have probably known better than to bet there given all the discussion about potential earthquake issues others had experienced in that general area trying to do the same thing. It was not an issue in hindsight, it was a well know risk that if any seismic activity were to occur, they could face a potential regulatory shutdown. I think day traders may have noticed however that the shares are trading at about 0.3X book even allowing for a well write-off (which may or may not not even happen), and that the company's debt is relatively cheap as well. The question now becomes whether or not the company has to issue more debt or shares to further lever up the hotel/resort bet. And most importantly whether that bet can pay off in Ohio.
I don't recall PESI ever getting any DOE funding for its Isotope project, am I right about that? If not, why not and why did they have to go to Poland for the money? Setting it up as a separate subsidiary was a smart move as it can be separately funded and perhaps even acquired by another entity as a "defensive " move w/o having to acquire all of PESi itself. In any event, there is close to zero credit being given by the market that this will ever turn into anything commercially viable for PESI, so there is only upside and no downside to swinging for the fences. You do wish they had more money and DOE backing behind them however, or at least a big company like GE interested.