Why would you want to buy call options when you can buy the common stock at $3 w/o the risk of time expiration? It probably drifts a little lower as some funds may decide they cannot (or are not allowed to) own shares in a company where a going concern issuance has been made by auditors.That issuance is worth about a $2 per share hickey to the stock price.The isotope potential is the golden ring, but it is still a couple years out. They need to get some contracts in the base business to ensure survival until that eventuates. Unfortunately, we are not seeing any insider purchases which surprises me a little. Someone on the CC referenced that as well. Government spending is still really tight. It will come back, but very slowly. Bottom line IMO, it cannot get much worse and should gradually improve.
I can answer all your questions w/the following: Anything bio-related, micro cap or small float is a risk-off trade. That's all you need to know. This is a massive asset class rotation taking place that will overwhelm everything else including news, earnings, dilutive financings etc.
The market continues to punish microcap/low float stocks, with many stocks in that area 20-40% off their recent highs. It's a risk-off market after the hefty gains of 2013, and that asset class is not one institutions want to show on their holdings list at month-end. Specific to AWX, the share price is also likely discounting a weak first quarter (i.e., due to weather), and further delays for the injection wells. What the stock price is not discounting yet IMO is a total abandonment of the injection well business. I think the odds of that are small, but there is some chance it could happen---though I would not want to put a percentage probability on it. If it does occur certainly the stock could trade to the $3.50-$3.75 range, supported by cash on the Balance Sheet at that level, and some implied asset value for the golf courses and remaining waste business. Without the injection wells, however, both revenues and margin growth becomes tougher to accomplish.
Looks like they are down to only one analyst covering them according to Yahoo, so I'm not sure how relevant the estimate is. More relevant is the fact that no analyst wants to cover them for fear of putting their neck on the chopping block every quarter. Earnings are not consistent, predictable or reliable. Even the company will go only so far as to say they expect to either be profitable for the year as a whole or not. That's why you get the low multiple on this, despite a great product, limited competition and pristine Balance Sheet.
You might be right about that, as I just assumed transportation costs were a determining variable in where disposal takes place. I do recall reading somewhere that AWX said there were not a lot of well injection sites available, so there is probably decent demand for those that are. Also I would rather be on AWX's end of the business, namely disposing of toxic chemicals and helping solve the remediation issue, rather than the operator generating the waste via fracking. Think there are numerous private settlements and suits related to the fracking itself (though i am sure deep-pocketed operators view it as a cost of doing business). That AWX got the permits to proceed w/the well construction in the first place is a good sign for their part of the business. It will however likely to a constant battle against environmental groups, Sierra club chapters, local citizen groups, etc. In the end if you are going to allow fracking, you have to deal w/disposal of the toxic chemicals. The challenge is overcoming the NIMBY issue.
Of course the second level of analysis is that even if AWX is approved for commercial operation of the injection wells, they also need the oil and gas operators to be approved for hydraulic fracking to generate the waste streams that will drive the business of well injection. Approval of well injection is probably a pretty good bet, but AWX also needs drilling and fracking to take place in the general area of their injection wells. If the ODNR shuts that down, well, lets just say AWX's injection wells are a derived-demand business.
If not, the cost to construct them will have to be written off I suppose. I bet the regulatory authorities involved will be very circumspect about giving the go-ahead. Once the toothpaste is out of the tube and stuff gets pumped down the well there is not much you can do but wait to see if there is some impact. This thing could be studied seven ways from Sunday before taking an irreversible step. Seismic activity only 20 miles away has me a tad worried these two wells will lay fallow for an indefinite period. In a nutshell, they don't really know the full impact of the injection wells until after the fact; they know they have seismic activity within about 20 miles. I wonder if the authorities will err on the side of the known variable? The market is pricing in a doubt discount of about 15% on the stock price.
Someone exited nearly 41,000 shares (which for this stock is a lot of volume) on March 26, a couple days after the report you cited. Would you buy more stock below $5, or wait until the injection is actually confirmed to have begun before adding to any position? The risk is of course that the state authorities ban either drilling or injection, or both, say something like indefinitely banning all activity within a 25 mile radius or 50 mile radius of where any significant seismic activity has occurred.
Thx kenbg for the value-added post. Sounds like the regulatory authorities are in no hurry to allow the injection to begin, even though the project still seems promising from AWX's perspective. At a minimum, the start looks likely to slip from the target date of the end of Q1. Stock is still cheap, and this is probably not a big deal unless they bar injection altogether. Still, it shows the perils of issuing an anticipated start date and is frustrating for sure. I suppose that explains the stock's recent weakness.
This is now selling for something like an EV/Revs of 0.14 X. The only thing that would explain that in my mind would be an issue w/the injection wells, but I have not seen anything in that regard. I mean that is the only change at the margin in what the company is doing from an operating standpoint.That does not mean someone doesn't know something though. Have about a one-third position here, but don't want to get too far out on the limb in case there is a land mine I am unaware of. Good support at $3.75, even better at $3.50 but I doubt it gets that low.
Stock price seems to be saying the whole injection well thing is not going to be a big deal. But at the current price you are paying for the golf courses and related facilities and company headquarters and getting the entire waste disposal business for free IMO---at least on an asset value basis. Would be nice if they gave some guidance on the injection wells, because as is always the case on Wall Street, in an information vacuum, investors will assume the worst.
Expect this will get trimmed by holders until earnings are reported. There is a lot of doubt that these guys will produce after two underperforming quarters in a row. The COO stock sale in March was hardly a vote of confidence on the upcoming results. We'll see. It's the first full quarter under the new CEO's watch. You never get a second chance to make a first impression. Maybe he will wow.
by dipping in I mean selling stock they own in the company. their shareholdings appear to be just a source of funds as needed for living expenses.
There may be some fear that Ohio could ban fracking, not on a statewide basis (although I suppose that is a remote possibility), but on a well by well, or specific regional area basis. Again not sure if AWX's injection wells are in a sensitive fault-prone area or not. The company hasn't really provided any transparency in that regard. Really, they don't disclose much beyond the bare minimum required by the SEC as a public company.
Didn't mean cooked as in cooking the books. Meant cooked as in finished w/the whole insulin deal since they terminated their agreement for the supply of recombinant human insulin. From an accounting standpoint there is nothing to cook, they don't have revenues. Thought that was understood, but I perhaps should have been clearer nonetheless.
There might be a situation where certain fund(s)/institution(s) have to divest of a holding once an auditor issues a going concern explanation, although I am not certain of that. It will certainly give any fund or institution that was looking to invest, pause, whether in observance of a Prudent Man Rule, or just exercising an abundance of caution. That said, PESI has already obtained waivers of its loan covenants through the Q1 2014 and a more lenient arithmetic formula for the covenant requirement through the remainder of 2014. In short, their bank appears to be "working w/them". Secondly, after Enron, and the Lehman collapse of late 2008, auditors are going to be very conservative well beyond the first principle of accounting (i.e, when in doubt be conservative) in order to CYA--especially after what happened to Arthur Andersen. Third, insiders are among the biggest vested owners of equity in the company. Almost any corporate entity who has the government as its prime/dominant customer is going to come under extreme scrutiny, given the uncertain timing of government spending and Congressional gridlock. But now, w/a new budget approved including potentially more spending for clean-up, PESI should be in a better position. It sounds like they are close to cash flow break-even perhaps as early as the current Q2, and that they still have borrowing capacity. So, yes, the going concern explanation moves them higher on the risk scale and the stock has become even more speculative just by definition. But because some entities may pull back it also makes shares easier to acquire. A few days ago I could not get all the stock at $5.09 that I wanted. Yesterday I added at $4.27. It is very speculative, and still a small part of my portfolio. The risk is it goes to zero, the reward potential is also very high IMO. The bottom line may be that the government has a decision to make w/regard to the company's future.
Market is letting the seller exit about 40,000-50,000 shares per day at trickle-down lower levels each day. Expect that to continue until earnings are reported in early May. Someone wants out ahead of the report.