Can't wait for the proxy! I think something is going on here. Taken private? The CEO talks about how undervalued OTEL is, and so far no action to back up those words. A bid to keep the price down? Time is running out for any insider activity this Q. We will know soon if anything is in the works.
Not sure, but the former 2nd-largest holder, LEG Partners, has been selling about as furiously as Aristides has been accumulating so it might be a wash. The lack of OTEL insider activity remains a mystery to me in light of Weaver's comments on the CC.
Obviously HTCO is a larger company than OTEL with double the revenue. But still, a $186 gap in Market Cap? It is insane. They are essentially in the same business. Those HTCO numbers are from its 3/3 PR under "fiscal outlook for 2014." Check it out. Forgot to mention that OTEL finished 2013 with $2M more in cash than HTCO.
HTCO was recently able to negotiate a more favorable bank agreement. OTEL doing things like making a voluntary extra principal payment of $1M last quarter can't hurt their chances of doing likewise. It's clear that is their intention. If OTEL is able to restructure its debt, you won't see its stock price trading in the $5/share range.
It's encouraging Aristides Capital has taken a 6.2% position that was disclosed yesterday.
For comparison purposes, let's look at OTEL vs. HTCO, a company that is similar in some ways. They just reported 4Q and offered guidance for 2014. The market assigns HTCO a Market Cap of $202M while OTEL is at $16M, some $186M lower. OTEL's EV/EBITDA is just over 4 while HTCO is over 7.20. The following 2014 numbers for OTEL are based on its bankruptcy Disclosure Statement that turned out to be very accurate for the just completed year.
2014 Year End Debt......OTEL $114.3M..........HTCO....a range of $133 - $135M.
2014 net income.............OTEL $6.3M.............HTCO...a range of $6.4 - $8.4M.
2014 EBITDA.................OTEL $31.7M...........HTCO...a range of $47 - $49.5M.
FWIW, OTEL's "guesses" did not take into account its purchase of Reliable Networks in January. While HTCO does pay a small dividend, it seems to be the Market is awarding extremely different values for two similar companies. While OTEL's expected EBITDA is lower, it will finish 2014 with $20M less debt than HTCO.
This $186M disparity in Market Cap between these two will narrow at some point, IMO.
I think OTEL has done a masterful job navigating a very difficult situation in the little over a year I have owned shares. Debt has gone from $271M to $127.9M in less than a year. There has been no validation however yet, to make the market listen. Listen to the CC. Weaver seems genuine that OTEL shares are cheap. Where is he then? The Management Incentive Plan (expected on the ballot for the Annual Meeting) would be good for both employees & stockholders. It would have a much better chance of passing if a little love from management was shown here.
Hard to gauge where OTEL is at here.
After 2Q earnings a Director purchased 1K shares @ $8.87/share.
After 3Q earnings the CFO made a small purchase of 400 shares @ $7.49/share.
After 4Q earnings there have been no insider purchases two days into the two week window that ends on 3/14. This despite the stock price flirting with its all-time low and the CEO spending the last 5 minutes of the recent CC talking about how undervalued he believes the stock currently is. And stabilization of EBITDA & revenue in the 4Q. Who knows, maybe everyone is taking their time. But as one of the cheapest telco's out there I'm not happy there has been no support for the stock at this point.
On Monday 3/17 if you're holding OTEL stock you become a shareholder of record for the Annual Meeting in May. It will be interesting to see what the Company has in the proxy to vote on then.
The former 2nd-largest shareholder may still be selling putting added weight on the caboose. I would never think of selling a share down here but will be extremely disappointed if the conductors don't toot their horn this week after listening to the CC.
The locomotive conductors are aware of how the train is doing two-thirds the way into 1Q/14. The conductors have a two week window to purchase shares of the train that begins tomorrow.
The conductors will more than likely bring up the Management Investment Plan in the proxy around April 1st. Since OTEL has lost half its Market Value since it emerged in May I would think it will be a tough sell to have the shareholders agree to 10% dilution if there is no direct support here.
This train was at $7.50/share split-adjusted at this exact time last year with $271m in debt, uncertainty of the bankruptcy outcome, uncertainty of where revenue & EBITDA may bottom, and possible total shareholder wipeout.
Today, OTEL trades at $5.55/share with$127.9M in debt, a reduction of $143.1M compared to this time last year, one of the shortest bankruptcies on record, stabilization of revenue & EBITDA from the 3Q to the 4Q, and they even managed to acquire a cloud hosting company in a creative way since the unfavorable bank agreement is extremely restrictive.
For all of this, the Market valued OTEL at $6M more for paragraph one than paragraph two... the present.
All the train needs to get back on the track is a few of the locomotive conductors to purchase shares to show the Market its undervalued. There was talk about it on the CC, now let's see some action.
You are correct. The MIP would substitute stock non-cash bonus for cash bonus which is excluded from EBITDA and in theory at least more closely aligns stockholders & management, as their financial success would be tied to OTEL's share value.
Voted for MIP last year, but due to an odd way they recognized votes (people that didn't bother to vote were counted as a "no") it failed. The measure had more "yes" votes than 'no" votes but a lot of people weren't paying attention. I'm almost 100% certain the Board will bring MIP up again this year, and I will be voting "for" it because of the reasons mentioned.
"We just do not want to dilute the heck out of shareholders at this depressed valuation."
That was a concern of an investor on the CC with regards to the Reliable Networks deal. If financial metrics are met, the former owner has a shot at 200K OTEL shares. Is it worth that? Who knows.
"Right now, it is obvious that management is finding the most value by using excess cash to pay down debt and reduce interest expense."
Not really, they have to. It's good OTEL is paying down debt at an accelerated rate, but OTEL's restrictive bank agreement REQUIRES most of the excess cash go to the banks. Those "Excess Cash Flow Payments" are in the bank covenant. Since its based on a percentage its good to see the amount trend up from 3Q to 4Q. If there wasn't any ECF payment in a given quarter, it would mean things aren't going so good.
Wonder what Curtis would think of that. You should run it by him.
FWIW, if the Disclosure Statement is accurate OTEL will pay down $14.4M this year....more than $3M per quarter. They nailed it in 2013.
Cloud will not show up until Q1/14 since the Reliable Networks deal wasn't until after the 1st. Weaver indicated to not expect much there until Q2.
Forgot to mention in the other post that in the Disclosure Statement OTEL pegged 2014 Cap Ex at $7.0M for 2013. In reality they only spent $6.2M. They are projected to spend $7M again this year, but barring something that could generate immediate growth, I doubt they'll go that high again.
Revenue was slightly higher in Q4 over Q3 and EBITDA stable at $7.3M. Its been some time since OTEL had this occur so its reasonable to speculate this may be the bottom. Sure, the usual stuff like residential RLEC voice lines continue their move downward, but there are some encouraging signs. HPBX seats are up 37% over 2012. Wholesale network lines (excluding the expired TW contract) up over 23% and RLEC business voice lines up 7%.
We will see in the next week if management truly believes its shares are undervalued. Action speaks louder than words.
I'm surprised nobody has taken this private. Its still a good cash generating machine. Take it private, retire the debt and its lousy bank terms, save money by not being a public entity, and book a nice profit. I'm not sure if I'm more surprised that this has a Market Cap under $17M or that Private Equity hasn't taken advantage of that fact yet.
I assume you're talking about the Management Incentive Plan...the one that was defeated at last years Annual Meeting. There are no incentive options now to my knowledge, however I'm almost positive the Board will try to resurrect the MIP again this year and put it on the ballot.
In the meantime, at this price, it would be welcome to see some direct purchase action from those who believe the stock is undervalued.
Just had a chance to listen to the CC replay. Quoting CEO Weaver:
"As a shareholder I'd like to think that the shares are undervalued based on where we are at and what we see in the industry. It's my personal view that the current market price of the shares don't reflect their value."
I agree Mike. If that's how you really feel you can take advantage of that fact in a couple days!