RE:For the gamblersOk, I'll bite.
Just to be clear, outside of the substantial up front cash payment EUO received from SICPA in the GFI sale, EUO was to also receive 5% earn-out payments on all future GFI contracts.
This is money SICPA is contractually obligated to pay to EUO for a limited amount of time.
If I'm remembering correctly, the deal was done in January 2016 and the 5% was for all GFI contracts signed in the following six years. Is that right? If I'm understanding this correctly, then any GFI deals signed in the next 3.5 years will require SICPA to make a 5% earn-out payment.
If they win a contract, no matter what the cost is to SICPA, they should still have to pay EUO their 5% right?
If SICPA bids at a price that causes them to take a loss for a few years because of their contract with EUO, then they must be expecting the contract, or future contract renewals to be lasting for much longer than the 3.5 years left on the deal. Otherwise how would they make any money on the bid?
I suppose SICPA could negotiate with EUO for a buy out of the contract. Would EUO enter into negotiations to do this before finding out if SICPA even wins whatever contract you are referring to. Which one is it by the way? In a sense EUO could be hedging by negotiating before a contract announcement deadline. Obviously if SICPA doesn't win it, EUO gets 5% of nothing. Perhaps getting something less than the potential value of the 5% of the contract would be a worthy risk to take.
Lets also not forget the $9 million royalty that was part of the deal. I believe EUO was collecting $750,000 every July and January. July 2016, January 2017, July 2017, January 2018. By my math it looks like they are still owed $6 million. I assume an EUO negotiation for a payout of the 5% would also include winding up of this $6 million as well, in a single settlement cash offer.
How am I doing so far? Do you think I'm on the right track here kidl2?
Personally I've kind of been hoping to see SICPA make a takeover offer for EUO instead, and let the shareholders decide if it should be accepted.
It might be the cheaper way for them going forward.
Lets see, the last numbers reported...
Q1 2018 EUO reported
Cash and cash equivalents $ 5,410,306
Marketable securities $ 0
Amounts receivable $ 595,707
Accounts payable and accrued liabilities $ 1,269,745
Deferred tax liability $ 0
Add it all up and you have a rough net cash position that looks something like this:
$ 4,736,268 / 90,750,238 shares = 5.219 c/sh
- at the end of Q1 of course. I have no idea what they will report when the Q2 numbers are out.
However, a back of the napkin calculation looks like $4.7M - future Q2 loss + NPV of $6M in owed royalties + whatever the 5% of SICPA GFI deals is worth (or can be negotiated to) + whatever the value is of assets, inventory, intelectual property, patents, etc (the rest of the company essentially) - whatever it would cost to lay everyone off.
Is $10 million for all of this too low? Divide that by 90,750,238 shares (assuming no warrants or options are in the money currently) and we are looking at 11.02 cents per share.
As we are only trading at 5 cents per share, what would be a fair takeover price? One that rewards current shareholders and still makes sense for SICPA to just take the whole company right now? 7.5 cents/share? 8.5 cents per share? More? SIPCA can still save millions, get the 5% earn-out payment problem out of the way, and we shareholders can walk away with a nice premium to the current share price.
A 50% premium if a deal gets done at 7.5 cents/share.
A 70% premium if a deal gets done at 8.5 cents/share.
Does this make sense to everyone? If I'm way off base, please let me know and why.
Thanks
PS, no whining please about having average costs of 10 or 20 cents. If you rode it all the way down for the past two years, that is on you my friends. For what EUO is TODAY, a 50% or 70% premium would be a lovely gift in my humble opinion.
kidl2 wrote:
There is now a contract within reach. The odds of SICPA winning it has improved from 3 to 1 to 2 to 1.
The pricing of this contract leaves essentially no room for EUO’s 5%.
Anyone care to guess what happens if SICPA wins this contract?
PPS, should I whine again about the majority of the volume getting redirected to the alt-exchanges YET AGAIN today? Looks like 100k at 5 cents that could have wiped out a substantial portion of the public (TSX-V) asks. More institutions having fun at our retail expense I suppose.