MCTH doesn’t have anywhere near the cash to close the acquisition. According to the recently released 8-K, MCTH is going to pay $26 in cash for Trustaff. Based on their most recent financials, MCTH only has $675k in cash.
Based on these facts, I can think of a few possible scenarios:
Scenario #1 (unlikely) - MCTH has somehow managed to raise $26M dollars in equity in the past 3 months without telling anyone about it either through a press release or SEC filing (this seems unlikely considering the company’s preference for issuing press releases every 3 days). Additionally, if they had managed to raise this amount of money is would be extremely dilutive to existing shareholders.
Scenario #2 (unlikely) - MCTH has somehow managed to borrow $26M dollars. This seems incredibly unlikely considering the very tough credit markets combined with MCTH’s horrific financials (2009 - $6M revenues and $7M in losses). Furthermore, if they had secured this type of debt facility, I would they would be required to disclose it in an SEC filing.
Scenario #3 (likely) - Now that MCTH has announced the acquisition, they are trying to figure out how to raise the $26M to pay for it. They will likely try issuing new shares of their artificially inflated stock to raise cash. This will seriously dilute existing shareholders. If any institutional (or retail) investors are stupid enough to invest in this company based on MCTH’s artificially inflated stock price (vs. AHS and CCRN) then I give full credit to MCTH for being incredible pump and dump sales guys.
Scenario #4 (likely) - Now that MCTH has announced the acquisition, they will string Trustaff along for several months while trying to raise cash. If MCTH is unsuccessful in raising cash, MCTH will try and change the terms of the deal and convince Trustaff to take artificially inflated stock (vs. AHS and CCRN) instead of cash. If Trustaff is dumb enough to take stock instead of cash, then I give full credit to MCTH for being the best pump and dump sales guys on earth.
Although I am highly skeptical that this transaction will ever close, best of luck to MCTH in closing this transaction.