RE:im a really pissed off.. i dont know what to expect
patrickp wrote:
i am loosing so much on this stock, and i dont know exactly how i feel about the lease. does it mean they can't sell the product ? do they have at least a lease contract ? on what term ? im in the dark regarding this news release and a bit desperate to be honest.. cheers.
Here's my take on this...
I understand the frustration from seeing the stock diminish that much in one day.
I don't think this is a matter of not being able to sell the torches but more to do with recurring revenue. Let's say pyro sold $1.5 billion worth of torches right off the hop. That's great, initial investors that got in early would surely love it watching the stock price fly up. The issue after that sale is recurring revenue. Sure they would get some from maintenance contracts but what about new torch sales? Now they have to run around and sell more torches to customers. How long do the torches last before needed to be replaced? If the company owns the torches outright they will be more inclined to keep repairing an old torch. Now new investors looking in may be spectical to jump into a company that was great as selling torches that one time to that one company but how sustainable is that?
Now let's look at leasing. Pyro sells $1.5billion in torches through a lease. Understand that when pyro sells these torches they get an upfront payment for the torches from the leasing company. The best part is they can charge a premium for the torch through the lease and work out a plan with the companies to replace said torches every 3 years, 5 years, 10 years etc. it will all be spelled out in the lease. Now pyro has the upper hand because they can replace these torches and thus we get the recurring revenue. They may also have a program where they take old torches out and refurbish them and then resell again.
the companies are happy because they don't actually own anything and thus don't have to write off and depreciate the assets. They save more capital money and thus can use for other projects. The beat part is they are paying a premium for being able to lease the torches so it is a win win for all parties.
Let's say pyro has 3-4 lease agreements out initially worth $1-2 billion dollars. If the terms are 5 years we now know as investors in 5 years we are gauranteed to see revenues in at least 5 years assuming the company doesn't even get off their butt looking for more customers.