The Coming of “Value Base” Hostilities Spell CashHorrors of horrors it happened, swiftly and unexpected a letter arrived expressing serious interest in acquiring a control position in the company at $ 1.50 per share - in cash.
Most companies do it regularly. This one prefers to do it when nobody’s watching. Others are at it brazenly if fleetingly.
The “it” is building value for shareholders, ignoring the “street”, the chat-rooms, the desires of impatient traders, the doomsayers, and the edgy shareholders. As for the first, well there haven’t been much of that lately, crisis and all, as for the second, well I have been writing about them in my capacity as an automobile after-market analyst for years. As to the third they spurt and as quickly as they appeared the value built on hype is gone.
Falken Industries (OTC : FLKI) has been amazingly ignored by the investment banking community and that suited it well. Rather than concentrate on short term results, it set about since 1997 becoming one of the world’s foremost companies in its industry with product conceptions trading the world over. Try Googling the symbol FLKI, you’ll see what I mean.
Then horrors of horrors it happened, swiftly and unexpected a letter arrived expressing serious interest in acquiring a control position in the company at $ 1.50 per share. Management is on overtime. Two press releases later we know that there is no ambiguity in the effort to fairly and properly consider the offer. We also know that we’ll get more news and it’s likely to suggest an increase in price. What we must know also is that management will dispense news on a “has to” basis and through minimal sufficient media.
Does this sudden attempt to absorb a thriving small but publicly traded company with no control block say something about the shifting landscape of the post crisis-world ? Are acquirers trying harder to find the gems in the backdrop ? Investment bankers were always too high-minded to consider this company, and until this year’s near shareholder mutiny at the annual meeting compelling the creation of a communication cell to consider the interface with the investment community, management interest for the shares were strictly limited to keeping their nose on their business, creating value, off balance sheet value such as brand value, intellectual property, distribution network etc. This company has done it all, and has done it well: witness a starting offer at $ 1.50 a share when the stock was trading at a dime !
The company did its part to ensure its focus on business by preserving its anonymity status in the investment community and it is likely that it will do all it can to downplay its exposure even now. Management heretofore has been firm in its conviction that a control position would inevitably impact upon the company’s ability to develop creative conceptions, it did all it could to avoid addressing the point that it’s market cap grossly underestimated its true value (by about 20:1 ! To those that argued that high stock value was a symbol of economic virility it convincingly countered its world-wide renown, its award winning product conceptions, its reputation and the envy of its colossal competitors. Problem is that it has done its job too well, and created value that can not longer be fully ignored.
This marks the coming of “value based hostilities”. The Company is worth at best guess about $ 2.50 to $ 3.00 a share when taken as a whole. It trades at under 20 cents trading recently on respectable volume.
The time has come for the stock price to reflect the company’s standing in the industrial community, and compressing the release of news through the pinhole of a needle is not going to be easy. Investors are still obviously unaware of the situation or arguably, are giving management’s reputation for incredible creativity to preserve its independence too much credit. Recent trading at 16.5 cents per share suggests that traders believe that the probability of a closing is only about 10%. There have been other acquisition rumors in the past but this one comes with the drum of solid cash at ten times the current trading price, and that’s just for openers.
Falken Industries Ltd OTC : FLKI is a diversified industrial conglomerate that operates in Chemicals, Wet Wipe and Biodegradable Technology. Falken Industries Ltd is the concept behind more than 160 products distributed through a network of global platforms and the recipient of trade awards for innovations, biodegradability and environmental and health quality standards.