RE:What are you all smoking?What are you all smoking part II.
I should have mentioned this part as well. In the GFI deal with SICPA, besides the cash they gave us, they also agreed to pay a minimum royalty of $9 million spread out over a number of years. I don't remember the exact dollar amounts, or when the first royalty payment was received. Was it in July 2016? Anyway, the deal called for something like $1.5 million to be paid to the company, minimum, per year. As we are still a month from the two year anniversary of this deal, have we currently received $2.25 million or has it actually been $3 million now? I'm just curious as one would mean that SICPA still owes us $6 million, and the other would mean they owe us $6.75 million. It is kind of important. Why?
Well if we currently have about 90 million shares and currently have a 7c share price, that means we have a $6.3 million dollar market cap.
Now if I'm right about still having 8 cents per share of net cash, or to put it another way, $7.2 million dollars in the kitty, and having SICPA currently owing us MORE than our current market cap, then why on earth would they not just take us over for a reasonable premium right now? Say 30% higher than today's price? That would only cost $9 million dollars or so.
I know, you all think that is insane right? "NO WAY WOULD I GIVE UP MY SHARES THAT CHEAPLY!" A 30% premium gets most deals done these days. But lets say SICPA is willing to pay the full 'cash' price for the company. Would you accept their offer then? What would be the full cash price? In my mind, that would be the dollar amount they still owe us from the royalty plus the net of debt remaining cash balance still on the books - lets say at the end of Q3. So $6 million or $6.75 million plus my guesstimate of about 8 cents per share, which would be about $7.2 million more.
$13 million, $13.75 million, or $13.95 million depending on which numbers you use. Lets go low and use the smallest number. Divide $13 million by our rough 90 million share count and we get 14.4 cents per share. A greater than 100% premium to today's closing share price. Would you accept that kind of an offer now?
What would be the cost to SICPA? Well considering it is only the cash they owe us and the cash we have left from their deal two years ago, it effectively costs them NOTHING. They get the rest of the company for free. GFI doesn't require any more royalty payments. They get all of the rest of EUO's technology and assets for free. They can fire every single employee and only have to pay some severance. Or, if they actually believe in one or two of the projects EUO is working on, even better for them. They get those for free and can keep developing them if they wish, for as long as they wish.
What is your upside? Well, who among you is going to spit in the face of a 100% premium to the closing price offer? I know I wouldn't. I'd take that sucker and run laughing all the way to the bank.
Does this all hinge on SICPA being the entity to make a 100% premium offer?
NO!
If my pockets were deep enough, I could offer $10 million for all of EUO today, fire everyone, pocket my $7 million in cash (less the costs of shutting it all down), wind up owing $3 million or so, and know that SICPA still owes me $6 million, or $6.75 million over the next 4 years or so. I'd be guaranteeing myself a 100% or greater return on my $3 million NET investment and have it guaranteed to be paid to me in just 4 years. A hell of a deal! And on top of that, I could still sell off the rest of the inventory, patents and assets of the company for who knows how much.
You would be getting a 30% premium that nobody else is offering, or likely to offer, outside of SICPA. Most of you would be smiling about it. Relieved to finally be out, and many out at close to their average cost I'm sure.
If I was the buyer, I know I'd be happy with that kind of deal. If I was SICPA I'd be going to the BOD and offering to top it of course. IF they could get us longs to accept anything less than a 100% premium offer for the company today, that would be a massive win for them.
So I ask you all again, WHAT IS THAT AMAZING STUFF YOU ARE ALL SMOKING?
Of course, this is just my speculation and guesstimates of current values, guesstimate of what the amount is still owed on the royalty, but it should give all of you longs who are thinking of selling at these crazy prices something to think about.
Have a great long weekend everyone.
And hey, if you think I'm totally wrong or off my rocker, please let me know and especially let me know why. No mindless bashing please. That will just earn you more ignores. Lets have a decent discussion about this.
Joseph_K wrote:
kidl2, when April 30th rolls around next year, let me know if you were right about how much cash the company had left at the end of the year.
Personally, I know my guesses for each quarter have been very accurate for the time I've been involved in the stock. My projections tell me the company had 8.07 cents per share net of debt in cash and cash instruments a week ago at the end of Q3. I give no value to the NPV of the royalty stream or to any of the divisions of the company. Just on a net cash basis alone, this should not be trading at 7 cents. However, over the past two years, I have witnessed it trade below cash numerous times. I can't remember it ever lasting more than a week though.
We will find out if I was correct in 7 weeks when they publish the Q3 numbers.
Until I have reason to believe otherwise, I'm going to keep buying these cash discount shares and get the rest of the company as a free play. Maybe Bruce will surprise us before April 30th, 2018. We shall see.
Cheers