RE:RE:Would shareholders be upset with $0.70 buyout?snajem wrote: Not an unreasonable comment, but you may be overthinking this a little bit. This is a localized business with licensing / quota restrictions on new entrants. So a scarce asset. Attracts a local crowd of patrons, not the business travelers / vegas type traffic, so I would argue this is less cyclical. Frame this business as a large restaurant chain on steroid (gambling) with a captive local customer base, printing money with minimal capex. Great cash cow to own. When you're talking valuation in the 5x-7x EBITDA range, this is a low duration asset, so a buyer shouldn't care too much about rising rates (ie. because easy to service P+I given low valuation). Worst case, you can probably expect a 10% - 15% revenue decline in a deep recession, which is not even the consensus view right now. Good comps would be Gamehost (also localized business), which saw a 20% decline in a very deep recession (Alberta oil crash of 2015-16).
They are selling at a cyclical peak, I agree. Net net, you may get a lower multiple (say 5x, instead of 6x) but on a peak trailing EBITDA number -- which basically shouldn't impact your cycle adjusted valuation. A control buyer will be more concerned about locking in this asset, and will look through the cycle to assess valuation... not just 1 year out.
Still think we get $1.00 based on trailing EBITDA and 5x EBITDA.
By the way, $0.70 implies a 2.5x EBITDA multiple. Considering a buyer could access reasonably priced debt financing at 3.0x EBITDA, they could effectively buy the company with no cash equity at $0.70. Why would a seller agree to this?
From memory, net cash is $23mm.
Properties, if they do own all four, could be valued $4mm to $10mm.
Licenses and businesses could be $5-10mm each.
I think you guys are overvaluing these cardrooms when comparing to full suite of casino offerings of competitors.
Plenty of room for negotiation here.
Said it before, not much on the table from mom and pop shareholders.
Insiders worn out from pandemic, may need to exit, and if this is the only buyer then you're not getting a premium price.
Business cycle rolling over and now in contraction.
Consumers less money to spend and wager.
You ain't getting top dollar for this business at this point in time.
See how it goes.
Going back a decade, post-credit crisis, I figured TNA would be in financial difficulty today.
No problem admitting that I was wrong about bankruptcy but I also note that there's too much optimism about buyout from resident stock pumpers.
Let's say a deal cannot be agreed upon. Stock goes back to $0.40-$60 range and will be stuck there.
If this group intended to grow this business, then you'd see reverse split and application to list in US and exit Canadian penny stock exchange.
Fun to watch, but has been too high risk for me to commit capital to.
Now if you said that they are partnering with FN to roll out digital games, that's a whole other story... Then they wouldn't be selling, they would be building casinos.
So there's potential but not sure the big shareholder in Florida with 37.5% of company is seeking FN partners in Washington. But you never know. Maybe he's a big-time poker player who's bluffing that TNA assets are the nuts.
We'll find out in coming months.