You are being overly positive on Play-By-Play's dilution by referring to the 937,500 shares underlying the convertible bonds. The reality is that due to the default on the bonds, and the terms by which principal repayment can be accelerated (already demanded by the holder of $5 million of them), and the lack of cash or other financing flexibility, the potential dilution from these bonds is far greater under a renegotiation of the original $16 per share conversion price.
But all of that is of course is a moot point, given the $31 million bank debt facility which is senior to the converts. Not only is there zero capacity left under this, the strain on operations from the lack of borrowing ability will apparently force them to either massively liquidate inventory or give away a lot of the company to the bank (if the bank would take it), or be forced into BK. (The idea of a new angelic banker coming along seems just a tad far-fetched.)
The direness of the situation is exacerbated because unlike most toy companies, the Christmas selling season doesn't really exist for these guys. In fact, it is the retail division's continued downward spiral that accounted for the latest earnings warning for the July quarter (by far and away the company's strongest), putting it at 5-10 cents per share vs. last year's 41 cents. As a result, it's hard to see why Play-By-Play will get much wiggle room here based on near-term cash flow prospects.
Regarding the management stock options, unless they've recently given out a lot of them (I don't believe there were any remaining under the last authorization) or they repriced the old ones (possible I suppose), then I don't think any of them would have been profitable to exercise. But I'm sure some insider shares could be getting sold, which we would eventually see reported.
But the extraordinary and likely dilution to shareholders from the bank and/or convertible holders would make all of that pale in comparison in its near-term punishment of shareholders. |
