A Boiler Room cretin on YAHOO Called me a Hypester
Is this HYPE?
1. On 6/1/99 (the merger was announced) FGI closed @ 16.375 (X) 23.42m shares = Mkt Cap $383.5m
2. On 6/1/99 HLX closed @ 7.3125 (X) 28.857m shares = Mkt Cap $211.02m
3. Per (merger) proxy, on 6/30/99 FGI shareholders had $102.849m in Stockholders Equity (SE) and HLX shareholders owned $166.872m in SE. Combined (HLX & FGI) SE was reflected as $296.1m on 6/30/99. (Don't ask me to explain how they determined the combined SE, I don't know; but, that is what is in the proxy.)
4. From 1 & 2, (above) we can see that Mkt Cap of the combined companies (now FGH) was $594.52 (a 100.8% market valuation premium) over the combined SE of $296.1m on 6/30/99.
5. At today's historic low of 8.6875 (X ) 40.1m FGH shares) Market Cap dropped to $348.37m resulting in a market valuation premium over SE-(6/30/99-$296.12) of only $52.27m.
WHY THIS IS IMPORTANT!
In a period of just 6 months the Equity Market (that's us) has reduced the valuation of FGH to a level $35.13 millions below what the MARKET said FGI was worth by itself on 6/1/99. It appears the Market is penalizing J. L. Holloway for increasing BOOK VALUE of FGI ($4.39) stock by $2.99 (68.1%) to $7.38 BOOK VALUE of FGH (Merrill Lynch's BV#) in only 6 months. . If there is such a think as Equity Market rationality, the conclusion must be reached that Halter's SE of $166.872 millions was worth $35 millions less than ZERO.
Mr. Holloway has stated repeatedly since the IPO 2 ½ years ago that his foremost goal was to increase stockholder value. He has done so in SPADES and continues to KEEP HIS WORD. That is good enough for me.
The six primary drivers of this downward thrust are:
1. Ocean Rig Dispute – (According to Mr. Hastings should be settled by the end of 1Q/00)
2. Tax selling – (ends 12/31/99)
3. Absence of financing for the Millenium S.A. – ( Expected to be achieved this month)
4. Massive Dis/Misinformation regarding the combined company fundamentals – (slowly being resolved)
5. Large overhang of Short Positions – (which is dropping significantly)
6. Last, and probably the most significant is MOMENTUM. Technically when a sharp drop occurs such as that experienced by FGH the Sentiment shifts so negatively that it takes on a life of its own UNTIL there are few Sellers left and the Stock picks up new BUYERs because of its oversold condition. We may have reached the selling CLIMAX today; but, no one KNOWS that.
The Company is lead by Outstanding Management, has attractive financing terms, and is in the right place, at the right time. The Contracts will start coming in (the DOLLARS & the NEED) are here. The Long Term outlook is exceptionally bright in view of their position in the Market place and the long term DEMAND for their products exists as far out as the eye can see. FPSOs, Double Hulls…etc.
Following today's debacle, I just thought some of you might want some encouragement. At some point FGH will again be an institutional and mutual fund manager choice. For fiduciary reasons money managers are reluctant to BUY issues with a lawsuit hanging over it even when the Outcome is expected to be favorable.
Best Regards and Good Luck to All,
SargeK
NOTE: Slider, if that is HYPE; then I guess I have answered my own question. >VBG<
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