Hello Herb,
Garage sale may get a company in trouble if they buy junk at high prices.
Looking at history, Geac has not proven that their model of buying companies in order to grow is good for shareholders. It is good for management because they keep their fat salaries and their stock options which they can unload should the stock price go up, but not good for shareholders. Just look at last year end, the company wrote off $269 million for junk it bought under the old CEO's reign!!!
Now, the new CEO is doing the same... buying JBA $214 million in excess of book value. When it is politically convenient sometime in the future, they'll wipe out all this junk with a stroke of the pen, and again take a large slice outof shareholders' equity. As the song goes.. the beat goes on.
Just look at those poor shareholders who thought that the garage sale model was a bargain ... those who bought this stock from spring 97 to spring 98 at prices ranging from $20 to $60!
Betcha... they're all waiting in the wings, waiting for this dog to go up a bit more so that they can unload it.
Buying junk at high prices is the main problem with Geac. It is a wonder shareholders have not asked management the question on each acquistion "Is the acqusition accretive to earnings?"
Buying junk keeps management important, but shareholders poor.
The company is now sorting through the JBA garage sale. So far, it doesn't look good... EBITDA has declined in Q1 and Q2, and most likely this coming Q3, and Q4. and Q1 and Q2 next year. In fact, I think I read that management don't expect the work at JBA to be completed until Q2 next fiscal year i.e. Oct 2001 !!! Who can wait ??? When the time comes, they may even say "Oh, it's going to take longer."
If indeed, they had bought more junk in the JBA acquisition, the new stock support level is at $10!! Just, check the chart, those who doubt this.
p.s. i thought the stock was cheap, until i checked the history and saw all the junk! |
