Open letter to Paul Henry.........
Paul,
In his first and to date only letter
to share holders Mr. Roix wrote,
"...my management team and I will give
100% to create REAL shareholder value..."
I'd like to discuss some aspects of the 8-K
in light of what has previously transpired
with share creation and dilution which, in turn,
has created negative sentiment amongst many
shareholders and thus skeptical of Scott's words.
Moreover, I'd like to suggest an idea for Mr. Roix and
management that I'd believe would restore share
holder confidence and directly address any
misperceptions..
Now on online forums, and also via
emails, the 8-K has been much discussed.
In my opinion some aspects of this 8-k
like the buy back option, and bonuses being
released per provisions for loan repayment
have been made more dramatic then what the
language actually prescribes.
However, the language pertaining to commissions
seems out of line with the "...team and I will give
100% to create REAL shareholder value..."
Unfortunately to many, including myself, in conjunction
with the number of shares needed for the
acquisition, appreciation on those shares (and options)
received should be incentive enough for Scott
and other members of Affinity's management team
to try to maximize sales of all the various
types of club memberships without the
added commissions taken from the bottom line.
Maximizing revenues and earning after operation costs
are taken out will ultimately be the bench mark
upon which shares will be valued. The greater the
revenues and earnings reported, the greater the
likelihood for stock price appreciation.
The commission structure, irrespective of the actual
amounts, in principle is working in contradiction
to maximizing the bottomline and seems
inconsistent with Scott's words,
"..I will give 100% to create REAL shareholder value..."
We've discussed this before, and hopefully what
you conveyed to me about these commission structures will
be amended in such a way as to benefit shareholders.
However, beyond what we discussed, I believe there
is a real opportunity for Scott not only to talk
the talk, but to walk the talk as well.
Now per PR's , there appears to be sufficient revenue
to both grow the number of employees and not to
have to draw down any financing. Whether there is $125 mill
or $1 mil of financing available right now and who is providing
it appears to be a non-issue since growth doesn't
appear to need what under any terms would create more equity
dilution. Long time shareholders should be well aware of
how any financing is dilutive.
The need to create so many
shares to keep the doors open while prior plans didn't generate
revenues is an history that also necessitated the creation
of so many shares for the acquisitions to balance out
percent ownerships. This dilutive history both to keep the
doors of tsig open and to acquire Affinity and GS
has also added skepticism in reference to Scott's words,
"..I will give 100% to create REAL shareholder value..."
Scott got shares, options, salary and commissions.
Many of us went through the reverse split and consequently
have reason for much skepticism.
Now if revenues are being generated at such a sufficient rate,
and with the share price so depressed, may I suggest that Scott
and other Affinity employees eligible for commissions
not only forgo those commissions, but also use what would have
gone for commissions to repurchase shares.
A PR that said that management won't take commissions,
and in lieu of increasing growth without the need to take
additional financing at this time, will repurchase shares would go a long
way to enforce that Scott means what he wrote when he
wrote ""..I will give 100% to create REAL shareholder value..."
Shares repurchased can be retired, or used for future acquisitions.
Shares repurchased would reduce the OS, tighten the float, and
thus allow for greater appreciation. Moreover, symbolically
such a move by management to repurchase shares and NOT
take commissions would go a long way to restoring
investor confidence in my opinion.
Sincerely,
Ztect
cc. Scott Roix sroix@theaffinitygrp.com
Steve Kaston skaston@tsig.com
info@tsig.com |
