It's so obvious, isn't it Mark? Have you ever seen a business sell for less than it is worth? It happens every day in the stock market. Somewhere out there a business is undervalued. GUMM is one of them. Why did Zengen sell for less than their 40% is worth? There are plenty of reasons not the least of which is they needed cash to work on products using their peptides, the IPO market dried up due to a bad market, and they didn't have any money to meet their obligations to Gel Tech. Everything doesn't meet the eye as obviously as you assert. But hey, go ahead and short GUMM based on your logic. You'll find out how wrong you are when the stock goes up. You'll be the guy shaking his head saying that this isn't supposed to be happening. In reality, Gum Tech management pulled off a good deal by only putting out $6.1 million now to buy the remainder of Gel Tech. They can pay the balance out of operating revenue over the next two years. Additionally, Zengen would have been entitled to 40% anyway. If sales are $27.5 million over the next two years, Gum Tech would have effectively paid Zengen the amount that they are paying for the business excluding the initial $6.1 million, but instead they will own it. You mock that as bad business skills? I look at it as buying a business that is worth more than they paid for very little out of pocket and spreading the rest over a two year period that they probably would have paid anyway. That sounds like good business skills to me.
Your calculations also ignore any value that the market is giving to Gum Tech's nicotine assets and any royalties that they might get from Wrigley on those three products that you don't know anything about. I still think that they will launch nicotine gum albeit not with Swedish Match. That joint venture will go bye bye at the end of this month in my opinion, and Gum Tech will get a new partner that will be more motivated to sell nicotine gum than Swedish Match.
BTW, that one time gain on underperforming assets, as you call it, was also a good deal for Gum Tech. They effectively wiped out five years worth of losses with a single transaction and now have money to pursue other more profitable businesses. Ah, but somehow you look at that as bad business skills. LOL. |
