Yes, I agree. If there were no lawsuits, the stock should have been at least $3.00.
I am trying my best to answer your questions. But note that I am merely a shareholder and have big position in this stock. I have bias and some might be my opinion.
1. The lawsuits are against multi-parties: (1) the company; (2) the old management; (3) the former outside auditors BDO Dunwoody Ward Mallette; (4) the underwriter of MTC's 1993 public offering, Daiwa Securities American, Inc.; and (5) the underwriter of MTC's 1991 public offering, H.J. Meyers, Inc. If they lose in the lawsuits, all party would share the expenses. But right now, the company has to defend the cases by itself. Since the plaintiffs' lawyers would get nothing if they could not win the lawsuits, they started a lot of conflicts and the company had to send lawyers to defend. Hence, the legal fee is very high. They mentioned that they spent about 5 million canadian dollors on this item last year. It dragged the earning a lot. As the trial of the lawsuits is scheduled for early 1998, it is now in the "quiet period". Hence, the plaintiffs' lawyers could not do anything before early next year in the court. I believe that the company could save some legal fee.
2. As always, the company emphasized the uncertainty of the lawsuits in the shareholder meeting. I asked about their guess of the potential
loss for the cases. They said that they had no idea. They were trying very hard to defend the lawsuits. I asked if it was possible they could settle down the lawsuits off the court. They said no. The reason was that the lawsuits involved in too many parties and very complicated. Everything had to wait to early next year in the court.
3. I asked as the stock price was so low associated with P/E=1 and BV=$2, did the company plan to pay dividend or have share buying back. They said that right now, they just focused on the lawsuits. After that, everything was possible.
4. In my opinion, the lawsuits could not hurt the company too much. As always, when stock price of a company goes a big fall, some lawsuits from shareholders occur immediately. I have not seen any such lawsuit to make a company lose too much. In addition, shareholders would get few but the lawyers get much more even a lawsuit wins by shareholders. I have such an impression, maybe I am wrong, that the company, for some reason, deliberately make the lawsuits looks very critical and emphasize it too much. We all know that the Nakamichi deal is very big and it makes a lot of money for the company potentially. The company agreed that it was a faver the parent company (Grande Group), which is a very profitable company in Hong Kong, gave to GTTIF. (Because this deal, it makes me buy this stock like crazy). The other shareholder who also attent the shareholder meeting asked me a question which I was not able to answer: When a company is in some serious lawsuits, they always try to make itself thin in order to pay less if they lose the lawsuits. But in GTTIF case, they try to make itself fat. Why? I don't know. I just believe in any aspect the stock is way undervalued at present price. I think that we would know more about the company soon.
Hope that I answered your questions and wish to hear from your opinion.
Happy investing.
Albert |
