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Technology Stocks : Blank Check IPOs (SPACS)
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To: Saul Feinberg Jr. who wrote (1042)7/7/2007 11:47:20 PM
From: Glenn Petersen  Read Replies (2) of 3862
 
Saul,

I suspect that the large discount for the EHHA warrants is attributable to the fact that there is no financial information available on the XLNT clinics that are being acquired. I also suspect that other people far more talented than me have crunched the (so far unavailable) numbers.

The whole idea of a rollup is to arbitrage the differences between public and private valuations and create "value." Whether or not that value is real or artificial can be debated, but it does exist in the markets. In the case of EHHA, the value creation is a two-step process. You have the private XLNT acquiring clinics from other private owners, and then selling the acquired clinics to a public entity.

The fact that the President and CEO of EHHA are also shareholders of XLNT makes me curious as to where in the two-step process the real value is being created. The proxy materials are going to make for some interesting reading.

Assuming that my assumptions are correct, the approval for the deal may be problematic. If that is the case, you can expect to see either the insiders to take a haircut or the deal adjusted. What has happened for some of the marginal deals that have been approved (see CRB) is that the stock declines after the shareholder vote and the warrants retain their value.

When I started looking at EHHA, I wanted to find a reason to buy the warrants. I like the pet care space. Hopefully, the proxy materials will prove me wrong.

Regards,

Glenn
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