I tell you this company is one royal pain. They are so nonchalant about their prospects, and the management's discussion of their financial results so skimpy, that one gets the impression that they don't care. In one of their newsreleases, Killins mentions that they will double revenues again by fiscal Q2. Well that ends Nov 1996. If they are profitable, the stock price will likely jump. But I can tell you that their competitor, Exabyte, has the same objective as Legacy: become the industry standard. In an article in the Wall Street Journal, Killins stated that they will try to become the industry standard with the VHS format, but if that fails (quote/unquote) they'll sell the products using the 1/4" format. (Go to the Legacy web site, press releases, to see this with your own eyes.) Killins should keep his mouth shut and let someone with PR experience do the interviewing. In any event, they will go head to head with Exabyte and everyone else (HWP,SEG)using the smaller format.
If other shareholders vote for the 10:1 consolidation, there may be demand for shares by individuals averaging down before the effective date which naturally will cause the price to increase. The big question is when. If shareholders reject the proposal, and in the absence of any positive news, the price could drop to book value and lower.(My estimate is $.25/share; BTW where did you get the $.20 number? Is that your estimate of book value?).
In the long haul, LEG will probably succeed in which case the current price will be seen as a great buying opportunity. But even in the best case scenario, I don't see this company as more than a $200 million dollar company. If one pegs the share price at twice annual revenues, this would put a long term share price target at $4-$5 /share. Mind you, I would be happy with such an increase and indeed, I'd help you remove the wallpaper!
Cheers, and best of luck. |
