ELXS.... A Value Stock That's Moving Up... Message Board

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Non-Tech : ELXS.... A Value Stock That's Moving Up...

ELXS 50.20

0.0%

Jun 8 5:00 PM EST

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To: Kenneth R. Moss who wrote (18)	11/13/1997 9:01:00 AM
From: Steve Stuart	Read Replies (1) of 23

I have followed Elxsi since last February, and am very glad to run across this thread. This is the just the sort of small, underfollowed stock where small fries like us can benefit by sharing information. I agree with everyone on this thread that ELXS appears to be undervalued. But there are a few warning flags that I have run across in the financials. I will share the info I have in the hope that others can add to, refute, or comment on it. Since most of my comments will be negative, let me also point out explicitly that I am long the stock. o) There are an unsettling number of conflicts of interest with the management. Example: the loan that Elxsi purchased from Bank of America earlier this year was an underperforming loan to a company called Azimuth. Azimuth just happens to have three officers and directors in common with Elxsi. It seems a little suspect to let Azimuth default on its loan in order for Elxsi to buy it at a discount, essentially earning money for the two companies at the bank's expense. Other conflicts of interest include Milley's double salary and a tangled web of options and loans to interrelated companies. o) I don't fully understand the "phantom stock options" granted to some executives. These will give some execs ownership of 14% of the restaurant business when they kick in, but they don't seem to appear on the books. Bottom line: investors will one day end up owning only 86% of what they think they own. o) The company is buying back stock, which is good. But for every share of stock they have bought back, they have also bought back two warrants. These are not purchased on the open market, but from a limited partnership that is owned by insiders. For me, the overriding factor that balances all of these danger signals is the off-balance-sheet asset of the carried-forward tax losses. I don't think the market has fully valued this asset. -Steve Stuart

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