Pugs:
2nd Request!!
With all due respect (for the 2nd time) I see that you've posted a share value for RMIL of $6/share. I thought that we discussed this yesterday and concluded that your analysis was a bit misleading. However, I returned today to find you disseminating the same (mis)information to this thread. You directed the non-believers to "do the math". So I did.
For starters, I attempted to estimate a share value based upon the P/E of the company. The price-to-earnings (P/E) ratio is based upon the simple equation:
Price of stock = EPS(earnings per share) divided by Common stock O/S (fully diluted).
Since RMIL does not have any earnings to add to this equation, the P/E ratio method cannot be utilized.
Therefore, I concluded that we must use the book value method to estimate a share value for RMIL. The equation for book value is:
Net Assets divided by Common stock O/S (fully diluted) = Book Value per share.
Common stock O/S (utilizing the 10Q as of 3/31 and the merger agreement) is:
2,571,081 (outstanding as of 3/31)
6,684,750 (payable to shareholders of Rocky Mountain per merger agreement)
6,000,000 (payable 1 year from merger date per merger agreement
---------
15,255,831 (fully diluted shares outstanding as of merger date)
Net assets at 3/31/97 were $907,585.
Net assets created by merger ($10 million cash, $5 million debt) is $5,000,000
Net assets at merger date are $5,907,585
Now back to our equation:
Net assets divided by common shares = book value per share
$5,907,585 divided by 15,255,831 = 39 cents/share book value
Your $6/share value has been officially determined to be 39 cents/share.
Also keep in mind that I assumed that $5 million of the merger money was a "gift". If it wasn't, the book value would be considerably lower.
Pugs, please retract your $6/share statement (2nd request). |
