I was looking at the FreeEdgar SEC submissions by MMGC, and found
something I wasn't really looking for. I think that it may have some
impact on how you look at the TA. A quick summary follows:
Mego Mortgage Corp. was formed in June 1992 as a wholly-owned subsidiary
of Mego Financial Corp. (NASD MEGO), and commenced origination of loans
in March 1994. In November 1996, Mego Mortgage Corp. consummated an
underwritten initial public offering of 2.3 million shares of Common
Stock. As a result of the consummation of the IPO, Mego Financial's
ownership of the Company was reduced to approximately 81.3% of the
outstanding Common Stock. On September 2, 1997, Mego Financial
distributed all of its 10.0 million shares of Common Stock of the
Company to Mego Financial's shareholders in a tax-free spin-off.
Basically, this is a dilution of shares from 2.3 million to 12.3 million
with no increase in revenue. If you take a price of $15.00 with 2.3
million shares, you have a market cap of $34.5 million back in mid
October (when the results of the distribution were being reported).
Today, there are 12.3 million shares at $3.50, for a market cap of $43
million. If you use the market cap from October, today's price per
share would be $2.80. If you use the stock price on September 2nd
($11.50) the market cap is only $26.45 million, and the diluted price
per share would drop to $2.15. There are other values in a company
which are not directly reflected in the market cap, of course, so this
probably isn't a good way of estimating current value.
However, I calculated the value of one of the prespin-off stockholder's
shares with an interesting result. Prior to the spin-off, he had
purchased 315,438 shares for $3,338,071. He received 607,431 shares in
the spin-off distribution. The resultant 'effective cost' of his total
of 922,869 shares is $3.62/share. Perhaps MMGC's price is now properly
adjusted for the stock dilution due to the spin-off. |
