Nero:
The warrants for 2MM shares at $12 would not, IMO, be dilutive and should not keep the price down particularly since they are not tradeable. With approx 52MM shares outstanding, 2MM is less than 4%, but the $24MM it would generate and add to book value would more than offset it. The dilution, at this point, would come to the buyer since they would not be getting $12 worth of assets. I suspect that it will be a long time before book value approaches $12 a share.
The 10% of the sterile facility profits should not be worrisome. My guess is that they were a part on the cash portion of the purchase price and this was part of a compromise. The alternative, IMO, was to pay more cash up-front. This, like any note, will be paid in future dollars but, unlike a note, does not accrue interest in the meantime. Plus, the sterile facility is just a part of the plant: it is not 10% of all the profits.
My continuing concern with CTAL, even though I have been and am still long, are margins and replacement of the vanishing GLX business. If CTAL can grow margins and can replace the GLX business, then it can grow nicely. If it can't, then it has significant downside potential.
Many people were predicting $20+ by the end of last year. It didn't happen. At least one brokerage firm has predicted $23 this year. At this point it doesn't look likely. Another analyst has predicted mid 40's within 3 years (about 2 1/2 now). It could happen but it will require more business growth than has been apparent so far.
Having said all of that, many of us are long CTAL precisely because they have been able to pull off much that many didn't expect or think was reasonably likely. The near to mid term could be flat, but this company still has bright future potential. This is especially true since Combustion will start producing revenue and earnings late this year or early next year.
Troy |
