GaBard, Regarding the potential FAMH merger with a NASDAQ company...
Technically this could be a "reverse merger," but it IS NOT AT ALL a "reverse split!" Reverse splits are normally used for 2 reasons:
1) A company has to regain share price to STAY on a major exchange,
2) A company (listed or BB) has run out of Authorized Shares and must "consolidate" in order to have more shares to issue because they still need more money.
FAMH is NOT in either of these situations. A share exchange would occur because they are MERGING. FAMH is bringing the value into probably an empty NASDAQ shell. That is why it is called a "reverse merger."
In a normal merger, the NASDAQ company would normally have more assets and more value than the merging company that comes "under their tent." In the FAMH case, FAMH is the one with the value.
As you can see, there's a big difference between "reverse merger" and "reverse split." Once in a great while, a reverse split is done for a positive reason. That reason is when, for example, a BB stock wants to increase its share price to finish meeting the qualifications for listing on a major exchange. Again, FAMH is not doing that at this point.
But many people confuse the terms "reverse merger" with "reverse split" simply because they sound similar. BIG mistake!
As for my thoughts...
I think a reverse merger is great here because we are essentially getting a NASDAQ shell for the "price" of whatever warrants are issued to the shareholders of the un-named NASDAQ company. And that interest should be very small by my calculations and by what was stated in the press release.
The press release says the post-merger EPS calculation for 97 would be 36 cents. So I figure it like this...
FAMH Current 97 EPS = 10.85›
10.85› x 4 (4 to 1 ratio) = 43.4› post-merger EPS equivalent
Press release estimates 36› post-merger EPS equivalent
36 divided by 43.4 = 82.9% so the other 17.1% is possible dilution that could occur by allowing for warrants for the un-named NASDAQ company shareholders.
If 40 million FAMH shares become 10 million shares of the new company, and that represents 82.9% of the total shares outstanding, we would have apx 12,062,000 total shares outstanding in the new company post-merger.
Post-Merger Summary:
12,062,000 total shares outstanding
1997 EPS 36›
1998 EPS 82› to 99› (using current projections from FAMH for 1998 EPS 25-30 cents x 4 x 82.9%)
P/E (based on FUTURE earnings, as most NASDAQ companies are):
25 - 35
Share Price when based on future earnings projections:
.82 x 25 = $20.50 (on the low end)
.99 x 35 = $34.65 (on the high end)
Average = $27.57 per share (previously 4 FAMH shares)
I like those numbers a lot!!!
Granted, this won't happen overnight, but I could certainly see this as a possibility over the next 6 to 9 months.
Just my opinion, of course. If you have an investment advisor, you might see what they think of our little "diamond in the rough."
:-)
Best wishes,
Brad |
