American Eco (ECGOF, ECX on Toronto exchange) Message Board

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Gold/Mining/Energy : American Eco (ECGOF, ECX on Toronto exchange)

ECX 1.720

-4.4%

1:53 PM EST

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To: Peter H. Mack who wrote (2226)	3/23/1998 11:11:00 PM
From: Michael Anthony	Read Replies (2) of 2841

>> Personally, I still suspect that they are better off without DBCO. << Financially, maybe that's the case. Now. So what? Why didn't they know that after due diligence before the entered into the agreement? All the street is going to care about is that they didn't deliver period and if it turns out it's because they couldn't get financing, the stock will go even lower still making it that much harder to acquire other companies in the future without requiring more debt instruments. When Eco was in the 7's, the had to use debentures to get CHEM. Now that we were over 10 for a time, the DBCO deal was structured more favorably as the stock had more worth in trade as cash. As Eco's stock languishes, it's going to be harder to get financing for acquisitions without debentures and the like because their stock is worth Jack for cash value transactions to be possible on a larger scale. It was in their best interest to get the price up so they can use their stock more efficiently to their advantage. In the 8's (and 7's I think now) they have little clout to go on buying sprees with cash. They will need to use debt instruments more the lower the price goes when acquiring for growth. That scares buyers away as the amount of outstanding shares will increase (why weren't we scared when the shares out went from 7 mill to 20 mill in a little over a year :) and it snowballs bringing the price down more. When you are a company using acquisitions to grow, but you have to use debt instruments to get them because financing is tough to get when you're in debt and in the single digits already. Then then the outstanding goes up and the stock goes down. If you have a more valuable stock, you have some power to structure your debt better as Eco almost did with DBCO. Now, Eco is a beggar for financing on a larger scale rather than a chooser. At least there was some sense of undervalue before that helped the stock up last year. Sentiment and "reality" is actually not nearly as rosy as it once was IMO. So you tell me. Why should it go up from here after all we have learned in the last month? Screw the estimates, screw management's word. They are useless now. Who's gonna believe them? I used to think this was dead money until DBCO came through. Now I can't think of a single reason to buy back in at this point. They made 66c last year using US GAAP methods (see the 10K) and you can bet that's how the street will look at them from now on. This year, they'll be taxed almost 4X last years rate. (37% vs 10%) For anyone on the sidelines, I see no compelling reason to get in at these prices. IMO, best case scenario they do 66c US GAAP again WITH taxes this year and a PE of 10-15 because of the debt I assume they'll incur when acquiring going forward. You can flame that prediction, but I don't think anyone can defend against it with higher expectations and be taken seriously now unfortunately.

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