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Microcap & Penny Stocks : INFE ... Infocall another Sleeper
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To: STEAMROLLER who wrote (4507)6/9/1998 9:48:00 PM
From: Sigmund  Read Replies (1) of 10343
 
<<<6th Growth obstacles

Meeting funding requirements for Acqusitions Systems Infrastrucure, which he believes is adequate to absorb more business and manpower.
<<<

This I think is the key. Forget about new contracts. The real news will be when they bring in new investors. The new contracts of course help in getting new investors.

But there are some issues for shareholders and perspective shareholders.

1. Why would a company that needs funds for expansion buy back shares? This makes no sense at all to me with respect to enhancing shareholder value. It may make sense from the perspective of obtaining additional financing on favorable terms.

2. And the key question is of course what the terms of the new financing will be? Will existing shareholders be diluted or enhanced.
Some dilution would be acceptable if it lead to rapid growth which apparently is the intent.

My own experience which is not that extensive is that the existing shareholders usually get shafted at least in the short run.

At $5 it was clear that the existing shareholders would get shafted.
But at $2 maybe it is ok. That I think is the key question. What terms will new investors demand?

How much money does this company need? $10MM, $20MM. We know the market cap is small today. What percentage of the stock will a sophisticated investor demand for $10MM, $20MM? Can there be innovative approaches applied which reward the new investor without hurting the existing shareholders e.g. warrants or convertible preferreds etc.?

These I think are the questions that need to be explored in the DD.

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