Dilution? What dilution? If the argument for EGRP being overvalued was that, as a securities broker, it should be valued on price-to-book which is too high, then that argument goes away as of now. I've made that very argument (more when it was in the $40s than recently). EGRP's book equity goes from $295 million to $695 million or a 136% increase while shares outstanding only increased by 38%. Book value per share is now $12.64 vs. $7.51 and price-to-book goes from 3.3 to 2.0.
BTW, I still don't think this should be valued on price-to-sales like the internuts used to be before they got really ridiculous. Price-to-book and a good old fashioned price-to-earnings are better measures for a financial services biz. That said, do you realize that if they just put the $400 million into t-bills earning 5%, they add 36 cents per annum (9 cents per quarter) to their EPS? Of course, if they managed to earn the same ROE as over the last 12 months (9.61%), that would boost EPS by 70 cents. Probably somewhere in between for a little while, but figure if estimates for '99 are 84 cents, the new shares would bring that down to 61 cents, but the t-bill return alone would push it back up to 97 cents. This brings the forward PE from about 30 down to under 26. Dilution it's not.
But then, who am I to complain if the Softbank association brings in the internut crowd and doubles the price by month end? Yahooooo!!
Good weekend to all,
Bob |
