Gerald:
...If this co was as bad as they suggest they could stick with fundamentals...
From today's press release:
MPI is a real estate investment company with properties in Houston, Harris County, Texas. MPI has a net book value of $2,500,000 and will be merged into Texas Real Estate Enterprises, Inc. (''TREE''), a wholly owned subsidiary of EDII. EDII issued 1,100,000 restricted shares of common stock for 100% of all shares outstanding of MPI. The EDII shares exchanged were based on a value of $2.40 per share.
exchange2000.com
Please explain to me who is conning who in this deal.
At EDII's closing price yesterday, $0.47 per share, MPI should have demanded at least 5.3 million shares if their net asset value is $2.5 million (2500/.47=5.3)
However, since EDII paid only 1.1 million shares, MPI is accepting paper worth only $517 thousand for its net assets "worth" 2.5 million. (1.1*.47=517). MPI accepted paper worth 20% of the net asset value??? Actually, this deal is far worse for the seller because the "paper" could go down and the seller has lost liquidity due to the restriction on selling the shares.
Permit me to ask a little question. I assume you own a home and that you have equity in it. To keep it simple let's assume you could sell your home, pay off your mortgage, and pocket $100,000 (I'm choosing that number for simplicity). If you did the same deal as above, you would transfer the title to your home (the asset) and the mortgage (the liability) to EDII in exchange for approximately 41,400 shares -- effectively $19,458. ((The ratio between what MPI should have received $2.5 million and what they did receive $517 thousand is 4.83 (2500/517)). The share price will only need to rise to $2.40 for you to break even. I'm sure you will enjoy the wait before you can sell your shares. Also, don't be surprised if - in an emergency - you need some quick cash - and a bank only loans you a fraction of the current market price on the shares because of the selling restriction. You can get a home equity line of 80% loan to value.
Why did EDII pay 20 cents on the dollar?
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