Here's an analysis of Turbodyne's sorry record of dilution.
Mike C2 wrote: <<John, do us a favor while you pour over all the
company annual reports. Find out just where all of the outstanding
shares came from: how many were issued for the Pacific Baja purchase,
how many from option exercises ...>>
Thank you for this very useful suggestion. I have gladly done this and
I am happy to share the results with others:
==============================================================
Year ending 12/31 shares outstanding increase
(millions) (millions)
1993 1.078
1994 10.663 + 9.585
1995 16.452 + 5.789
1996 23.580* + 7.128*
1997 29.961 + 6.381
3/31/98 36.275 + 6.314 YTD
(Data from 1997 & 1996 annual reports and Q1 98 quarterly report)
Where did all these millions and millions of shares come from?
Let's track it down.
The co. was formed in 1993 by a reverse merger into a defunct mining
company shell. Mr. Halimi was issued 1.0 M shares at that time.
That's the starting point for the subsequent massive dilution.
* Pacific Baja was acquired 7/2/96 for 3.076 M shares + $12 M cash,
a total value of < $35 M, based on the highest stock price during the
July-Sept. 1996 quarter. This really didn't dilute the stock much in
comparison to the following:
32 M shares were created by dilutive financing mechanisms. That's the
running total as of 3/31/98. These dilutive mechanisms include
issuing warrants, convertible preferred stock, and private placement
of common stock. They do not include to my knowledge any underwritten
secondary offerings, which would require significant disclosure.
Most importantly, though, the dilutive mechanisms include employee
options, primarily to Mr. Halimi and Mr. Nowek.
let's evaluate how extravagant these options are:
In the 1997 annual report, Note (7) indicates options granted in 1997
had a fair value of $7.5 M, and those granted in 1996 a fair
value of $4.0 M. If the co. had reported this as an expense as
per FASB Statement 123, the co. would have lost a whopping $20.7 M in
1997.
Compare the operations of the co. to its financing:
During Q1 of 1998, the co. sold $9.7 M of products.
Compare this to the Q1 stock dilution of 6.3 M shares, which had a
market value of approximately $15 M, based on the stock price at
that time. That's more stock sold than products.
Here is my opinion:
This co. is not run for the benefit of the shareholders, but rather
for the enrichment of Mr. Halimi and Mr. Nowek.
The primary business of this company is not selling aluminum wheels or
electric motors for superchargers. Rather, the primary business of
Turbodyne is selling stock. It does this to line the pockets of
Mr. Halimi and Mr. Nowek. They have accomplished this using
mechanisms that require very little disclosure to shareholders. |
