Joe, I just went long on TTRIF because their floorless is finally out (and their share count has gone from 45 MM shares or so to 85 MM shares). Last time we had this discussion the argument that these floorless had an anti shorting clause made a lot of sense, and I stated so, with the caveat, that spirals down are still feasible even with such clauses (and AIPN's people have seen the effect of this action, their stock went from a high of 7 to just 1, despite their own anti hedging clause). The last time we discussed this issue, the stock was piercing the 2.25 on its way to a new high, but I believe that the impact of shares proliferation (from 15 MM shares to 35 MM shares) is undeniable and the stock is thus lingering in the low 1'.
Chris asked me to look at the financial statements and let him know if there is any chance of conversion occurring under 1, the way I see it, the company does not have to issue the preferred, but it surely can, and it is a simple question of cash flow. If they get a big inheritance before cash runs out, you lucked out, if they do not, the spiral down will continue.
As far as I can see these are the very dry facts, no agenda, no nothing. So far I have been proven right, and frankly, if you see a sudden volume explosion with little price change for a day or two, it might indeed be a signal of an "end game" in progress (like it was at TTRIF, IMHO), but right now, the stock and company are at the mercy of their own burn rate. For the later, you really need to do a more refined analysis than what I posted in my former post. The $818 K in losses do include some "future" interest and discounts, thus no "real current cash", the actual operational losses per quarter are closer to $400 K.
Last, since you are close to the company, why are they going for such a large preferred issue, it seems to me that together with the warrants they are looking to be able to draw down $9 MM ($10 MM less the 10% "costs") of which they drew down $2 MM (net $1.8 MM) so far. If their burn rate is indeed only some $1.5 MM to $1.6 MM per year, why such a large stand by financial facility which expires within the next 18 months? Do they have current plans to expand their "burn rate", or possibly invest these funds in building their own GTL plants?
Zeev |
