Paul et al, spoke to Norman Muller, CFO, yesterday with some pointed ???
It seems that the ONLY reason this stock is not being rewarded is because people do not understand the convertible situation and are being way way too pessimistic about it. Hopefully this will explain it.
FROM MY POSTING ON YAHOO YESTERDAY:
I agree and I spoke to Mr. Muller today and asked him some pertinent questions:
I wanted to get his feedback on some things (and particularly on the statement below), in light of the discussion on this thread recently about fully diluted earnings under the WORST case scenerio of conversion.
Now remember the following was spelled out publicly recently:
"If all the preferred were converted
there would be a total of 15,308,761 shares of Common Stock outstanding, this is according to form S-3/A filed June 16, 1998.
Takeaway the warrants which account for 3,017,691 of the total shares mentioned here, which have exercise prices ranging from $1.50 to $8.75 per share, and you have 12,291,070 shares."
**** THE QUESTIONS: ****
So what about this Mr. Muller? In light of the concern that some have about what earnings WOULD have been for Q2 if every single preferred share was converted, how would that have affected the number?
MULLER: Earnings would have been about 6 cents per share instead of 9 cents, and that is figuring MAXIMUM dilution, which is extremely unlikely. The solid positive earnings for the first half, would still have been solid even if MAXIMUM dilution HAD occured, especially considering our low stock price.
********
Mr. Muller, it seems to me that the reason the stock price is low is because shareholders do not understand how great the strides you have made locking up the convertibles to prevent dilution. I also don't think they realize that even if the worst case of dilution occurred after Nov. 15, the earnings you likely will post in the 2nd half, would still be the envy of 99% of all stocks on NASDAQ in the under $2.00 range. I mean you already have 15 cents a share in the slowest 2 quarters, which for even a $3.00 NASDAQ stock is great performance.
Anyway....In light of how confusing convertibles and lockups are to the average shareholder, why did you not more carefully explain the last press release lockup numbers? I got the feeling that many, especially new potential investors, did not understand the significance of locking up 2,000 preferred shares. I think the reaction, especially of new potential investors was "big deal, 2,000 shares"
MULLER: Good point! It is easy for many of us who this share situation to understand what the significance is of what we have accomplished to lock these up. Of course a preferred share equals $1,000 and so we locked up $2,000,000. We think that is good progress. I will check into drafting a response for shareholders to explain this in more basic terms.
***********
Why have there been so many series?
MULLER: Because when we needed finaning to move forward more successfully and quickly, we got money in in chunks. We could have waited but decided to open and close a series as each source of funds became available. Confusing but not complicated really.
What do you have to say about the shorters?
MULLER: We cannot be too concerned about them. We have a company to run and cannot respond or become distracted about them. We supply clarification and PR when needed and more importantly we feel we are beginning to execute a strong game plan. The stock price does not reflect it yet of course, but we are confident.
******** MY TAKE *********
I am not a big fan of Liberty Capital. Everyone knows that. But I have to admit that Jay Grieg had a well run CC the other day and Tom Raack is a big improvement over Jo Elkins and Cheryl of days past. As far as GBIT goes, I am not losing site of the fact that diluted or not, the earnings were very very solid for the first half, and historically when I checked briefing.com, I noticed very clearly that Q3 AND q4 REVENUE numbers are significantly strongly than Q1 and Q2.
How anyone can asked for a faster turnaround than GBIT has had is not living in reality. Originally they announced that they might not be profitable until the second half of 1998. That is typical of the conservative, non-hype nature of this management group.
What also impresses me is that their revenue numbers are still up about 18% Q2 '98 over Q2 '97, even though they closed down some other divisions. That is remarkable.
Plus they have had some contract "extensions" exercised BY THE CUSTOMER, which means to me that the customer is very satisfied with their performance during the initial contract period. That is a very healthy sign.
I am very impressed by GBIT. It is just typical of shorters to spread fear and doubt based on any little thing they can find. To suggest as one of them did that becuase of dilution Q3 earnings of 14 cents would drop to 2 cents is nuts. Simple math tells you that. You would have to have a 700% increase in shares outstanding....and that of course is ridiculous.
Time will reward us |
