Mark,
You're absolutely right! DSSI is by no means a sure thing.
Like you said things can go wrong, and one possibility is the company issuing more stock.
Only thing is there are other reasons for such an offering. The company doesn't really need more cash, and the reason Morgenstern might decide to issue more shares is to protect him from being thrown out. He wants to keep controlling the company, as he makes tons of money this way (on our expense of course), he takes so called "management fees" from each of his subsidiaries (even the start-ups that need every penny for R&D and marketing, he did take a nice chunk from PHD at the time).
He has a poison pill in place (read the 10-K), which is triggered when an individual or a group holds 15% of the shares. Once that happens, he can issue a lot of worthless rights to shareholders other than that particular group.
Morgenstern isn't stupid, and he wants to continue this as long as he can. It's worthwhile for him and his family - his son in law is the attorney of the company, and another relative was running CyberCard, very poorly I must add, and was paid a hefty salary, oh and of course his son will probably take over one of these days. All this reminds me of one of those mom and pops places, and not a publicly traded high tech holding company.
If he feels threatened, he might try to issue more shares and create more dilution. However, I think he will find it quite hard to issue more shares, especially as he could get sued when he does so and so will all his board members. That will make them think twice before acting.
This company is too good for him and his family, and I hope someone will step up and make a move. He doesn't care about the stock price, as he and his family get paid no matter what... he doesn't own too many shares so this decline doesn't even bother him. The only thing that will hurt him is if he gets thrown out and someone else takes over.
If I had the money, I would have definitely made a move... does anyone have $5 million to spare :-)
Omer |
