Martin, I do not think that the conversion price is $1/share, the dollar per share is the price of the preferred. There is no mention of the conversion price and we should look at a S-3 filing for GRNO, if they file these for the conversion price.
Yet, even if we assume that the conversion prices is around todays quoted prices (1/8), that will bring the total number of shares to 15 MM shares, not great but not yet a disaster. I hope the conversion price is fixed and any conversion rate above 1/8 is a bonanza.
Even if we have now 15 MM shares (and possibly as much as 20 MM shares, since to survive, I would not be surprised if additional shares would have been issued). The stock is currently "undervalued". A simplistic approach would be to add to the $1 MM in new equity another $3 MM in "virtual" equity" since the Chinese are funding the company at a valuation of $6 MM (a minimum of $3 MM cash from them and technology from GRNO at another 50% since GRNO will own 50%). Thus even at 20 MM share the basic book value is about $.20 (worst case?). The real value is in future cash flows, which if we assume that we will start and see accretion late in 1999 (they plan to start operating June, but we all know Mr. Murphy by now), could be quite significant.
If we assume 24 hours per day and 300 days per year, and profit margins at a puny 10%, at 50% ownership these two 1000 gallon per hour plants should yield profits of $1.8 MM. Profit margings could easily be doublr that figure, but I do not know the tax situation in China, so it is best to keep the IEI down, and take only $1.8 MM per year bottom line money. At 18 MM shares (that assumes conversion rate at $.125/share and some more shares issued since the halt), it gives us a stock worth about $2/share (PE=20 since it is expected to grow rapidly once GRNO gets positive cash flow). If Turkey and the Charlston operations come back on line, I think that the IEI could get this stock rapidly back to new highs, providing that China follows through....
Good luck everyone. Let us hope it is not a dream.
Zeev |
