<The guy knows companies can be taken over, and so he felt he had to do something to protect his company. I hope that his next move, would be to start another buy back program, using up the huge cash position>
Ummm, shouldn't that be “…. do something to protect OUR company…..” Sorry, just trying to illustrate a point. DSPG treats the company as if its privately held. Shareholder value is the least of their concerns. Normally I'd say that we'd have to vote down the current board and put in someone who actually cares about ALL the shareholders, not just management's favored few, but since Magnum gets two board seats & DSPG has 2 board seats and they probably will have near 50% of the voting stock controlled, I guess we need to be content & hope they don't find some new favored investor to further dilute our holdings.
If DSPG makes a private placement & then uses the proceeds of this private placement to initiate another stock buy back program, what kind of sense would that make? The only way that would make sense is if they were doing a huge financial favor for Magnum at the existing shareholder expense. It already strongly appears as if that was the case, but I guess a 3 million share buyback would make it obvious to everyone. If that happens, I'll initiate the class action lawsuit myself.
Regarding the rest of your post:
I'm not upset that Magnum diluted us. They didn't, the current board did. I'm pissed that the board decided to have a K-mart blue light special & made us finance it. Maybe they did their DD, maybe not. I know if the boards of stocks told me beforehand what the earnings report was going to look like, I might be a much better investor. I don't think anyone here believes that Magnum came in and made first contact with the company after the earnings report.
Assuming the company earns $.13, $.27, $.39, and $.50 in the coming quarters, which seems to be your best guess, they would have to a P/E ratio of 31 to trade at $40/share which you seem to expect. I really don't see that happening, especially after the private placement.
I figure you're looking at the 12-18 month time-frame because that's how long Magnum is supposed to hold the stock. They are buying several hundred thousand shares on the open market and yet the stock still hasn't pushed over the $15/share mark. Apparently they'll be able to buy their 35% at something around there. What happens then? Either the stock languishes in that same range, goes down, or the lowest of the low, the individual investors will push it up so that Magnum can make their profit. Either way when Magnum starts dumping their 35% of the stock back on the market, it'll hit the stock price like an A-bomb. Good Luck to all,
Bob Richmann
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