A brief retrospective, from one person's vantage point (long since $2).
ABTX is a consolidation, or rollup, play. They buy Mom-n-Pop seed companies and consolidate them into a larger enterprise, which larger enterprise then can afford to do the necessary research work to incorporate biotech improvements in the seeds, such that the margins on the improved seeds are much, much higher than for standard seeds.
They managed to achieve a significant degree of consolidation, a lot of the purchases done with stock ... and typically retaining the management of the purchased company.
They also began to establish biotech linkages with a number of sources, the value of which, IMHO, was never fully appreciated by the Street.
The stock traded in the $15-ish range for several months during the Spring of 1998, and then soared to the peak in June of 1998, based on speculation/hopes of a buyout/buyin by a major chemical corporation. (These deals were all the rage at that time.)
The company announced that it was seeking such a suitor, and made some perhaps ill-advised remarks, including a deadline, which led some people to think that it was nigh onto a sure thing.
Then several things happened, all pretty much entangled together.
The deadline came and went, with no announcement.
People came to their senses and realized that the time it takes to effect consolidation and subsequent savings was far, far longer than the Street was planning on, ie it was going to be tougher than originally imagined.
The stock price fell, making it ever tougher to make additional acquisitions and, I suspect, thoroughly irritating the people who had sold their companies to ABTX and had taken back stock at the same time.
This brought about the drop in price from the peak to a trading channel in the $10 to $15 range.
Shorts took a greater interest in the company.
Then certain bank loans came due, and the company sold some convertible warrants ... death warrants, some people call them ... which provided for the warrant-holders to get a greater percentage of the company as the stock price fell.
Shorts took an ever greater interest in the company.
And the price fell to the $5-6 range.
Is this a turnaround situation? I guess you could say so. They have a new CEO, who appears to be doing the right things and re-establishing (though slowly) the company's credibilty with Wall Street. They have negotiated some improvements and increases in their bank loans. They have stated publicly that they anticipate buying back the warrants before the trigger date for massive dilution. And they press on with the nitty gritty details of the consolidation, probably most notable of which is the move to a single accounting system and the potential sale of some excess facilities.
My hunch is that once the warrants are redeemed, the company will be back to about the same position it was in the spring of 1998, except one full year farther along with the consolidation process.
I view it as somewhat undervalued, and eyeball its current value as being in the $10 to $12 range, or maybe even as high as $15-17. I personally do not think it ever was worth $29. Caveat: I am not a balance sheet expert, so take my comments with a grain of salt.
However, based primarily upon technical indicators, I am not yet ready to declare the patient totally cured of its maladies.
Hope this helps.
JSb. |
