mst, first you criticize me for using $.04 per share (which I did not) then you loosely use the term "making few pennies per share", which even your assumption of $.015 on each side is not. The point I am trying to make is very simple. Money, opportunity and competition.
I think that ASTN can put its hand on some $20 MM and they'd better do it now (about $10 MM from warrants conversion and $10 in the leaky floorless equity line). This way they probably have a good three quarters where they do not have to worry about burn rate forcing them back to the well under less than perfect conditions. Of course if they do that the share count will go to some 33 MM shares, but that is much better than if they get caught in a declining market. If they indeed do that, it will probably put some pressure on the stock, but nothing like a death spiral.
The opportunity seems to be there, but is it at the rate of $.015/share and at 20 MM shares daily? I have some doubts that these numbers will be actualized. If they are, you must believe that competitors are going to come down on this opportunity and narrow the profit margins. This is a very low barrier to entry situation (the software was capitalized at less than $500 K, giving you an indication of the implementation costs), and there is no patent protection or brand name recognition, nor a massive presence in the market to prevent others' entry.
Thus if you are trying to set a fair valuation on this entity based on that activity (and I have not seen anything but about $500 K in revenues on the Gomez side to set valuation on other activities), I would suggest that coming up with a fair overhead for that activity (currently some $3 to 4 MM quarterly or so?), take more rational volumes and half the rate currently assumed, or like $.015 for both sides of the transaction, rather than $.03.
Under these assumptions, I am getting $6 MM in pretax quarterly, or $3 MM in after tax earnings, which with about 33 MM shares equivalent outstanding (taking Rajiv's 30 MM and adding 3 MM shares for the warrants and equity line, it could actually get to 34 MM or so), gets you to about $.36/share in annual earnings rate sometime next year. That does not take into account any unexpected "upsides" nor does it take into account the less than zero risks that Mr. Murphy's hand will derail at least some of the timing. It does not even take into account that there must be a substantial cost involved in getting institutions to subscribe to the system (if I understood correctly, access is by prior subscription and the last number of institutions subscribed was about 60).
Does this scenario justify a stock price in excess of $10/share? I know not.
Zeev |
