Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Floorless Preferred Stock/Debenture -- Ignore unavailable to you. Want to Upgrade?

To: marketmover who wrote (1061)	11/23/1999 12:07:00 AM
From: DanZ	Read Replies (1) \| Respond to of 1438

marketmover: <I agree the GUMM/Citadel financing isnt all that toxic, but it was desperate.> What is desperate about the financing? Gum Tech turned down several spiral converts because they weren't in the best interest of shareholders. The Citadel financing is very good for both parties and Gum Tech took their time to find the best financing for shareholders. I hardly think that the word desperate fairly characterizes it. <So will GUMM's next financing be if the ZICAM product is not an immediate success in the current quarter.> Success is ambiguous. They received orders for about $3.5 million of Zicam in the two days after the USA Today article came out and they received another ~$3.0 million in orders between November 12 and November 18. Many stores sold out within a day or two after the USA Today article hit the newsstands. Is this successful? I think the product is very successful so far, although I would agree that one needs to see if sales grow over the next few quarters before passing judgement. If sales grow, your short position will not look very good. <So have been the last 20 financings by independent consumer products companies that think they can go it alone against P&G, G, etc> Gum Tech has left open an option to form a joint venture with a large consumer products company to market and distribute Zicam. So far they don't need any help so it doesn't make sense to share the profits. If it gets to the point where they can't do it alone, they will most likely pursue this option. <It looks to me like GUMM owns only a minority of ZICAM and has a mkt cap over $150mm, before dilution.> Gum Tech currently owns 60% of Gel Tech LLC (Zicam). The company's market cap is not solely based on Zicam. Gum Tech's core business is the manufacture of functional chewing gum, and this business has grown about 80% year to year since the management change in 1998. The company is currently negotiating a joint venture to manufacture and co-market nicotine gum. The sales and profits from this joint venture could very well be even bigger than Zicam. <This is a product of Gunn Allen market manipulation and retail buyers of the "cure-the-common-cold" story.> Please excuse my french, but this is bullsh*t. Gunn Allen is not manipulating GUMM and investors are bidding the stock higher because they understand the potential for Zicam and nicotine gum. So far the story is playing out in longs' favor, and an MSN alert on November 18 notes that "Institutional holdings of GUMM increased significantly." moneycentral.msn.com . Gunn Allen didn't manipulate these institutions and they didn't manipulate me or the plethora of other retail investors who own tens of thousands of shares each and don't even have accounts at Gunn Allen. <I cant imagine that the ZICAM product will ever have greater success and market acceptance than Quigley's Cold-Eze. And look at QGLY now -- getting squeezed off shelves by the big guys and down to a 20mm mkt cap.> There are several reasons that I think Zicam will be more successful than Cold Eeze. One, Zicam is more effective than Cold Eeze and doesn't have a foul taste. Second, companies are able to get around Quigley's license because of The Dietary Supplement Health and Education Act of 1994 (DSHEA). Most of the zinc lozenges on the market are sold as dietary supplements so they don't have to pay Quigley royalties. Nasal products can not be sold as dietary supplements; therefore, DSHEA doesn't apply and there is no corresponding loophole that companies can use to get around Gel Tech's patent (which is now pending). You can read about DSHEA at crnusa.org if you are interested. Other than the fact that Gum Tech sells a nasal gel for reducing the duration and severity of the common cold and Quigley sells a zinc lozenge for the same purpose, there is no similarity whatsoever between the two companies. Quigley is basically a one product company, although they have different flavors of Cold Eeze and a new Cold Eeze gum. Gum Tech has their core functional chewing gum business which includes Breath Asure Dental Gum, private label dental gums for various drug store chains, Aspirgum, Acutrim Diet gum, Brain gum, and a successful line of functional chewing gums sold by Pharmagreen in Israel, to name a few of their larger customers. More importantly, Gum Tech will be entering the nicotine gum market very soon and I believe that their joint venture partner will be a tobacco company. They are also in negotiations with a large toothpaste company for a new dental gum agreement. Quigley's product line is not as broad as Gum Tech's and they don't possess nearly as much expertise as Gum Tech. <So be careful with this one.> I have a substantial position in Gum Tech, and you can be sure that I keep an open mind and try to uncover any potential negatives. The market doesn't care if I own 1 share or 50,000 shares, but I am motivated to put a lot of energy into my due diligence because I have a large position in the company. To those of you who are short GUMM: be careful with this one. Regards, Dan