To all: I just posted this in response to someone else regarding the reverse merger issue, a lot of it won't make sense, and much is a rehash of Brad's post, but maybe it will clear up some confusion:
Gabard, I respectfully disagree, and in my opinion, your post is fraught with an important mathematical and logical inconsistency, and since you have resurrected the dead horse, I will continue to beat on it, hopefully into the netherworlds:
<<LMAO GO ahead folks buy that stock it needs the price to go up so you can give up 75% of your holdings>>
75% of the physical share count. If I had a stack of 100 stock certificates, that stock would be reduced to 25. You're right.
My 100 shares gets to be manipulated, walked down, held down, and left to rot on the OTC. You even said something to that effect. How many of the stocks that you personally like for long term holds are fairly valuated on this exchange? None I would think, because at that point they would be either at target or pricey by definition. Hypothetically, my 100 shares gets to trade at a multiple of 5.9 times undiluted trailing earnings, or 2 times projected fully diluted earnings on the OTC, where the industry average of the sector on the NASD ranges from the low 20's to as high as 40 and up. One company, STFF, is coming off of a loss and trades at a market cap of over 35 times trailing earnings.
But my holdings have been reduced by 75 percent you say? Not really, only the physical and quantifiable share count, which is the only tangible, physical, unchanging aspect of any investment in stocks.
Currently, If I had 100 shares, my equity would be $64 dollars. Am I willing to let this exchange with it's modern day robber barons (read market maker) fairly valuate this stock? Will the new proposal for the NASD to reduce or eliminate the spread be carried over to this bastard son of an exchange? I don't think so, at least I won't hold my breath.
On the other hand, what if my 25 shares( after the 75% physical reduction in share count ), which goes from an undiluted trailing EPS of .1085 to an undiluted trailing EPS of .36 trades at the same multiple it is right now? My equity( 25x (.36x5.9)) is $53. A reduction one would say, but here's the rub: what are the chances that this issue, being on the bigger boards, would be allowed to follow the purer, fairer, economic rules of supply and demand and be valuated according to 1)the sector and 2)projected earnings ? Very, very good in my opinion. Using the above example, since my equity on 25 shares(originally 100) was reduced to $53 after conversion, the stock would only have to trade at an undiluted trailing Price to Earnings ratio of 7 to make up for the loss!
Some industry comparisons:
STAF: PE: 34.6
ALRC: PE: 27.6
ASF: PE: 73.4
TPMI: PE: 18.6
Industry average pulled from Media General: 66.3
Obviously, their is a difference between the mean and the average, but the numbers are telling. Personally, I am willing to take the gamble. Others should do their own DD, obviously. When you factor in that the Myriad deal will be inked next week, and that the acquisition will add at least 60MM to FAMH this year in sales, then how does one factor in a PE for FAMH? (President said in Conference call that Myriad currently has 8,000 employees leased, at below full time and below minimum wage and below poverty of 10K, with only 9 months annual, that averages to 60MM). Ira Monas said in the CC that he expects, with current share count, a minimal EPS of .25 to .32 on 40MM shares outstanding. That, after the merger, converts to:
$.90 to $1.15 PROJECTED MINIMUM EPS
You seem to keep forgetting, that as the shares are converted downward, the eps gets converted up.
Earnings per share: Total earnings divided by the number of shares.
It is an inverse ratio!
EPS= NET/SHARECOUNT NET=EPS X SHARECOUNT
The net remains the same, if the share count goes down, the eps goes up. (The horse is pleading for me to stop, please, must I go on? )
What factors in the price for an equity on the bigger boards?
Earnings, ratios, growth potential.
What factors in the price for an equity on the OTC?
Pump and dump, MM's, instant loss spreads, sell on news, etc.
Aside from the above, another important point that seems to be missed:
the FLOAT will be reduced to 3MM.
I will take any on a gentleman's bet. I've never been to the circus and quite frankly, clowns scare me.
Jin. The horse says "Neiggggh! Thank you. Rip."
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