Robert, in its filing, GTAX says it will force the exercise of the
warrants, which may indeed do something nasty to the stock for one or
two days. Except for you, me, and anybody else who reads the filings,
this isn't known yet, because the co. hasn't put out a news release.
The number of shares that will be suddenly created, and possibly
sold, is 0.5 M, vs. 2.1 M float. Ordinarily this is a highly optimal
situation for short sellers. However, the way the stock has been
going up, it might not work.
Here's why ....
When the registration is deemed effective, the co. will announce that
they will 'redeem' all the warrants unless they are exercised first.
The warrant holder will receive a penny from the co. if he does
nothing. Being smart, he will instead send a check for the exercise
price of $4.67 to the co. and receive a share of stock, which is now
trading for about 13. This obviously puts the holder out some cash,
which you might expect to result in him selling something, which
might very well be the new GTAX common stock he just got.
In the past, when I've seen this, the stock has dropped hard for
about one day, and then it often recovers quickly. I'm not sure why
the response is so rapid.
Here's the downside: The stock has been going up fast, yesterday up
over a point, so unless you get lucky in your timing, a one or two
point drop due to the news of the warrant redemption won't even make
up for the loss you get from shorting too early.
The only way I want to short a stock that is going up really fast is
if I am confident the thing is overvalued beyond the nosebleed stage.
The p/e of 44 looks fairly high. The eps growth rate looks pretty
high, and reading the S-2/a leads me to suspect that the march
quarter of 98 might look good, due to not adding as many new offices
this winter (new offices are unprofitable for a year or two, it says.)
Here's the blurb from the S-2/a re. the warrants:
PLAN OF DISTRIBUTION
The 507,926 shares of Common Stock issuable upon exercise of the currently
outstanding Redeemable Public Warrants and registered hereby will be issued by
the Company to the holders of the Redeemable Public Warrants upon the exercise
thereof by such holders. The Company has the right to redeem Redeemable Public
Warrants at a price of $.01 per share, provided that Redeemable
53
Public Warrantholders will have 30 days to exercise in the case of such
redemption. Upon the effectiveness of the registration of which this Prospectus
is a part, the Company currently intends to notice redemption of the Redeemable
Public Warrants, in which case, the Company believes, most of the Redeemable
Public Warrants will be promptly exercised, and, therefore, the Company
currently has no plans to actively solicit the exercise of the Redeemable Public
Warrants.
******************************
Here's a MarketGuide report:
Market Guide Quick Facts Report
Gilman & Ciocia SYMBOL: GTAX EXCHANGE: NASD
PRICING DATA (AS OF) 03/20/98 RATIOS & STATISTICS
Price 13.94 Price/Revenue (TTM) 3.75
52 Week High 14.38 P/E (TTM) 44.25
52 Week Low 1.88 Price/Book (MRQ) 11.03
Beta 1.78 Price/Cash Flow (TTM) 29.85
Avg Daily Vol (10 Day) 0.12 Mil ROA (TTM) 18.65%
Avg Daily Vol (3 Month) 0.08 Mil ROE (TTM) 27.98%
Current Ratio (MRQ) 2.09
DIVIDEND INFORMATION Total Debt/Equity (MRQ) 0.36
Indicated Annual ($) 0.00
Yield 0.00% NOTE: TTM = trailing twelve months
MRQ = most recent quarter
SHARE RELATED INFORMATION SHORT INTEREST INFORMATION
Market Cap. ($) 74.931 Mil Current Month 0.265 Mil
Shares Out. 5.376 Mil Previous Month 0.223 Mil
Float 2.100 Mil Short Interest Ratio 2.1 Day
INSTITUTIONAL & INSIDER OWNERSHIP
PURCHASES SALES NET PURCH %OWNED
Institutions (3 Months) 0.140 Mil 0.001 Mil 0.140 Mil 2.6%
Insiders (6 Months) 0.000 Mil 0.000 Mil 0.000 Mil 60.9%
BUSINESS SUMMARY Gilman & Ciocia is a provider of income tax
preparation and financial planning services to individuals
and businesses. GTAX also provides direct mail services.
For the six months ended 12/31/97, total revenues increased
30% to $6M. Net loss fell 83% to $183K. Revenues reflect
the opening of eight new offices and growth in the direct
mail division. Lower loss reflects decreased salaries and
commissions due to personnel changes.
REVENUES (Thousands of U.S. Dollars)
QUARTERS 1995 1996 1997 1998
SEP 943 1,829 2,159 2,442
DEC 778 1,568 2,454 3,560
MAR 5,629 8,304 9,813
JUN 2,582 4,809 4,646
TOTAL 9,932 16,510 19,072
EARNINGS PER SHARE
SEP -0.030 0.010 -0.110 -0.020
DEC -0.110 -0.080 -0.090 -0.010
MAR 0.200 0.060 0.180
JUN -0.040 0.070 0.170
TOTAL 0.020 0.060 0.150
FY'96 Q's are restated. 7/96, Co. acquired 50% interest in
Suffolk Service Burea Corp.
GROWTH RATES 1 YEAR 3 YEAR 5 YEAR
Revenue 15.52% NA% NM%
EPS 74.44% NA% NM%
Dividend NM% NA% NM% |
