Hi N Saliba,
You have inquired what I believe are the three most important things that TFS can do to help the valuation of their equity in the interest of *all* shareholders:
1) It is clear that David Buchanan is "uncomfortable" with the Wall Street related aspects of his position. Although he may be talented when it comes to technological issues, I am hard pressed to view him as an "articulate" spokesman for the firm and *US*. Even in the recently improved conference call it was relatively clear that the material he was covering was *read* from a script.
Anyway, it must be clear to him that this is so, which is the principal reason why it appears that most of the company's information flow is directed to a limited number of Phoenix area residents. After all, it is easier to conduct conversational activity with "friends," is it not?
To improve valuations, the company must attract a *national* presence, rather than the limited regional one that is in place. In fact, I strongly believe that a top-flight professional, aware of Wall Street and the importance of optimal stock valuations (such as minimizing the cost to shareholders of raising additional capital, when necessary), should be handling corporate communications in a *pro-active* way. I have no problems with the job that Liz does; it is clear that she is limited to a "responsive" rather than pro-active role. She doesn't have the necessary authority to do the job properly. And, as anyone on this thread realizes, the world doesn't beat a path to your door, even *if* you have the proverbial better mousetrap.
Having seen him in action, it is my sincere belief that Jeff Buchanan could handle the job admirably. Unfortunately, however, because the senior Buchanan believes "If we build it (the company), they will come (the institutions)", he has been too passive in expecting this process to happen. It *doesn't* happen unless you work at it. The freak move this company's stock had in the mid-1990's...when TFS found itself in front of the cellular wave more or less by accident...won't be duplicated. The momentum crowd got hurt then, and it is doubtful that they will be back. This time, an entire educational process will have to take place to attract the *right* institutions.
It will require that this position either be full time...and with appropriate authority in the hands of the responsible party...or the younger Buchanan will have to recognize that it will end up taking 35%-40% of his time. There is literally no other way.
TFS probably *has* the better mousetrap. If I didn't think so, I wouldn't own the stock. However, it is necessary for it to have a cogent, clear, long-term pro-active commitment to telling the company's story to *relevant* institutions. As one of my parents used to occasionally ask me: "If a tree falls in the forest, and there is no one there to hear it, has it made a sound?" So it is with TFS. The company needs to make some investment *noise*...and it is necessary that the community that hears it be outside of Arizona.
2) Something must be done to improve the liquidity of the stock. Whether this takes the form of a couple (over a year's period) of 5:4 stock splits (virtually doubling the shares outstanding), or a policy of paying 15% or 20% stock dividends is beside the point.
The *important* aspect of the trading is that it calls attention to the company. Obviously, TFS isn't watching the newspapers. Otherwise, it would know that most splits...even those under the level of 2:1, which would clearly be too much right now...result in higher prices for the equity being split. The reason, of course, is that such splits (though meaningless from the standpoint of changing the way the company's equity is held) call to the investment community's attention the fact that the company is looking toward the future with *confidence.*
It says much more, and much more effectively, than a five or six year running commentary in the Chairman's "Letter to Shareholders" section of the annual report indicating "We have never been in as strong a position and as optimistic about the future blah blah blah blah..."
Anyone else care to give them the names of a half dozen companies that have benefitted from such announcements in merely the last month?
3) TFS should do a public offering, either via selling another million shares of stock *or* doing a convertible deal. Aside from the benefits of increasing the company's capitalization, the opportunity to raise capital during the "sweet spot" of the economic cycle (at relatively low cost) is too good to pass up.
Obviously, the company will be using its cash balances throughout the balance of the year to fund capital expenditures *and* raise inventory levels. The money will be necessary anyway, if we are to have no bank debt on the balance sheet.
But, you actually *do* get ancillary benefits from an early financing. TFS will get additional analytic coverage, something that it badly *NEEDS*. Even in my conversation of a couple of days ago with Rob Cihra (of Furman Selz), *he* said that he would be happier with addiitonal coverage.
One man can't do it all on his own. Although Cihra has done honest, quality work in covering this company, his impact on the trading has been minimal. How do I know? Because among my broker relationships I trade through his firm. And, in the natural course of business, they contact me when they have something sizeable to do, because they know that I have been sizeable in the stock.
It doesn't happen very often.
Anyway, N Saliba, you only allowed me three suggestions. And, that is what I have come up with. I hope that it is helpful. TFS *has* the capability to handle this responsibility, if it deems it sufficiently important. Prior to this annual meeting, the senior people have treated even the large holders with indifference. The fact that they have called around to try to get support for the shareholder vote next week is a clear indication that management is concerned that the vote my prove embarrassing.
I will report it on the "thread" no matter what the outcome. One can only hope that this nascent "responsiveness" is a policy change rather than a sop to investors prior to the annual meeting.
All of *you* will be able to judge that for yourselves over the coming months. |
