TO ALL:
Once again a posting for my buddies on the yahoo thread where they deem my responses to wordy for publication in their entirety. I hope those of you here at SI enjoy it as well....
Mr. dttttk,
In regards to the "Mr. stuff", the reason I always use the formal tense when addressing anyone on line I have explained before. The internet is an international (obviously) outlet. In many societies outside the United States it is considered demeaning and/or rude to address someone by their common name, unless you know them well on a personal basis. I have had many entities ask me to please quit referring to them in the formal tense, but I find I am unable to keep track of this list, and find it better to err on the side of formality; rather than, to be chastised (and rightly so) for informality.
As for your friends "feedback" on "(my) sic latest theories", they are, to say the least, cliché. The only thing it appears he left out were "we just got to play them one game at a time" and "everything will work out, God willing". Mr. dttttk, no disrespect meant to you or your "contact", but the phrases he uses I have heard many a time on conference calls by BOD members. They are standard issue and, quite honestly, very diplomatic and professional on his part. Also, I would like to take issue with your use of the term "(my) sic theories". I have presented no "theories"! All I have presented is the facts, as I understand them, and possible "scenarios", from material pertaining to contractual agreements presented in publicly (transparent) accessible documents through the SEC (http://www.sec.gov). I do have theorem (that makes me very bullish on the stock) as to what may be responsible for the erratic price action in SCUR securities. But I wouldn't dare present them fully in a public forum for two (2) reasons. a.) They are just that, theories, and therefore not factually provable, and b.) They may include actions by principals that could be interpreted as, or could be construed to be, in a somewhat of a legal "gray" area.
Now I would like to take the time to respond to your "contacts" statements:
1.)" -thought you might want to hear a little feedback on your latest (scenarios) sic, just got this back from my contact out in Ca. And his feelings are, first, glad you took the time to read the filings, he thought that was pretty commendable."…..I don't feel that researching and learning every possible detail about financials, business stratagies, and personnel, that is available to me in the public domain, in any company I "own" a part of, is commendable. It is not only prudent, but should be required!
2.)"He states that it is difficult to figure out what the preferred holders might be thinking, but you have the right idea generally in terms of the deal"……It is not only difficult, it is impossible! But there are clues. One must ask. Why would such large entities as Credit Suisse First Boston (CSFB), and Castle Creek Partners (CCP) be inclined to purchase 16 million dollars worth of preferred stock in the form of warrants (preferential and warranted securities) in such an illiquid (16 million shares at time of issuance) company as SCUR? Was it because they expected to reap a large long-term investment because they liked the management (which sold them the deal) and the company? Was it because they liked the fact that in case the company went in the crapper they would be given preference to all company assets on liquidation up to their 20 million-dollar warranty? Is there another reason? Which leads to your "contacts" next statement…
3.)"Whether or not SCUR is in a position to redeem the preferred is d(e)batable, one reason they did an equity deal rather than debt is to avoid fi(x)ed charges and have a stronger looking equity based, balance sheet." ….As one of my cronies is so apt to say, "No s**t Sherlock"! We all understand why SCUR did the equity offering rather than assuming debt. The more important question, as above is, what were CSFB and CCP reasons for entering into and agreeing to the equity offering? As for whether SCUR is in a position to redeem being debatable, that is correct. But again there are clues. As I interpret the warrant agreement, now that the 20 day sub-five(5) dollar closing bid covenant has been breached SCUR has the "option" to redeem or "call in" all the warrants for a lump sum of 20 million cash, OR pay 13%APR on any or all of that amount that goes unpaid. Does SCUR want to do this? I don't know! I wouldn't. The most important issue to remember, from my point of view, is the additional 25 million authorized shares that stockholders (mostly institutions) approved in November. The covenants ruling these shares, as I understand it, state that these 25 million shares are free to be used by the company board of directors as they see fit WITHOUT general shareholder approval. Could SCUR use these shares in a secondary public offering to raise capital to pay-off CSFB and CCP? As I read it, Yes they could! Could SCUR find anyone willing to underwrite the secondary given the attitude many have attributed to the way Prudential and others feel "burned" by SCUR management? I don't know! But, as I remember Prudential didn't have any problems acting as agent for insiders who were selling into weakness recently. It appears to me that CSFB and CCP may, I repeat may, have been forced into a corner here. If, and that is IF, SCUR chooses to notify CSFB and CCP that they are going to force the optional redemption unless they convert their warrants, CSFB and CCP must decide….a.) Do we take the redemption and its possible ramifications; or, b.) Do we convert to the maximum number of shares possible under the terms of the warrant agreement giving us approximately 16% of the common shares of the company, but NO warranty? Which will they do if presented this scenario? I have an idea, but I don't know for sure! Conversely, does SCUR want to do a secondary offering at a point in time when their stock price is at an all time low combined with the possibility of redemption debt on the books? I don't know. I wouldn't.
4.)"He told me to remember also, that just because incentive targets were met in the past does not mean anyone can make it happen! ….When the management of a company reaches its incentive bonus stock price through a last quarter doubling of the price for just a long enough period of time to reach that bonus, on only slightly increased trading volume, it is a coincidence. When management of a company, the next year, reaches its incentive bonus stock price through a last quarter quadrupling of the price for just a long enough period of time to reach that bonus, again on only slightly increased trading volume, it is a pattern! And patterns are what traders (which I am not generally) look for!
5.)"Stock price movements are dependent upon the company attaining acc(e)ptable financial results for a sustained period, so if the target you mentioned is to be hit, the company will have to do an outstanding job and prove it with numbers over the next several quarters. They are still hoping they can!"…..This is the most cliché, mantra-like, corporate line, naïve statement of them all! In the long-term, and by long-term I mean 10-20 years out, this is a factually correct statement. But, in the short-term, and by that I mean 1 minute to 1 year, the examples of this being a factually incorrect statement are many. We all know of many companies that on paper are financial nightmares, yet their stock is skyrocketing. On the other hand we could name many small and medium-cap companies with 4-10 PE ratios and excellent books that have absolutely no institutional following or retail interest. Which leads to another, and maybe the most intriguing question about this company. What is it about this little small-cap company SCUR, with only 16 - 21 million shares (depending on warrants and options), that keeps institutional buyers invested (AMEX among the largest) at levels of 40%-60% of the shares outstanding? I don't know, but I do like hanging out with the pros.
In conclusion, I would just like to add, we are seeing one hell of a poker game here between management, warrant holders, institutions, shorts, and retail investors/traders. I believe it was Warren Buffet who once said…"Investing is like playing poker, if you've been at the table for 15 minutes and you're not sure who the patsy is, your it! I have chosen to back the management and institutions in this game! Are they bluffing? Will they call for a re-deal? Will they fold? Will they call? Who will win? Is someone cheating (ace up the sleeve), and will they be caught? There are so many scenarios that could play out here that it would literally take days to type them all out. Suffice it to say they range from; (worst) the warrant holders actually trying to force redemption on SCUR for misrepresentation by SCUR management. Too (ambivalent) absolutely nothing happens, as SCUR doesn't chose to redeem because this is an "optional" covenant that has been broken, and conversely CSFB and CCP chose not to convert. Or (rosiest) the way I believe this will play out. That being, that CSFB and CCP convert their warrants adding minimal dilution while keeping a strong financial balance sheet, and gaining a couple of very strong partners to boot. First quarter woes turn to second and third quarter glows as unfulfilled contracts get completed and earnings are suddenly coming in on the upward surprise side again. Am I right, or have I out foxed myself? Only time will tell! As always…..
Best Wishes,
Swedelo
PS: dttttk, glad to hear you've been fishing. You know the saying, every day you spend fishing doesn't count against your total amount of time allotted on this earth. That being the case I am about 13 years old! The Bass, Crappie, and Walleye have been in an on/off pattern as the Spring cold fronts come and go but overall the fishing here has been good the last month. Don't forget to sharpen your hooks mate! |
