Retired Aviator

Deep value, special situations, contrarian, closed-end funds
Retired Aviator
Deep value, special situations, contrarian, closed-end funds
Contributor since: 2010
You /should/ take those. So now you switch what you claim I 'lied' about to "the terms are worse" statement because the "no additional cash" supposed "lie" I proved to be completely baseless. It's not even false!
Since I am long the stock I want the price to go up not down. So why would I point out that the terms are worse? A dishonest person would not. Makes no sense whatsoever. Author thought the penalty shares would cost the lender like 2.8 cents each, apparently that money going to the company. Fact is the penalty shares would be free, no additional cash going to the company but for the original loan.
Congratulations on pursuing probably the most ludicrous, baseless, nasty series of accusations I've seen on any internet chat board. Suggestion: if you think a commenter is contradicting himself, just point out the apparent contradiction and ask for clarification instead of jumping to conclusions and screaming at them LIAR in all caps. That's what anybody else would do. Be a decent human being for a change. End your witch hunt of me.
The quote above "Upon reading ..." is 100% true! You are insane.
The problem with the stock is not business results which are rapidly uptrending and not the valuation which is just a fraction of a reasonable takeover value. The problem is basically that the stock is thinly owned and very thinly traded so if just a small part of the herd of owners gets spooked over potential dilution and starts selling it can turn into a terrific % rout in no time flat. Self fulfilling prophecy as then new share issues grow hugely. If 5-10x times as many investors followed this stock I think it would have found support back before the split at between 10 and 20 cents. Now it is below 2 cents!
If the bridge loan is paid on time it may help the stock some but it's hard to say with so much uncertainty looming over financing. It would be good news anyway to drop the shares out then by the 26.3M to back around 170M (pre split).
A quarter or two of only stingy new share issuances would probably do wonders but it seems unlikely right now given the CEO's apparent philosophy of "immediate and rapidest expansion at all costs". Terrible management in my view. Gives his own investors the silent treatment as he destroys them with dilution and the lack of communication. We'll see as hope is not lost yet.
Absurd and brain dead notion. The author put a value of something like $.028 on each of the 26.3M penalty shares if issued. I merely reacted by saying that putting ANY cost figure on those shares if issued is mistaken because those shares would be issued for no additional cash, i.e. cost free. Yes, it's true, the lender would get those shares with no additional cash FROM THE LENDER. I never said there would be no other cash flow OF ANY KIND in the deal, such as repayment going TO the lender.
Ridiculous your point anyway, since it is as trifling as can be. It is hugely to the credit of the integrity of my comment history that this is ALL the ammo you have on me; to take a speck of sand and try to blow it up into a mountainous accusation. Every single time you've called me out I've shown you to be completely wrong.
Did you even notice when accusing me of the indignity of "lying" that there is NO possible motive for telling this particular "lie"? You see, when people lie, they have to actually have some motive for it to be a lie. Otherwise it is called an error. In this case it's not even an error. The error is yours for misunderstanding what I said.
The rest of your rant is pure poppycock; not at all factual. All I ever did on AXPW blog toward you was to correct your errors and point out the dumbness when you stubbornly refused to see them and got nasty. My criticisms of you were constructive; to inform and stop your rubbish. Your criticisms of me were every one falsehoods, inappropriate, often nasty and going way out of your way to fault-find. And you never showed a bit of contrition the many times I proved your nastiness misplaced and mistaken. We are nothing alike.
Do you see now why I suggest that you and I just go our separate ways? Stop addressing me. Stop calling me out with accusations. Pretend my posts don't exist so we can both finally have some peace for God's sake.
Of course they are true. You've claimed I said something false "LIED" but been completely unable to point to anything I've EVER said that was false. Meanwhile I've demonstrated clearly that over a dozen of your cocksure claims were flat out wrong. Time to stop accusing me in your vague and strange way and state exactly what you think I said wrongly and why it's wrong. You have never done so.
BTW common decency dictates that if somebody says something you think is false then you shouldn't just nastily accuse them of lying when it could be just an error or misunderstanding on your part (which it is).
Paulo> But if they don't short it then a seller must sell only /after/ they get their pile of shares. The 26.3M (pre split) shares have not been received yet and it is unknown whether they will be received at all.
You claim to know as fact how "rare" it is for people to short a penny stock like this. How could you know? You can't. Considering that the company announced a reverse split, which is almost always anathema to shareholder value, and that the only 'analysis' is yours (if you can call it that) saying "falling into death spiral" right in the title, it seems plausible that some bears would want to take short positions. Maybe just small ones to avoid big risks. But with such low liquidity very little aggregate short money can move the price in a big way.
Actually, though the idea that your articles being the only 'analysis' around may have caused shorting is speculative on my part, shorting is not even necessary to tank the stock badly. If your writing has simply convinced people who would have otherwise bought shares to not buy, that could have been plenty impactful to have killed the share price. Or if you convinced people who held shares that they had better get out.
Bottom line is that a company that appears to be growing sales /very/ rapidly and has very juicy margins that should get it to profitability within a year has been punished extremely hard by the market. The market says it is worth a mere $3M right now with sales of $10M, and gross margins around 35% which are poised to grow fatter with scale. The flagship product has taken the #1 selling spot in one of its major markets of southern CA and has strong market share widely. Supermarket chains are readily giving up valuable shelf space for it though the jugs take a lot of space. Everything about the business performance is screaming "success" at the same time everything about the stock performance is screaming "disaster". Why is that? I think the answer is probably you. You focused very heavily on past dilution while ignoring the extremely positive business developments almost entirely. So the market seems to now see only dilution. Voila, self fulfilling prophecy.
Please explain or give an example. I don't think it works the way you think it does.
I recognize those are my words and I stand by them. Which side exactly do you think I'm 100% taking? That WTER is a buy or that it is a sell? Have I suggested any place here to take a position in the stock either way? Ridiculous.
Nobody? As in you speak for all people? Zero credibility to such a statement. Plus your exception is a huge one. People who for some reason stand to gain from more dilution could short the stock down so that dilution is as extreme as possible. With such thin daily volumes such schemes can make lots of sense even if the shorted shares lose money due to subsequent rally.
hing> Light rail, passenger trains etc are often pure electric running off of electric high voltage lines but no freight trains are pure electric to my knowledge. Diesel/electric hybrids all, for the heavy stuff. Nothing much changing here at this point except for a couple science projects like Norfolk Southern is tinkering with.
Why would the lender "sell preemptively" given that such selling would push down the value (through possibly tremendous dilution) of the 26.3M shares s/he might be receiving?
If anything wouldn't the lender, if expecting default, want to push /up/ the share price to minimize dilution of the large stake s/he expected to receive? Buying a few million shares in the open market could buoy the price for weeks in which case the 26.3M would be worth a whole lot more than otherwise.
Yes the 26.3M shares held in escrow are part of the outstanding 190M (3.8M post split). If no default the outstanding shares would revert to 190 - 26.3 = 163.7M (post split, 3.27M). That gives the company a current valuation of $3 million plus the Preferred, after the Note is paid. If it can be paid off from operating cash I would, given the chance, buy the whole company at the current ~$1.00 share for $3 million in a heartbeat. Run rate is $10M revenue, growing rapidly, and gross margin as I recall something like 35% and likely to improve with economies of scale. Net profit in the $1 million range on $10-$15M sales annually at maturity seems very possible.
A shame that they sell water to consumers so well but are so inept at selling the company's shares to financiers. I don't do a lot of penny stocks but this is the first time I've seen a company poised for so much success to be trashed in the capital markets like this. Live and learn. Anything can happen in the pennies.
Since you are long I would not be thankful to the author. He's done only a very cursory, non informative in my opinion, treatment of this company and taken a strong position that the stock is poison and untouchable. The toxic words "Death Spiral" in his title even, though technically they are not even appropriate. His wide following, and the fact that there is virtually nothing else written up on the company, may mean that he may have focused the attention of shorts who then together have killed the stock. In the absence of buyers to take up the slack the shorts win the day and whatever they say the company is worth becomes a self fulfilling prophecy, as upcoming dilution is a function of market price. IOW if the market had rallied to 20 cents (pre split) on the 10Q news and held that level, new financing might have gone off at 15 cents a share and buyers at 10 cents would be sitting well. But if the thinly traded market instead tanks to 2 cents, as it has (due to shorts??), new financing goes off at maybe 1.5 cents. The difference in new shares to be issued is *tenfold*, 15 cents vs. 1.5 cents, for the same amount of capital infusion. Same company, same prospects -- high growth, high margins, and profitability within a year. Yeah thanks a lot paulo.
Now they are looking for shareholder approval to explode the # of authorized. No explanation to speak of. Terrible management that doesn't care a hoot about shareholders. I never saw that coming given that the CEO/Founder and CFO own large stakes of Common. CEO very large. They badly dilute themselves too, but maybe they have an insidious plan to just get their stake back through large stock awards to themselves. If so I think there's a shareholder lawsuit in that.
You are hallucinating again. Your quotes of mine contain no untruths or contradictions whatsoever. How many times do I have to point this out before you understand?
The "zero additional cash" means that in the case of default the shares are issued with no cash cost for those shares -- i.e. the 26M shares are pure PENALTY, which you don't seem to grasp. Principal and interest are separate. Those have nothing to do with the 26.3M penalty shares.
Principal/interest = future cash to Note holder.
Penalty shares if issued = no additional cash from Note holder.
Exactly as I said the first time. Get it now?
It is YOU who owes me an apology for your stalking and hounding me on SA for a long time now, purely to find fault. You have tried to contend my words many times now and every single time I have shown your preposterous position that I was wrong or that I "lied", as you put it, to have zero merit. Just leave me alone. I have no interest in what you have to say. I will never again address you or anything you say unless forced to defend myself by your misstating the facts as you are wont to do. You and I will be BOTH better off if you just call off your dogs and go away. I doubt you care a whit about WTER anyway. You are here only to dog me.
Apologies to others having to read all this, but this Freya character has a long history -- some kind of vendetta for me. He actually followed me here from another board where I mentioned WTER briefly.
Free markets are wonderful in many ways. Often competition makes for nearly ideal outcomes for society. But in many industries free markets do a lousy to terrible job. Over many decades those areas have tended to become more regulated in order to deal with actual problems. The idealists who think free markets are always great are just pigheadedly wrong.
Airlines and air traffic are still subject to all kinds of regulations! You are off topic anyway, plus I said "almost never" making your single exception meaningless.
The dollar has had an incredible 30% rally in a bit over a year, simultaneous with commodity prices (in dollars) having plummeted. The author's main point hinges around the idea that perhaps the dollar rally against other currencies is done and so the dollar is now poised to give up some ground. If so, commodity prices should rise from a dollar fall alone, all else being equal. I agree.
Yea Clinton screwed up on that but it was at the behest and constant nagging of Wall Street with the GOP cheerleading the whole thing.
Deregulation is almost never initiated by the left. You don't know this? It is comical to blame the /left/ when free markets don't work.
Bernanke said later that they were aware of subprime problems before the crash but what they didn't foresee was the extent of irrational panic in financial markets. Pretty reasonable.
ACA is very similar to the Republican sponsored health care plan of the 1990's! Bob Dole et al offered an 'Obamacare' of sorts as an alternative to the Clintons' single payer. Just goes to show how the Republican party has gone off the reservation since.
Dent is a joke. Look on Amazon at descriptions of his books from years ago. Collosally wrong predictions from this sensationalist.
Jeremy, most of the negatives you listed are actually rooted in the massive dollar strengthening we have seen. Without the dollar rally, commodity prices wouldn't have crashed so hard, for example. Thus if the dollar weakens IOW there is any mean reversion that will be good news for most of the problem areas you mentioned. I would not bet on the dollar rally continuing indefinitely and it could reverse in 2016.
Actually electric provides superior torque. Locomotives for example use a diesel engine to crank a generator which in turn powers an electric drive motor /because/ electric drive motors have superior torque versus mechanical. The problem is storage, i.e. batteries. A tiny company in Kentucky has largely solved the problem except for overheating of batteries under some conditions.
I agree that diesel will have a huge market for decades in all sorts of heavy duty applications. Clean energy will probably make larger inroads into gasoline than into diesel.
"I'm more inclined to think that they simply didn't want to wait for the $750k to roll in before continuing forward with their next round of expansion."
It could be that they decided they needed the $750k in a hurry based on purchase orders in hand or expected. It takes time to get a capacity expansion up and running and they may view any delays in filling POs as anathema to customer relationships, thus the hurry to grab cash. But converting the warrants to shares really bothers me.
"As you guys already mentioned it would cost them a mere $18,493,"
You "guyS"? The author didn't figure that out; he thought the bad terms and rate were proof the financing was a disaster. $18k plus the warrant conversion could easily be the total cost of the loan which isn't too bad while he thought it necessarily terrible.
Sorry but the author has only ever done a skin deep analysis of this company that had important omissions and flaws too. He thinks authoring an article on a company for pay shouldn't come with any obligation to read a bit deeper or fact check.
Their cash flow actually looks even better as the last reported forecast was $10M annual revenue run rate for the current FY. So instead of the ~$1.5M quarters they must be up to ~$2M by now. OTOH if the cash flow is so good, why do they need to borrow money? Again, I see 2 ways to look at it: either something fishy is going on and as the author says the evidence of cockroaches is that they can only get lousy loan terms; or they are certain they can pay in 60 days in full in which case the 15% interest is trivial. (However, the dilution from converting warrants to shares must be added to the cost of financing.)
Penny stocks are risky and I've seen all kinds of crazy developments in them but if the sales growth story is true this company is going to have value. Question is whether the current shareholders will have more than 4 cents worth in the future. Unfortunately it is unanswerable at this time given the horrible shareholder communications and very questionable policies of bad financing, repricing warrants, passing out shares like candy etc. Agreed the next year's quarterlies will be interesting and revealing. There's a decent chance that the market is factoring in much more dilution at 4 cents than ultimately will happen.
It really is a penalty that only comes into play if there's default. You obsess over the word "penalty" for no reason whatsoever. I NEVER said that the word "penalty" appears in any document. In fact I said it did NOT appear in the documents but you continue to not understand what I wrote and to blow up over a word.
"What a crock, the lender was satisfied that at the time of the loan ..."
The crock is that you have a history of following me around and putting all my comments under a microscope trying to find fault. The latest being you try to make a stink about my use of the word "penalty" when it is in fact quite accurate. And you haven't a clue what "satisfy the principal" means but you just have to go off about my using the term anyway.
Freya you're completely wrong. "satisfy the principal" is terminology used in debt instruments. It means to pay off the principal. If you go down to the county courthouse and look at real estate records you will find "Mortgage Satisfaction" documents, meaning the bank declared the mortgage to be paid off. So again you don't know of what you speak.
Every word of my quote below is accurate. He just does not grasp that I can describe the 26.3M shares as a "penalty" when the word "penalty" does not appear in the documents. But that is what it is; a penalty for default.
"Upon reading the 8-k for the $750,000 loan, the terms are worse than the author states. Upon default the lender would receive the 26.3 million shares as a penalty; the principal and interest are still due. So the 26.3 million shares are not as the author says "in exchange for" anything, and so the figure of $.0285/share is a nonsensical number."
Bottom line:
No default = zero shares go to Noteholder.
Default = 26.3M shares go to Noteholder for zero additional cash.
The shares are clearly a penalty in the event of default.
Statements that are factually incorrect are errors, by definition.
It is not irrelevant as the facts of the financing are all we have to go on to guess at what's really going on at this time. As I pointed out earlier, the terrible interest rate and horrendous penalty shares could mean that the company is in trouble and desperate. But given the rapidly rising cash flow, it seems it shouldn't be. Maybe the CEO agreed to the penalty clause due to being supremely confident there will not be default. I don't know but it's worth thinking about and somebody might want to look deeper than just the interest rate and penalty to try to infer the situation. When I did the math at the 15% rate I discovered the interest was actually trivial over 60 days. 5% or 15%, hardly matters.
It's an interesting story for sure with profitability projected within a year. Seems a divide is coming when the dilution will cease.
One extremely important thing that your "coverage" of this company to my recollection never unearthed was that the CEO owns some 47 million shares. Recently that represented well over 1/3 of the company.
Re: sloppy work excuses, no I do not excuse errors in an article because you expect low page views, any more than I would excuse a barista for making me the wrong drink. The barista is being paid maybe $8/hour; given the minimum $35/article that SA pays, you got paid for this very brief piece at least 4 or 5 times the hourly rate of the barista! In my view SA made a mistake in publishing the article as it covers so little about the company. As it turned out it had errors too.
I'd suggest an attitude change from one of entitlement to one of pride in work, even when compensation is lower than what you are used to. The true compensation for work should be the feeling of satisfaction in accomplishment and thoroughness. It only took me only a couple of minutes to find out that the escrow shares were penalty-only that would not satisfy the principal of the Note. Even if I had had to read every word of the Note it wasn't very long.
Claiming you were prescient on this stock does not impress me in the least. Anybody can have 2 lucky guesses predicting a coin toss (it will go up or it will go down). Show me over many calls on different stocks' directions that your batting average is .750 or better and that would impress me. Keep in mind that a monkey with a dart will get stock price direction right half of the time (or bat .500).
You got the high dilution risk right but that was easy to see.