HoustonKing

A-Power and AgFeed: The Importance of a Strong Balance Sheet

Your comments tell me you know nothing about running/owning a business. No one who is positive about their company ever wants to give up a significant percentage of it unless all other options are gone.


On Jan 02 11:44 AM ChinaStockGuru wrote:

> First off, to address your point. This is Econ 101: if you borrow
> money, current investors get the benefit of the increased earnings.
> If you issue more shares, the now diluted base gets a reduced EPS
> benefit.
>
> Borrowed money is riskier, but more beneficial if you're successful.
>
>
> The true issue here is that FEED is in a commodity business and they
> are going to suffer typical commodity volatility in their margins.
> They are finding out the hard way that they need more equity to survive
> the current downturn. There is no way they grow earnings 100% next
> year unless business conditions turn. Don't be surprised if they
> need to issue more shares again. And, ask yourself this...if they
> grow earnings 50% but need to issue 100% more shares, how are you
> looking?
>
> I can't predict when the cycle turns or what FEED will earn, but
> I can say that APWR doesn't need to dilute anyone to stay strong
> for the next cycle. They are better positioned due to their balance
> sheet.