Thursday, March 12, 2009

Penny Ante Arbitrage Update



In a post last month ("Penny Ante Arbitrage") I mentioned that I bought 749 shares each of Asure Software, Inc. (Nasdaq: ASUR) in several different accounts at an average price of 18 cents per share, in the hopes of getting them cashed out at 36 cents per share, as part of Asure's proposed plan to take itself private.

Today Asure announced its financial results for its 2009 fiscal second quarter. The two salient points for our purposes are these:

- The CEO says the plan to take the company private is on track:

"Our plans for going private remain on track, with our preliminary proxy filing currently under standard review by the SEC."


- Based on the updated balance sheet and burn rate numbers, it looks like the company will still have more than enough cash to buy out fractional shares at 36 cents each, assuming the reverse split happens within the next two quarters. As of January 31st, the company had $9,056,000 in cash + $3,074,000 in short term investments + $1,528,000 in net receivables - $7,226,000 in total liabilities = $6,432,000. The company had a net loss in the last quarter of $1,539,000. Assuming another two quarters of similar losses before the reverse split would leave the company with about $3.4 million in cash. Assuming the number of shareholders is the about the same as reported in the last 10-K, the maximum amount it should cost the company to cash out fractional shares is about $2.7 million.

7 comments:

Anonymous said...

Why can't I see the # of shareholders in the 10-k? I must be blind, can you provide a page number?

Also, while I also own 749 shares in a few accounts, I've seen these situations blow up, as the company drastically underestimates the number of shareholders they'll have to cash out...

DaveinHackensack said...

"Why can't I see the # of shareholders in the 10-k? I must be blind, can you provide a page number?"

Looks to be p.11 according to Edgar Online. Here's the quote:

"As of October 23, 2008, there were approximately 10,054 stockholders of record of the Company’s common stock."

From my original post on this, here's where I estimated the cost of cashing everyone out:

"Assuming that each shareholder will have the maximum number of fractional shares (749), the company will have to cash out 7,530,446 shares. At 36 cents per share, that would cost $2,710,960."

There may be more shareholders now than in October though, I don't know.

DaveinHackensack said...

Incidentally, the fellow whose idea this was initially added this comment yesterday on the company's Yahoo! message board:

"If there are 10K shareholders, there won't be anywhere near that many 749 share lots. I would expect mostly a standard bell-curve distribution, skewed slightly towards 749, so call the average 400 shares. Accordingly, 4M shares get bought @ 36 cents, about half the cost of your expectation.

In any event, the risk isn't whether they will have enough cash, it's whether they can muster the required number of votes.

Just make sure you cast yours, ok?"

AMAZARA said...

H

Anonymous said...

Thanks for posting that, I was searching for shareholder, not stockholder.

So who owns this? I don't mean who owns 749 shares, but who are the big owners? Insiders don't own a lot. Of the 31 million shares, the top holders are Red Oak Capital Partners (are they associated with the insiders?), Renaissance Technologies (they won't want to hold a private company, so they're likely selling their 1.6m shares), Dimensional Fund Advisors (not certain, but likely don't want to hold), and down the list. So I think we get continued selling pressure until all the big holders sell...

Rama said...

What is magical about this number - 749 shares. I am probably missing something obvious here. Can someone help me understand.

DaveinHackensack said...

Rama,

The first step in the company's proposed plan to go private is a 750-1 reverse split. If you have 750 shares, you would get exchanged for 1 new share in that step; if you have fewer than 750 shares, the plan is for you to get cashed out at 36 cents per share.