Verdant Share Discussion Threads

[pacman88] 07/12/2001 15:58

35-37p. moving after US open ... do we have interest from abroad??

[pacman88] 07/12/2001 15:50

also for an utdated but interesting article on how it works see

[pacman88] 07/12/2001 15:38

Recent PIPEs in the US include
1. Critical Path last week
2. Priceline (Feb-Mar)

For overview see:

[stewjames] 07/12/2001 15:32

Do you happen to know of any publicly quoted examples of such companies, pacman88?

[pacman88] 07/12/2001 15:28

i think there is slightly more to that, but it isn't for the risk averse. this is why you are seeingt lots more PIPE (Private Investment in Public Equity) where private equity and VC companies are now investing in public securities which they feel are underpriced, primarily because the people who do public market transactions do not have the exprience, risk comfort, etc that they have. in fact, public markets provide some great opportunities companred to public companies.

[stewjames] 07/12/2001 15:25

pacman88, I suppose it's like betting on the rank outsiders. Most will fail but the one that romps home makes you a fortune. Not for me, I guess!

[pacman88] 07/12/2001 15:22

crystal ball wld be useful. at the end of the day, any valuation measure tries to capture the value of the assets and ability to generate cash. what the public markets are not used to is valuing businessess that are still very much in their gestation period. suggest you grab someone form the private equity or venture capital world who has been doing it for more than 5 years and ask him or her how the he valued company X, with 18 employees, no revenues att $5M pre money, etc. not an easy business and something that is very much still an internship. the more businesses you see, the more you see grow and the ones you see go public (not like 2000 when the IPOd before they were ready), you start to understand a little about pricing ranges.

anyway, sorry for the ramble........c'est la vie. good luck to all. :-)

[alsfar] 07/12/2001 15:18

I agree StewJames, valuations of techs can still be strange.
However, it happens, and it is best to go with the flow.
Look at AIH now. Doesn't add up to me, but I still made
plenty on it. It is a funny old world!

[stewjames] 07/12/2001 15:13

alsfar, I like to see some evidence in the now of undervaluation. VET looks to be burning cash all too quickly and not growing the bottom line quickly enough to deserve a valuation even as high as today's to me. They say breakeven next year, I really can't see it. But then I accept I'm not much of a visionary :-)

Host Europe, the operating performance is OK but I certainly don't think it's worth it's current market cap! Strange that even now people are still willing to assign the sort of valuations to techs that they wouldn't even think of giving to 'old' economy shares with similar or better financial perfomance.

pacman88, sounds like that method requires a remarkable crystal ball. :-)

Funnily enough VET was on my watchlist when the price was at its low, mainly for the cashpile and the hint (from the company, if not the figures) of stemming cash outflow. It'll be interesting to see how it pans out.

I wish you (further) good luck.

[pacman88] 07/12/2001 15:00

1x revenue based on transaction in the private markets in the US. Also important to look at the underlying growth and breakeven projections. Most look at 24 month cash flow to assess when company will break even, work out some terminal value and discount that. In many (not all) these have fallen between 1-3x revenues for transactions completed in q3.

[alsfar] 07/12/2001 14:58

Better still 'StewJames', what is your valuation?
Also note similarities with Host Europe.
One is either overvalued, or the other
undervalued.

[stewjames] 07/12/2001 14:54

Where's this 1*revenue idea coming from? Seems to me whenever a company isn't making a profit people invent silly measures to try and give it some worth!

(added on edit: in other words can anyone give me a sensible reason why revenue multiples are a sound way of valuing a company?)

[pacman88] 07/12/2001 14:38

Am happy with my 15K (5K at 20p, 5K at 23p and 5K at 32p). No such thing in a sure thing and am not comfortable putting more than 5% of my portfolio into these type of situations. Good luck to all. ;-)

[niccar] 07/12/2001 14:19

74p a share is my bet you will probably see it open at 60p+ monday morning, If your thinking of buying today is the day because Monday you will be priced out.
I was advised to go into VET on the 3rd Dec and the same source was talking about 74p. This is IMHO but I will not be far out. I am holding 50k shares so take it as a ramp if you wish!

[highstreetmike] 07/12/2001 14:00

Here we go.....healthy jumps and buying in last 2 mins

[pacman88] 07/12/2001 14:00

Only managed to get another 5000 shares at 32p before price move to 25 and then 36p. AAAhhhhh. SHould have bought and then spent time posting!! Lets see where it moves to before I buy my next 15K.

[pacman88] 07/12/2001 13:59

That may be the intrinsic value, but in this market most corporate action does not deliver that. What I was trying to articulate is a conservative take-out position which the buyer might offer for the business. On the high side I think you will get 3x revenues, valuing the business at 30M or 110-120p.

In any case, am selling down other holdings to get into this.

[alsfar] 07/12/2001 13:56

Your valuation 'pacman88' is overly conservative. Company has 'tangible' fixed assets £3m+ and no intangibles (goodwill from acquisitions already written off). As of 31st July NAV was ~£14.7m. These could be worth ~£1/share (recent options exercise price), but certainly 75p/share IMO.

[pacman88] 07/12/2001 13:46

Turnover for 9 mths to 31 July 2001 = £6.3M (50% YOY growth over 2000)
Cash at 31 July = £10M
Burned £4.6M in 3 months to 31 July = £1.6M per month
Assuming no cost cutting, company should have £4-5M in bank today, probably more.

Turnover for FY = £9-10M
Cash = £4-5M

So even on the most conservative (in my view at least) the company is worth 1x revenue plus cash = £15M, or about 55-60p per share.

Plus directors buying
100K at 25p in Aug
200K at 45p in Apr

Will tuck a few more away. Rish-reward ratio attractive.

DYOR, etc. ;-)

[cashisking] 07/12/2001 13:38

If it is a US takeover is it reasonable to expect an announcement today when NAS opens at 2pm?

[highstreetmike] 07/12/2001 11:15

Fair few sells this morning - guess it could be someone who bought in the mid teens and is taking profits.

Seems a bit strange to bailing out in advance of any announcement, mind you if I had doubled my money in about six weeks I would be tempted

[alsfar] 07/12/2001 10:28

chadders - A hostile bid is a non-starter. Drummond controls the fate of the company. The trade off is between an attractive bid or taking the company through to profitability. Management has been making upbeat noises about cash-burn and future profits. This bid will now call their bluff. Either way, those already holding shares, cannot really lose IMO. Don't you love it when a plan comes together? Good luck all holders.

[chadders] 07/12/2001 10:18

HighStreetMike,

Good point and remember Jason Drummond was buying a short while ago at 45p.

[highstreetmike] 07/12/2001 10:15

Surely with 53% of the shares in one persons hands a hostile bid would be doomed?