CPNE.OB

[Sterlis]

Institutional Investors Purchase 4.8 Million Shares of Common Stock From a Major Shareholder and Members of Managemen

http://biz.yahoo.com/prnews/070213/latu132.html?.v=42

Hey David,
What do you make of this?  Thanks, Ray

I could be wrong about this, but it seems like this is not dillution, just major shareholders and management selling some of their own shares.  If so, its positive for the stock as they mention in the article in that it shows institutional interest in the stock.  And it probably motivates management to work harder so that their next big sale of shares is worth even more 

I would agree that this is positive on two fronts.

First the transfer of inside shares sends a signal to both CPNE management and to external investors that the management is now focused on improving the value proposition by creating credible sustainable business value. The investment community is looking for quarter on quarter, year on profitability. Looks like  CPNE is stepping up to take the challenge. The cash from the sale will be quite useful as well.

Second, the barrier is now broken - institutional investment exists and the taboo of being "the first" is gone.  Others can rationalize joining by pointing to the first.

This sets things up nicely for the upcoming conference. Smart!

[realcoolhead]

Institutional Investors Purchase 4.8 Million Shares of Common Stock From a Major Shareholder and Members of Managemen

http://biz.yahoo.com/prnews/070213/latu132.html?.v=42

Hey David,
What do you make of this?  Thanks, Ray

I wish I was wrong. But I don't like the price ($1.9) they are getting ...

[basonista]

Institutional Investors Purchase 4.8 Million Shares of Common Stock From a Major Shareholder and Members of Managemen

http://biz.yahoo.com/prnews/070213/latu132.html?.v=42

Hey David,
What do you make of this?  Thanks, Ray

I could be wrong about this, but it seems like this is not dillution, just major shareholders and management selling some of their own shares.  If so, its positive for the stock as they mention in the article in that it shows institutional interest in the stock.  And it probably motivates management to work harder so that their next big sale of shares is worth even more 

I may be wrong but this does look like dilution although not on a big scale.  It was stated in the press release that unregistered shares were being sold but that they would be registered.  Doesn't that add the 4.8 million shares being transferred to the total number of outstanding shares?  So, one question is why individual shareholders are holding unregistered shares - would these be in the form of warrants or stock options that must be excercised to be sold?

It is interesting that the sellers are taking such a huge discount at $1.90 versus being able to sell at the current market value for the shares.  I can't imagine them taking such a loss on their stock value unless they believed something good would come from it.  But I am also interested in knowing what the restrictions are for the institutional investors in regards to selling the purchased shares.  It also wouldn't make sense for the shares to be transferred to the institution only to have them sell and reap the profit.

[basonista]

OK, looking into this more, OPBL did basically the same thing with shareholders selling 19% stake to NYMEX with options to increase their holdings if they desire. 

Optionable Announces NYMEX Holdings to Purchase 19 Percent of Outstanding Shares of the Company


The stock gapped up huge the next day and has continued to run ever since.  Looking for more info....

[tokyopua]

Worst case lets say this equals dillution, it would still not be too bad per the following math:

Total shares outstanding:  47.3 M
New Shares: 4.8 M
Net total shares outstanding:  52.1

New Price per share = (47.3*3.12+4.8*1.9)/(52.1) = 3.01

Again, that is assuming this were dillution.  I guess its not impossible given that the company has a current ratio less than 1. 

But I still dont think it is, its just that these shares were not registered, which means that the sellers did not register them with the SEC and record their name and address yada yada...

Since the holders are insiders anyway, they probably had these shares from much lower so they probably wouldnt complain too much.  Plus there is the aspect that selling that many shares on the open market might not be that easy.  Further, it could be the case that the deal had been in place from before the price runup, etc.

[basonista]

Worst case lets say this equals dillution, it would still not be too bad per the following math:

Total shares outstanding:  47.3 M
New Shares: 4.8 M
Net total shares outstanding:  52.1

New Price per share = (47.3*3.12+4.8*1.9)/(52.1) = 3.01

Again, that is assuming this were dillution.  I guess its not impossible given that the company has a current ratio less than 1. 

But I still dont think it is, its just that these shares were not registered, which means that the sellers did not register them with the SEC and record their name and address yada yada...

Since the holders are insiders anyway, they probably had these shares from much lower so they probably wouldnt complain too much.  Plus there is the aspect that selling that many shares on the open market might not be that easy.  Further, it could be the case that the deal had been in place from before the price runup, etc.

Actually, I think you are correct in that this isn't dilution.  This isn't a private placement, it is insiders selling to these guys so the private placement dilution isn't happening.  And the fact that they are selling at a 10% discount to the 20 day close means that this was in the works for a while and isn't some spur of the moment deal.

The fundamentals tell the story of a bright future for CPNE.  And if the big boys are willing to buy $9.2 million worth of stock and the insiders are willing to let it go at such a discount, well, that can't be so bad either.

[dnickers]

But I still dont think it is, its just that these shares were not registered, which means that the sellers did not register them with the SEC and record their name and address yada yada...

Unregistered shares are not included in basic or diluted earning per share calculations.  This is effectively a 10% increase in the number of outstanding shares, and therefore, dilution.

I'm also not too sure about your new value of $3.01.  The price at which the shares were sold, $1.90, doesn't matter (I don't think).  What it boils down to is that each share is now worth 10% less than it was before...so that would be (3.12 - .1*3.12 =) $2.81.

Using David's numbers from the first page of the thread with the new share count, I get a forward annual EPS estimate of .3515, which even at today's close, is a very modest P/E of 8.9.  I like.

But, as basonista indicated, the future looks bright for Commerce Planet...and that is what is going to direct the share price - not adding a few shares.

We'll see what Dave has to say about it, but I don't think he'll be that concerned.  I'm not.     ( <-- me and Dave)

[jmccar2]

From the limited amount that I've learned this week about stocks (still felt confident enough to pour about 30k into CPNE ), I agree with dnickers that these unregistered shares perhaps weren't included in David's Market Cap calculations and then future share evaluations....

However, here's why they're selling cheap:

"Securities law substantially restricts the sale of unregistered shares on the open market; although as I understand it, unregistered stock can be sold in small amounts under the so-called leakage rule. In addition, it may be possible to sell the shares outside the confines of the exchange on which the buyer's shares trade (i.e., a private sale)."

Hope this adds some value-- Don't be afraid to tell me if I'm out of my league here

[jmccar2]

Also, Tokyopua: I would worst case senerio average in the roughly "30% insider owned shares" as unregistered that Hill referred to when speaking to a 3SOF senior member to come up with a new share valuation...

[Michael]

Well here is my take.

Dilution is not an issue in this transaction. The shares in question were already issued and outstanding.

The main concern must be why insiders decide to sell 4.8 million shares ahead of a supposedly blow out quarter at $1.23 discount to the market price.

Even though I have to admit that the transaction sets off my alarm bells it is important to remember:

• The deal has most likely been in the making for months while the stock were trading at a much lower level.
• A discount is natural as the selling shareholders would not have been able to off load this amount of shares in the open market without severely depressing the share price.

Lets see how the market reacts to the news. I don't think we will gap up but on the other hand an overreaction to the news could represent a good buying opportunity 

[David Randolph]

Good morning

The news is:

• Institutional Investors Purchase 4.8 Million Shares of Common Stock From a Major Shareholder and Members of Management
PR Newswire (Tue 6:19pm)

I think some of you are making a perfectly natural confusion between issued and outstanding and registered or unregistered shares.

Registered or unregistered are shares issued and outstanding.

The difference between being registered or unregistered only relates to being available to be sold in the public market or not.

In CPNE.OB's case, the company's founders and what seems to be a "previous IPO" investor are selling 4.8 million of their restricted shares. This doesn't increase the number of shares issued and outstanding, they were already included (it doesn't change the fully diluted EPS calculus - although there's misleading information about this on the internet).

As relative to the price of the transaction, $1.9 per share. I think your explanation that the deal has been in the making for some time is probably accurate, and this is the normal practice in this type of deal (actually, it usually is a 15% discount over the last 20 days average bid price, not 10%).

Insiders couldn't sell those shares in the open market, not in bulk, as you can read here: Rule 144: Selling Restricted and Control Securities. And probably they were not interested in doing so, because, as Michael says, that would depress the share price. This way they're opening the door to institutional ownership, which was non existent.

The press release says the company will register these shares, so the new investor's may sell, but only after the registration form is filed with the SEC.

I think basonista's mention to OPBL.OB's case was opportune, because OPBL.OB's founders also sold 19% of the company to Nymex at $2.69, on the day the stock closed at $4.34. The next day the stock opened at $5.55.

I guess this won't be the case here because it was obvious that Nymex is a long term investor in OPBL.OB and we don't know if that's the case with CPNE's institutional investor. (by the way, finally understood OPBL.OB)

CPNE's management has been crying that the market doesn't accurately value the company, particularly in comparison to companies with similar financial metrics. That is also, at least partially, the basis for my investment in CPNE: the company is undervalued.

And it is undervalued partially because it had no institutional ownership, only institutions can take a share price a lot higher on a sustainable basis.

So I believe this was a correct step, that will take the share price higher over time. The founders, especially the CEO, will be a lot richer with 8 million shares valued at $12 than with 10 million shares valued at $4.

I'll keep holding CPNE.OB.

[basonista]

Continuation of yesterday's news?

Commerce Planet Announces the Joint Engagement of Roth Capital Partners and Craig-Hallum Capital Group to Service Their Investment Banking Needs

Last update: 2/14/2007 7:00:00 AMGOLETA, Calif., Feb 14, 2007 /PRNewswire-FirstCall via COMTEX/ -- Commerce Planet, Inc. (CPNE) announced today they engaged the investment banking firms of Roth Capital Partners () and Craig-Hallum Capital Group () to assist with their 2007 strategic initiatives. After months of due diligence regarding various investment banking firms, Commerce Planet chose to engage both firms to take advantage of their differing areas of strength. Both firms are established in the investment banking community and well connected to institutional investors and fund managers. Roth Capital Partners, located in Newport Beach, California, has a distinguished record of working with microcap companies similarly situated to Commerce Planet. Craig-Hallum Capital Group, located in Minneapolis, will provide an East Coast reach to capital markets and is well known for its research and fundamentally sound analysis. The firms will assist with the assessment of various financing objectives, which may include mergers, acquisitions and private sale transactions. Michael Hill, CEO, stated, "we believe our engagement of both Roth and Craig-Hallum provides us with the best of all scenarios. Both firms are extremely well-regarded and have deep reaches into the public and private investment community. In addition, each understands and has participated in several online media-related transactions. They are each highly familiar with and have worked alongside some of the largest media companies in our industry. We think these firms will provide us with valuable access to capital, extended industry relationships and sound financial advice."

About Roth Capital Partners () Since 1984 Roth Capital Partners, LLC ("ROTH") has been a leader and innovator in the small and micro cap markets. Roth's exclusive focus has been, is, and will continue to be providing the full spectrum of investment banking services, including raising capital, research coverage, creating liquidity, trading and market making, merger and acquisition advisory services, sales support, and investor conferences, to our customers. Our experience and capabilities in raising capital for public companies are the hallmarks of the Firm. Over the last ten years, we raised over $8.7 billion for small and micro cap public companies and completed over 123 merger, acquisition and advisory assignments. In 2005, Roth raised $1.7 billion for our clients. Also, the firm has been a leading placement agent over the last two years for the number of PIPE transactions, raising over a billion dollars.

About Craig-Hallum () Craig-Hallum is an institutional research, trading and investment banking boutique, owned and operated by experienced professionals who share a common belief that this business is all about performance.
    *  We need to help our institutional clients make money.    *  We need to provide our investment banking clients access to capital       and strategic advice in order to help them achieve their growth       objectives.Our approach to the business is different from most. At Craig-Hallum, our research analysts are driven to find misunderstood, small-to-mid cap public companies that represent outstanding investment opportunities for our institutional clients. By introducing company managements to our clients, we institutionalize the ownership of these stocks and provide liquidity in trading the stocks within our coverage universe. Our investment banking activities are focused within a specific range of capabilities where we have a history of getting the job done.

[JKN]

This seems like a positive to me also.  Just two weeks ago $1.90 was a fair price.  Do we know if the sellers received any options?

[nullzero]

CPNE is selling off big time . David is right though got to ignore the short term noise and have strong hands for the long term.

[dcrlin]

Any comment on this posting?

http://www.investorshub.com/boards/read_msg.asp?message_id=17045100

Thanks.