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HyerDynamics (OTC BB: HYPD)
Closing Price And Volume: $2.22 x $2.375
52 Week High and Low: $7.75, $.50
Average Daily Volume: 25,227
Shares Issued and Outstanding: 13 million
Shares Publicly Traded: 5 million (estimated)
We have been watching the stock climb
steadily since the beginning of August. The slight pull back in conjunction
with the market provides an excellent entry level.
Traders should look to get into
the stock no higher than $3.00. In our opinion, barring a major market
decline, the stock has a good chance of trading into the $4 range in the
next one to three weeks, which represents about a 68% return from today's
closing price if we are right. This is based on the stock continuing its
current uptrend. A good stop loss would be $2 if the stock goes the other
way, however set your stop loss based on your own risk tolerance.
Overview of the Company
Hyperdynamics provides completely
planned, designed, implemented and managed Information Technology (IT)
based environments for business. Hyperdynamics facilitates its client's
e-Business integration by defining new business models, new processes,
and dramatically changing the way they do business in the new digital environment.
Their current client base includes
such household names as Lockheed Martin, Ford Aerospace, Exxon Mobil,
and Texas Medical Center.
The company's sales rose dramatically
on a percentage basis for the first 9 months of fiscal 2000. In 1999 sales
were $489,000. They rose to over $1.5 million in fiscal 2000- over
300% growth rate through the first three quarters. The company
is not profitable yet, but losses are minimal.
Shares of HYPD have been rising
steadily since the first week of August. At that time the stock was $1.
Since then it has risen to a high of $2.75, and has eased down to the $2.375
level in the last several trading days.
Two recent events have been pushing
up the price of this stock. On September 12th the company announced that
it had broken ground on its new state-of-the-art IT Hosting Center.
Once completed, the new digital center will allow small to mid sized companies
the opportunity to house their IT Solutions in a "one-stop-shopping"
This digital environment will allow
companies to take advantage of the best IT Solutions on a true Internet
BackBone with the latest fiber optic connectivity. Rumor has it that the
company's phone has been ringing off the hook with new business for the
Hosting Center. The center will allow small to medium size companies
to avail themselves of the latest broadband Internet technologies without
the enormous expense of an in house build out.
Completion of the center is scheduled
for November. The facility will have the capacity to represent approximately
$20 million in annual revenues for the company. Click
Here to read the associated Press Release.
The second recent event is totally
unique in our experience. On August 31st Hyperdynamics announced
an exchange offering. In mid October shareholders of HYPD will have
the right to convert their shares, on a one-for-one basis, into a newly
created Unit which will eventually trade publicly on its own.
This unit will contain one share
of Preferred Stock and three warrants. The Preferred will carry a 9% dividend.
The warrants will all convert into common stock with an exercise price
This is a very complex security.
The easiest way to describe it is to say that it is structured so that
unit holders will automatically double the number of shares they own once
every 7 1/2 years with additional cost or risk. It is a unique way for
the company to reward long term shareholders. If you own the stock you
will have the option to convert the stock into units sometime in October.
There is no additional risk, only upside for long term investors.
Sophisticated investors realize that
there is a potential arbitrage play here. This could end up being a case
where one plus one equals four. On paper, the unit is worth much more than
the stock today, but is not trading publicly as a unit yet. When it does
trade, it should trade much higher than the common stock as the warrants
within the unit have value. Click
Here to read the press release announcing the introduction of the
One key feature on this unit- Once
long term investors have the opportunity to convert their shares of common
stock into the units the net effect will be to reduce the supply of shares
available in the open market. Shareholders will have the opportunity to
convert just before the company opens its new IT Hosting Center,
which is represents the future of the company. This could lead to an
increasing demand for the stock coupled with a decreasing supply- the inevitable
result will be higher prices.
The Trading Alerts are issued
when we find a unique situation where we believe there is a high probablility
for a short term gain. If you like the company you might want to look at
it for the longer term. However, factors completely out of our control
can effect the short term movements in any stock, which is why traders
seeking a short term profit should set a stop loss to minimize the risk.
As always we remind you that this
is just our opinion. If you like the idea go with it. However, it is your
money, so use caution.
Here to go to the OTC Journal's section which describes
our Trading Alerts and how they work.