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September 20, 2000
Volume III, Issue 79
Email : info@otcjournal.com
URL : http://www.otcjournal.com

To OTC Journal Members:
 

Trading Alert: HyerDynamics (OTC BB: HYPD)
  • Closing Price And Volume: $2.22 x $2.375 on 10,500
  • 52 Week High and Low: $7.75, $.50
  • Average Daily Volume: 25,227
  • Shares Issued and Outstanding: 13 million (estimated)
  • Shares Publicly Traded: 5 million (estimated)
Trading Overview

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.
 

Brief 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" environment.

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 IT 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 of $1.35.

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 Unit.

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.
 

Conclusion

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.

Click Here to go to the OTC Journal's section which describes our Trading Alerts and how they work.
 

Disclaimer
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Disclaimer

The OTC Journal Newsletter is an electronic publication committed to providing our readers with useful information on publicly traded companies. The Newsletter contracts with publicly traded companies and receives compensation from them or third parties as payment for publishing information and opinions about the company and the trading market for their securities. Principals of the Newsletter may also purchase or sell securities of the companies in the open market from time to time. The positions, if any, that the Newsletter or its principals presently maintain in the securities of the companies are disclosed here (click here) and should be considered in making an investment decision regarding these companies securities. The Newsletter and its principals reserve the right to acquire additional shares or liquidate some or all of the positions they may hold in the issuer’s securities at any time in the future without further notice. These publications should not be considered to be independent publications concerning the company.

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