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|December 10, 1999||
Volume II, Issue 65
To OTC Journal Members:
We have been red hot lately and can only hope the trend continues. Last month's profile, Blue Zone (OTC BB: BLZN) traded extremely well just after it's release on November 12th at $5. Within four trading days the stock hit a high of $8 providing a 60% return on invested capital for you short term traders. Since then, the stock has drifted down on fairly light volume into the $6 range, which is still a nice premium above the profiled price.
NetSol International (OTC BB: NTWK) continues to tear up the charts, seemingly making a new all time high everyday. The stock finally broke the $10 barrier last week, and now has found its way to $11.625. The stock still continues to appear undervalued when compared to its big brother, Infosys (NASDAQ: INFY). We brought you this company last January 15th at $3.75.
Another stock that we have been covering lately, Envoy Communications (TSE: ECG), is also appreciating nicely. Up about 46% in the last 30 days, watch for this company to do extremely well when the stock gets dual listed on both the Toronto Stock Exchange and the NASDAQ. Management estimates that this will happen in January.
This month's profile is another company in the Internet Sector which we believe will be a formidable entry into the "E-Tailing" world, and will probably give Ebay, Inc (NASDAQ: EBAY) a run for its money. If you feel you missed the early stage opportunities in the major E-Tailers like Ebay and Amazon, this is one to have a look at.
Pawnbroker.com (OTC BB: PBRR)
There are currently 12,000 to 14,000 pawnshops in operation doing about $3 billion in annual sales. There are an additional 45,000 pawnshops world-wide. Approximately 10% of the population has used the services of a pawnshop at one time or another. Most pawnshop operators own multiple locations within a restricted geographic area.
There are many inefficiencies in the business model of a Brick and Mortar pawn shop. The need for capital to fund inventory growth restricts business, and a limited customer base of a several square mile area restricts the number of buyers for their goods.
Pawnbroker.com will consolidate this vast resource of goods into one central location where dealers can interface with customers on the Internet. This will go a long ways towards enhancing the neighborhood pawnshop business model.
The Pawnbroker.com Solution
Pawnbroker.com will allow the vast network of Pawnshops nationwide to enter the E-Commerce market through one central Internet location with very little investment on their part. They only need a computer and Internet access to market their merchandise.
The site will be attractive to consumers seeking significant cost savings on purchases of previously owned jewelry and gemstones, computers and electronics, coins and stamps, and collectibles.
Inventory will be vended into the site from subscribing pawn shops. Pawnbroker.com will act as an "Escrow Agent" for transactions between sellers and buyers, thereby insuring the integrity of purchases.
Purchases will be subject to a 10 day review period. The buyer pre-pays the cost of the purchase to Pawnbroker.com. The item is then delivered to the buyer who has 10 days to decide that the merchandise is acceptable. If the buyer decides to keep the merchandise, the funds are released to the Pawnbroker 10 days after receipt by the buyer. Pawnbroker.com keeps its portion of the proceeds from the transaction. Merchandise will be available on the site for 90 days at no charge to the Pawnbroker.
Competitive Advantage Over the E-Bay Auction Model
Although some Pawnbrokers currently use EBay as an outlet for their goods, there are several aspects to their model that many within the industry do not like.
Pawnshops don't like the auction model where the goods eventually go to the lowest bidder after waiting 4 to 7 days for final pricing. The Pawnbroker.com technology will allow buyer and seller to negotiate, but not in an auction format.
Pawnshops also don't like to pay a fee to advertise their merchandise, and then pay again if the item is not sold within the EBay time frame. Additionally, the largest transactions that Pawnbrokers engage in on the EBay site are in the $300 range, which is far below the level pawnshops get for high end merchandise such as Rolex Watches and Diamond rings.
Pawnbroker.com has assembled a management team to launch this business with a vast wealth of experience and success in all aspects of their business model.
Neil McElwee, CEO, has held senior management positions with both Infoseek and Novell. At Infoseek, as Director of Business Development, he co-developed the e-commerce platform for what is now Go.com, the Disney and Infoseek web site. More recently, during a long-term consulting engagement, he was responsible for developing the strategic direction for Nortel Network's e-commerce web business.
Joseph Schlader, President, brings in the expertise in the Pawnshop industry. He founded Pacific Pawnbrokers in 1981 and grew the company's operations to a $10 million chain of stores serving Northern Nevada and California.
Nathan Butler, Vice President of Marketing, is a ten year veteran in marketing high technology. He was a Senior Manager of Oracle Corporation's Worldwide Marketing Team with a focus on global brand and communications for Oracle's applications and vertical markets from 1997 through 1999.
As you can plainly see from these resumes, there is deep experience in the industry, technology, and technology marketing within the management team. They have also assembled an advisory board which reads like the Who's Who of the Pawnshop industry.
Last June the Company raised just over $3 million in a private placement which is funding the development of the site and current operations.
Currently this Company meets all the minimum requirements for a NASDAQ listing with one exception. They are a little short of the minimum 300 shareholders. As word gets out on this one, we don't expect that condition to last long, and we expect this Company to apply for a NASDAQ listing in the 1st Quarter of 2,000.
They reached the "No Comment" phase with the SEC in their FORM 10SB filing back in November, and are therefore fully reporting. If you are considering investing in the stock, you should read the document. Simply click here, and you will be taken directly to it.
There are no revenues to date as they have not begun commercial operations. They are targeting February for their official launch date, and are hoping to have the site go live in time for Valentine's Day.
Jeffries & Co. Signs on as Their Investment Banker
On December 7th Pawnbroker.com announced that they had retained Jeffries & Co. to represent the Company as their Investment Banker. Click Here to read the press release.
This is a well respected Institutional Wall Street Brokerage Firm that has raised over $40 billion in equity capital since 1993. They recently were involved in such high profile IPOs as PurchasePro.com, Inc. (NASDAQ: PPRO), Metasolv Software, Inc. (NASDAQ: MSLV), PFSweb, Inc. (NASDAQ: PFSW) and Worldgate Communications, Inc. (NASDAQ: WGAT). Every one of these IPOs skyrocketed. To learn more about them go to http://www.jefco.com/.
It is anticipated that Jeffries & Co. will act as the placement agent for the next round of financing which will give the Company the needed to capital to properly advertise the site.
Barriers To Commercial Success
In order to provide an E-Commerce site that experiences thousands of transactions, Pawnbrokers have to be willing to use it. The Company feels it needs at least 3,000 Pawnbrokers to register and provide merchandise on a regular basis. By September, on word of mouth only, Pawnbroker.com had already registered over 2,000 Pawnbrokers.
Despite the fact that this particular industry group might not have the propensity to embrace the New World of Internet commerce, the concept of expanding their market to the World Wide Web, as opposed to their immediate neighborhood, will be irresistible to Pawnshop owners.
Consumer acceptance may take some time. Pawnshops are generally considered to be "On the Other Side of the Tracks", and therefore somewhat unsavory. This may work to the Company's advantage. There are millions of consumers that are bargain oriented, but are reluctant to seek out the Pawnshops in their vicinity. The Internet will not only allow them to shop Nationwide, but they will be able to do so in the anonymity of their own home.
The Pawnshop industry has been thriving since ancient times, and you might be surprised at the quality of the inventory they carry. Pawnshops do not purchase their inventory. They make loans against merchandise, and only take title after the borrower's time frame to repay the loan has expired. Therefore, they end up with a great deal of quality merchandise from customers that intend to reclaim in the future, but are unable to do so.
One cannot resist comparing this company to E-Bay. The similarities in the business model ae compelling. Neither company purchases inventory, and both have a transaction based revenue model. They both focus primarily on pre-owned merchandise, and both provide a forum for outsiders to use their site to sell merchandise.
However, Pawnbroker.com will not be an auction site. Initially, they will not charge a fee for advertising products, and they will only allow registered and licensed Pawnbrokers to participate. With over 200 million items available for resale in the market, this site could turn into one of the all-time great shopping Meccas for bargain hunters.
Through the first 9 months of 1999, EBay did $150 million in revenues, and the stock currently carriers a Market Capitalization of $21 billion. Since its all time low of about $11 in October of 1998, the stock has seen a high of $208, and is currently trading around $160.
If you had the opportunity to invest in Ebay prior to the commercial launch of its site, you would have made an enormous return on your investment.
Pawnbroker.com has 17 million shares issued and outstanding, and currently trades at about $7.00, making the market capitalization $119 million. If we have done the math correctly, this means that Pawnbroker.com, based on the current number of shares issued, would have to appreciate 184 times its current level to reach the market capitalization of Ebay. This equates to a $1,242 share price.
We are not suggesting that Pawnbroker.com is going to $1242 per share. That would be ridiculous. However, we do feel that subject to a successful launch of their site, one to two years from now they could be enjoying as much business as Ebay. They will have an unlimited supply of quality merchandise, and the Internet provides them with an unlimited number of potential customers.
As always, we remind you that it is the theme of this newsletter to provide you with investment ideas that you might not learn about on your own through main stream financial media. You don't need us for that. However, unless we get lucky as we did with our recent profile of Infowave, early stage investors have the potential to enjoy substantial profits when positioned ahead of Wall Street if you have a one-to-two year investment time horizon. The recent addition of Jeffries & Co. ensures a Wall Street following if this Company can successfully launch its site and executes its business plan.
To learn more, there is an audio
clip of a September interview with the President. You can find it
on their web site in the Investor section, or simply click
here to go directly to it.
The OTCjournal.com Newsletter is an independent electronic publication committed to providing our readers with factual information on selected publicly traded companies. All companies are chosen on the basis of certain financial analysis and other pertinent criteria with a view toward maximizing the upside potential for investors while minimizing the downside risk, whenever possible. All statements and expressions are the sole opinions of the editors and are subject to change without notice. This profile is neither an offer nor solicitation to buy or sell any securities mentioned. This newsletter is owned by SSP Management, Inc, a wholly owned subsidiary of 1st Net Technologies, Inc ("1st Net"). While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof, nor the statements made herein. The editor, members of the editor's family, and/or entities with which they are affiliated, may own stock in and have other financial dealings with the companies who appear in the publication. To that degree, this newsletter should not be regarded to be an independent publication. SSP Management has not received any compensation of any kind for coverage of Pawnbroker.com, and has no formal relationship with the company. The OTCjournal.com critiques may contain forward looking statements relating to the expected capabilities of the companies mentioned herein.
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and/or the National Association of Securities Dealers ("NASD") at http://www.nasd.com.
We also strongly recommend that you read the SEC advisory to investors
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Readers can review all public filings by companies at the SEC's EDGAR page.
The NASD has published information on how to invest carefully at its web
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