Home Page : www.otcjournal.com
Email Questions or Comments To:
editor@otcjournal.com
To
OTC Journal Members:
 |
The Titan Mess:
Anatomy of a Disaster |
|
| I strongly recommend the continued
accumulation of TTGL with an eye on another double. Could take six months
to a year, but worth waiting for. Fundamentals suggest a far higher valuation.
October
20, 2007 OTC Journal BLOG |
| Titan Global is rapidly becoming
an oxymoron- A contradiction in terms if you will. Here's what I mean-
this is probably one of the least risky $2 stocks in my experience. This
doesn't mean it can't go down. However, the way this company is headed,
your downside is limited by the pure fundamentals. October 27, 2007
OTC Journal |
| Now that Spicy Pickle's valuation
is stretched and I would prefer investors to wait for a pullback, TTGL
has become my #1 idea at this time. You should own this stock in the speculative
end of your portfolio. I feel very strongly that a lot more interest will
be materializing from investors, and you need to position yourself right
now. It's not the only idea I have, but I believe it has the most upside
potential against the least amount of risk at this time. October 27,
2007 in the OTC Journal |
If you never watched the Spicy
Pickle video, you might be wondering what I look like. Here's a picture
of me today. Yes- I'm one of the Three Stooges, and yes, that's
egg on my face.
My former belief in the future of
Titan
Global has yielded a good and well deserved egging. It certainly is
not the first time a management team totally screwed up a company, and
it won't be the last. However, it is never fun and it's always painful.
Above you will find three quotes
from my writings back in October when TTGL (Now TTGLE) was doing
very well. Those quotes serve as a painful reminder that I can be
completely wrong and totally misjudge a situation. It's amazing how badly
management can screw up a good thing at times. No doubt, it will happen
again.
TTGL's management team appeared
to know what it was doing at that point in time. They had come off a couple
of very successful quarters of growth, margins were improving, the stock
was trading very well, and the company was generating significant positive
cash flow on about $150 million in annual revs. They even settled
their AT&T law suit over the excess payments in excise taxes,
and were getting beautifully on track.
Management was very vocal about their
great game plan to turn the Oblio Telecom division into a profit
generating machine. Boasting the third highest volume "pre paid" phone
card operation in the business, their specialty was the distribution of
international calling cards to "First Generation Americans" (another words,
immigrants and illegal aliens). There were selling massive prepaid traffic
to Latin America and the Far East.
As a marketing company only, they
would simply buy the minutes from a major carrier with infrastructure,
mark them up competitively, and sell the cards through a network of 6,000
bodega stores. It was a huge volume, low margin business, but a steady
cash flow generator.
Then they got the brilliant idea
of building out their own switches, having their own infrastructure, and
increasing their margins. The early returns were promising- the only hiccup
was deferred revenues- they really couldn't book the revenues until the
cards were used. It was now their responsibility to deliver the minutes.
When I published my thoughts (which
you can read above) in October- all appeared to be going well, and the
company publicly boasted they would deliver $3/4 of a billion in revs,
and earn $17 million in fiscal '08. They believed this would be the case
in early December when they published their forecast on December 3rd. If
you want to have a bittersweet laugh, click
here to read their press release.
Fast forward to today. Their Oblio
Telecom division is a complete disaster. I don't know exactly what
happened, but I do know their migration to their own switches was a complete
failure, causing the company to take massive write downs.
Coincidentally with the supposed
upswing in the telecom division, they embarked on more ambitious expansion
plans through the acquisitions of Appalachian Oil and USA Detergent. With
2/3rds of one quarter publicly disclosed, it would appear Appalachian Oil
is doing ok- high revs and very low margins- hopefully they won't screw
that up. USA Detergent has proven a total disaster, and they are not even
operating the company. They have shut down its operations.
Back in October, based on the trailing
performance, Titan Global looked like a pretty creative company
with a big future.
Today, here's how I see it. They
considered themselves turn around experts who could identify poorly managed
companies, acquire them in leveraged buy outs, implement new strategies,
improve profitability, and glean a result through the price performance
of the stock.
Nice idea- one problem- they have
now proven they are completely inept. CEO Bryan Chance and his team have
mismanaged and misjudged this company into oblivion, and the stock has
followed them right down.
For what its worth (very little on
this idea based on my track record), I don't believe the stock is a sell
right now. In Q1 of '08, they did generate $122 million in revenues, and
took massive write downs on their blunders. They can only take those write
downs once, so it could clear the decks for improved future performance.
At the current price level of $.60,
the market is giving the company a value of $30 million as there are only
50 million shares I&O. They haven't managed to pollute the capital
structure- yet.
From here, I believe it is likely
the company will be providing more disclosure about their current state
of affairs, how they got to this point, and what they plan to do in the
future. They can't just leave things with the quarterly numbers.
Unfortunately, my software won't
allow me to pull a chart with TTGL and TTGLE combined, but
I can tell you the stock has not been this low since September of '06.
A lot of negative stuff has happened
with the company. Unless they are so flawed they are going to fold their
tent and disappear into the wasteland of dead companies, something good
or at least mitigating is bound to happen.
The stock is very oversold, and anything
positive could result in some sort of anemic rebound, at which point in
time I will re evaluate with more facts.
In any case, Titan Global will
always serve as a reminder that bad management can take a good thing and
screw it up in a big hurry. So, no matter how good the numbers look at
any given point in time, there is always the risk of a major reversal fueled
by the foolish plans of incompetent people.
My deepest apologies to any investors
who have lost money on this idea as a result of my coverage. It happens,
but it's never fun.
I'll continue to cover developments
and share some thoughts. There could be an oversold rebound in the offing.
They have to get the "E" off the stock ASAP, and deliver more information.
Stand by for the next episode of
this microcap version of a soap opera. Hopefully, the show will become
less tragic.
|
Free Annual Reports
