For those of you who hung in there on the Southland dividend play from Bad Toys- time for an update- the situation looks more promising than ever.
This past week Bad Toys announced Southland received a letter of commitment for a $10 million debt financing – this capital would be used to cure the company’s defaults with the IRS and GE Capital. If completed, there would be a few million left over for working capital.
This is the news I have been waiting for to put me in a very optimistic mood about our odds of seeing Southland open at $4 plus on the NASDAQ.
I had a conversation with CEO Larry Lunan yesterday. He believes it will take about 2 months to complete the transaction. It’s a function of making a settlement with the IRS- they have to agree upon a final number, and the government does not move quickly.
GE Capital is less complicated- it can be handled in a day or so. The lender will pay both entities directly, and both defaults will be cured. The IRS and GE Capital defaulted debts will be gone, and the company will have substantial additional working capital and no black marks.
This will pave the way for institutional sponsorship of a NASDAQ listing for Southland- which it would fully qualify for in every way.
CEO Lunan believes Southland will trade before the end of Q2- by the end of June. No guarantees, but it’s becoming more believable all the time.
On another note: It will probably be about another 2 weeks before your Southland shares are sent to you. The company finally received a list from DTC last week.
I had previously stated all shares would be sent directly to shareholders- this may not be the case- your stock certificate may end up being sent to your brokerage firm. I will know in advance and will tell everyone when to start looking for the cert. If you owned shares of Bad Toys on the record date, you will get your stock certificate.
If you like the news and want to participate- at this time the only way to do so is by accumulating shares of Bad Toys. BTYH no longer counts Southland as a subsidiary of the parent company. However, BTYH still owns 25% of Southland.
If Southland opens for trading at $4, BTYH’s stake will be worth about $30 million- the company has about 7 million shares. BTYH has 21 million I&O- so if their stake in Southland is worth $30 million- that would give BTYH about $1.50 per share in value.
Here’s the recent chart:
As you can see, the stock dropped from about $1 to about $.25 with a day or two after trading x-dividend, and rightly so.
Since making its bottom, it has recovered slightly into the $.35 range- if you bought the stock in the $.70 range before it traded x-dividend you could get half your money back by selling and still have your Southland.
However, if you want to take a further shot at participating in Southland the only way you could do so now is to buy BTYH- it could be a triple. It will probably appreciate as evidence builds concerning Southland opening for trading.
I’ll keep everyone up to date as further progress is made. In the interim, comments and questions are welcome.
my broker is holding my shares inBAD TOYS. will they send the shares in Southland Health direct to my broker?? E-TRADE ??
Editor: I used to think it would definitely come to you- now I am not sure. It might go to you or your broker. I’m not sure which, but I will be able to tell you when to start looking for it.
I Like your data on EFSF. I feel this stock could be a major winner with the three major things they have in the works. Walmart is just the start, I hope, for Cinnergen. The other items look good also. Hope they can get them moving soon.
I enjoy receiving the OTCJ.
Wendel
Editor: Thanks Wendel- tell your friends to sign up. Do you like EFSF because of the company’s products, or do you like it because the stock has traded well and that makes you think it is a good speculation?
Some kind of feedback on your opinion of whether to sell or hold BTYH the day after the ex date would have been useful before now. But this update is helpful at least.
Editor: It didn’t matter. I was very clear to everyone the stock would drop after the dividend. It did so. Whether you sell is entirely up to you. Sell and you get some of your money back that you can use elsewhere. Don’t, and you have a chance of making money on BTYH when they get Southland trading. Either way, it’s entirely up to you.
If Southland were to open at $4 a share, what would the outlook be? Would you hold or sell? Do you think it would be overvalued at $4? Thanks.
Editor: I’ll answer that question when the time comes. It depends on what’s going on at the company. It will be a good question to have to answer.
According to the blog on YAHOO IRS has put a lien on all Southland equipment and accounts recievable.
I do not know if this is true or not.
There seems to be a lot of unhappy campers on the YAHOO blog.
Any idea what is going on?
If true, how will this affect us shareholders?
Does it really take so long to settle things with the IRS?
I see ads on tv for experts to settle claims with the IRS.
Maybe Mr. Lunan should look into this.
Editor: Frank, Frank, Frank, Frank- are you kidding me? Frank- you have to start reading. How many times have I written about the defaulted debt to the IRS and GE Capital- and how getting rid of that debt is the most important factor for Southland to be successful. What did you think I was talking about? And, did you read the company has entered into a new debt deal for $10 million to refinance the debt- What do you think they are doing right now? They are negotiating with the IRS to get a final number so that can pay them off and get out of debt, along with GE Capital. Then, off we go. In answer to your question- Mr. Lunan has been doing nothing but focusing on this for several months now.
Do you have any idea when the Bad Toys guys plan on mailing out the Southland stock certificates? You said two week from the date of March 16th but I have not received anything yet.
Editor: Will check with them this week.
Thank you for all your good intel.
Enjoyed KAL,BTYH, don’t understand how some people are soooo pessimistic and jumpy?
We lose some and gain some, isn’t that the game people.
We should be greatfull having this guy on our side.
Keep up the good work.
Regards Akira.
Editor: I have often had people complain about my bad calls on some of the losers. I always tell them to simply get out, this end of the market is not for you if you can’t accept that fact that there will be some losers in small companies. You seem to have the right attitude.
Thanks for all the great research. I just added to my holdings of BTYH (to go with the Southland I will soon be receiving!), as I see the timing to be perfect. I read the Yahoo blogs too, and see some of those as misinformed, and others are purposely misleading.
Patiently waiting for the Southland issue,
Mike S. (thanks again! Keep up the great work!)
Editor: Not a bad bet. As I have been saying all along, the key to the Southland dividend was to get Southland up and trading on the NASDAQ small cap. The key to the NASDAQ listing is to get out of the defaulted debt. They claim to have a lender lined up, and are negotiating a final payment to the IRS- If they get the loan, and pay off GE Capital and the IRS- watch them pull it off. The one big issue- how long it will take. Things don’t seem to happen quickly with this one. They don’t even have the dividend out yet.
I checked with my online broker. The shares for Southland has been in my account for more than 2 weeks. The company deposited them right in.
Editor: Really?- I haven’t seen mine yet. That’s good. Now, they just need to trade.
What do you think of Btyh at these current levels (0.36)? When southland starts trading do you think this should have a considerable impact on BTYH’s share price? Also on your quote service it shows en EPS of 0.12. Is this accurate? If so are these earnings reflecting Southland still?
Thanks for your help!
Editor: I believe it is pretty reasonable. I would suggest a strong buy if Southland gets its debt financing. That will be the only way to participate in the news.
Even with the IRS and GE out, they still have other lawsuits that will drain. Plus, have you looked at the latest financials?
Editor: Other lawsuits are pretty meaningless. If they get the IRS and GE out of the picture, they will have a real shot getting this thing up on the NASDAQ- would help if they got their profit levels back up a bit, but they are still making a profit on over $50 million in revs- it’s a good business with all the baggage gone.
If these guys are unable to get Southland listed anywhere, they would have to give us back the dividend money of Bad Toys that was taken out right? It cannot possibly be legal for them to keep our money.
Editor: No, I don’t think they would have to do that. You are now a shareholder in a public company which simply does not trade on any exchange yet. If it never did, you would still be a shareholder, but I don’t know what your recourse would be.
Any real update on the progress of the IRS and GE settlements and loan issue. What about the Southland shares have they actually been sent out yet, because I have not got mine yet. If not, what is the hold-up?
Editor: I spoke with the CEO last week, and he is unavailable this week for health reasons. They haven’t sent the certs due to something having to do with waiting for the remaining names from the brokerage firms. On the IRS/GE situation, they are in the middle of the offer and compromise negotiations with the IRS, and presenting some evidence relative to the former ownership that might mitigate the damages. I’ll have an update next week sometime. Once they have their deal with the IRS, they can move forward on the funding and get off the hook. This is moving with glacial speed- like a herd of turtles.
Your comment on Larry Lunans health sent a shiver up my spine. How sick is he? Without him I feel this stock is going nowhere.
Editor: He is not sick- I can’t say more because it is personal. Besides, why worry. There is nothing any of us can do but wait for Southland to open. If you still own BYTH, I suppose you could do something there. At any rate, the die is cast. We have all made our bets. We just have to wait for them to pan out.
This may sound dumb but why is there no trading on BTYH today??? Is this strange or is thier something I missed? I would like to load up on Commerce P while it is down but I can’t sell my BTYH?
Editor: Not sure what you are talking about- the stock just traded no volume. You can sell it if you want, and buy CPNE- probably not a bad move if you have the Southland dividend coming.
When will these guys be sending us the Southland stock certificates. It seems to me that these guys are not planning on sending anything anytime soon and are sitting with our money. I even tried emailin them at badtoys@badtoys.net several times and I never get a response. What is happening here?
Editor: I spoke to them week after last, and they were getting ready to do the share distribution. I don’t know what you mean when you say “sitting on your money”- they aren’t sitting on any money. They just need to get the distribution done. As far as no response, that is inexcusable.
Good morning:
Just wondering if you ever got a hold of Mr.Lunan last week. I notice the bid/ask is almost frozen in a range, and waiting for some progress to catapult it upwards. I realize the IRS issue takes time, but is there any update forthcoming? You seem to be the only one who has the ear of the company!
Sincerely,
Mike
Editor: No- I haven’t spoken with him. As soon as I do, there will be an update for everyone.
Well I guess the big questions are:
1. What time frame do you give for Southalnd trading, 3-6 months or 6-12 months.
2. Assuming they retire their debt, what price range do you expect it to trade in 0-1 dollar, 1-3 dollars or 4-5 dollars.
Any input or forecast would be appreciated.
Editor: On the time frame I would say 6 to 12 months just to lower expectations. Things happen glacially slow at this company. Debt retired? I would say there are only 6 million reasons it wouldn’t trade in the $3 to $5 range- those 6 million reasons are the 6 million shares you, myself, and all the other shareholders own at $.50 to $1.50. Obviously, a lot of those shares would be for sale. Right now, the company is working on a deal for a final number with the IRS so they can get it done.
I hope you havn’t forgot about BTYH. I failed to see any comments in your spring cleaning issue. Any news on where they are with the spin off of Southland?
Editor: There is really nothing to do with that one but wait. You have the dividend, now you just wait for the stock to open someday. In the interim, if some really good things happen, we can look at BTYH again.
Is it safe to say then that you no longer feel the same way that you did when you stated that
“This is the news I have been waiting for to put me in a very optimistic mood about our odds of seeing Southland open at $4 plus on the NASDAQ.”
In light of the fact that you said,”I would say there are only 6 million reasons it wouldn’t trade in the $3 to $5 range- those 6 million reasons are the 6 million shares you, myself, and all the other shareholders own at $.50 to $1.50. Obviously, a lot of those shares would be for sale. ”
Also I am unclear as to how the price paid by us shareholders would keep the stock from appreciating to a higher level once it is separate from the poorly performing BTYH?
Editor: Not true- I am still optimistic this will work out, subject to the financing. I have been saying this all along and will continue saying it- in my view, the potential success of Southland is tied entirely to the refinance of the debt. If they continue to operate in default with the IRS and GE Capital, there is no chance. They have announced they have a new lender, and it’s just a question of getting a final, negotiated number out of the IRS. Then, they execute on their new loan, and take out the bad debt. Then, they have a real shot at an opening of $4 on NASDAQ or $3 on AMEX. And yes, a $4 opening could lead to significant selling from shareholders like you and I, but nevertheless the company should be worth the valuation. They do have an “interested” sponsoring firm, so we will have to see how it all plays out. There is nothing to do but wait.
Mr. Editor
Thanks for the info.
I missed the distribution but since badboys still owns 25% of southland, there is still oppurtunity here. My question is that, how can you justify an opening price of 4/share? I briefly read the 10k and my estimation for the fair value of the bussines, optimistically, 35-40 million. With 28m shares outstanding, it is like 1.25-1.4 per share value. Could you pls post your calculation of the fair value of southland? I am pretty sure they will get financing becasue of the FCF. However, this financing will not come at a low price. I doubt any1 will lend good money to them at a rate below 12%.
Anyway, I am still interested. Just need to clarify a few things and continue my digging.
Thanks again. BTW, this is one of the most interesting spin-off I have ever seen.
Best,
Fan
Editor: I have covered this exhaustively in the past, so you will have to dig through past editions and/or BLOGS for that information. However, I believe if you make the assumption the company can refinance its defaulted debt to GE Capital and the IRS, you can work your way through to a considerably more profitable company. There is one comp out there that trades at a fairly robust market value relative to sales and earnings, but I won’t do the research again right now because there is no reason to. Here’s the bottom line- I would not pledge new money on this idea at this time. The possibilities are very limited until Southland gets refinanced. Until you have learned that Southland has taken out the defaulted debt, there is no reason to buy this stock. In my opinion, Southland will never get a senior listing or trade on any sort of senior exchange until they have refinanced their debt, and as such I wouldn’t touch BTYH until they get this done. If and when they get it done, I will start looking at it again. In the interim- I agree with your assesment- they are trying something I have never seen done or tried. I hope they pull it off.
Based on email correspondence with BTYH (sent and received this morning), they are finishing up the compilation of shareholder lists. “Certificates are on order, and we expect to start issuing in batches the next few weeks.”
As for the refinancing, they stated that the IRS process is ongoing. However, he mentioned that both sides have been cooperative, and “we have indication that the IRS would like to wrap this up by the end of the month.”
I asked for guidance on what exchange they think Southland will trade on, but they did not offer further guidance. All in all, I was pleasantly surprised by the prompt and straightforward response. I will still try to phone the company for further confirmation. BTW, the response sent to me was from the email address of one “Thomas Alan Walls.”
Keep in touch,
MIke S.
Editor: Thanks very much for sharing this information with everyone. It is greatly appreciated. It’s more or less what I’ve been saying all along, but it’s nice to see it confirmed directly.
I bought Bad Toys before it declared the dividend of stock in Southland and held onto the stock after the significant date to get the dividend. Evidence that I would get the dividend as shares in Southland showed up on my internet brokerage account. Recently, about a month ago, that evidence was removed from my brokerage account. Should I be concerned?
Editor: No-they are going to send you a certificate in the mail. Sooner or later- I wish these guys would get around to it already. They are sure taking their sweet time.
Looks like they made a mess out of distributing the shares of Southland. Someone on the Yahoo boards is reporting that he received an offer of one cent a share for his yet to be distributed shares. I think its about time Mr Lunan or Al Kau issued a statement about the current state of affairs. Getting very antsy about this one.
Editor: I find that hard to believe- but you never know. I’ll buy their stock for $.01 just for the hell of it. Calling the company for an update. Will fill everyone in via BLOG next week.
Press release just came out.
Michael
Editor: There you have it. At least they are sending out the certs and giving everyone a timeline.
According to a Yahoo finance article today under the stock, Bad Toys is mailing out stock certificates to shareholders directly but it has not resolved its IRS issue, which it hopes to by the 4th quarter. Then it will do the IPO.
Editor: Correct- everything this company does seems to take a year. Not too quick.
HIHO!
I was doing some “homework” today, and plugged in SOUT on the Scottrade website. TO MY SURPRISE, the company that came up was Southridge Technology Group, Inc. (SOUT:OTC BB). Did Southland change their name? I thought SOUT was legally tied up by Southland. ANY NEWS?
Editor: No- that is meaningless. The only news is they are still waiting for responses from the IRS so they can get the back taxes paid with a loan and get out of default. From there, they will move toward trading.
Has anyone gotten their stock certificates?
Editor: I have not yet, but will check my mail in a day or so and let everyone know when I do.
HIHO!
BTYH sure is being volitile! I am not seeing any real news that would effect the stock this much! Do you have any insight on BTYH? Anything new on Southland?
Thank you.
I hope this finds you well!
Michael
Editor: Just spoke with the CEO yesterday. Southland is still trying to get the IRS to be responsive. Apparently, it is a long process to get a firm number from the IRS. All I can tell you is you should get your Southland dividend shares about now. Southland cannot move forward with their refinance until the make a deal with the IRS, take on the debt, pay the IRS, and come out of default. Then, they can probably get the stock up and trading at a decent valuation. Until progress is made with the IRS, there really is nothing to do. I don’t care about BYTH other than as a trading vehicle out in front of Southland if it looks as if it will open for trading. Other than that, there’s not much to do other than wait it out.