TTGL has been under a bit of pressure of late. I don’t know why. My suspicions are all related to the lousy financings the company engaged in when it was just getting rolling in the telecom space. Shareholders are still paying the price for the company’s weak capital structure on the financing side, despite having cleaned up about 75% of the problem.
My SSL on this one is $1.04, so it is now crunch time. It is time to decide if you want to hang in there, or take your small loss and/or small gain and move on.
Certainly, from a fundamental point of view, the company is worth considerably more than today’s level. But, that does not put the stock there.
I believe $1.40 is far more problematic than today’s swoon to $1. Why? Because that is the level the stock simply cannot break through despite numerous attempts, and investors are losing patience.
Right now, this is a good company, but a lousy stock. Let’s look at the chart:
This chart goes back to the OTC Journal’s first edition on the company- the stock was about $.80 at the time.
Since that time, the company has done nothing but deliver good news. Increasing revenues, turning profitable, etc. Despite turning profitable and likely delivering about $150 million in revs this year, the stock continues to trade at the anemic market value of about $55 million. Pathetic.
For some reason, we are in a low volume environment for microcaps right now, and the stock could not hold up under the pressure of whoever wanted to get out. Probably one of the two agressive funds who are in this deal. (Specifically Cornell and Laurus).
From here, the stock will probably bounce, and if you want to get out, you can probably do so in the $1.10 to $1.20 range in the next few days.
Today’s red bar on the chart is just plain ugly, and there are a couple of ways to look at it. You could decide the stock is a mess technically, get out, and wait for it to behave better. Or, you could figure the seller is now out of their position and the next time it gets some legs it could break out through that $1.40 level with less resistance.
Longer term- here’s what the company needs to do. Collect this money promised from the excise tax rebates from AT&T, Sprint, and the like. Use the money to buy out the toxic debt, and clean up the capital structure. This stock will then have a shot at getting fully valued. ($4 range)
If you like the idea, the trick will be to buy it on days when it swoons; like today. Sell it or sell part of it when it surges.
I would be more inclined to be a buyer vs a seller today. Today’s action reeks of capitulation. Someone who wanted out is hopefully gone. A bounce is probably in the cards. However, I wouldn’t blame you if you decided this one is not for you.
I suspect today was an exhaustion selling. I may waffle around $1.05 for a few days until some news comes out but unless the news is bad, I don’t see it sinking.
Paul
Editor: It is doing pretty much exactly what I predicted. Now is the time to sell if you don’t want to hang in there for the longer term.
I was hoping you explain a little bit about the current state of the micros in general right now. I have noticed they are taking a hit in general and wanted to hear your thoughts on why and what the next catalyst upward will be.
Love the newsletter and blog. Would not mind hearing from you more frequently !!!!
Editor: I don’t quite understand the anemic nature of the micros right now consider how the larger market is powering higher. Same thing happened in August, and the micros took off in October through January. Perhaps it’s the time of the year- micro investors are reluctant to get active prior to the quiet summer months. I might write something about this in the weekend edition.
Glad you like my publication. Tell all your friends.
I believe that of all the microstock OTC is covering, this one actually has the best shot at making some real money. These guys are making real money NOW and there is serious growth going on RIGHT NOW….I took the $1.00 level of yesterday as a real opportunity and added to my pos. This is a stock where time works for the investor (they make real money so they are becoming fundamentally more valueable. I wish I had as much confidence with CPNE or SIENA….those companies seem to be running out of gas…
Editor: I don’t agree. CPNE is actually financially far stronger than TTGL as they have no debt of any kind, and much better margins. I believe CPNE has a perception problem with their business model- investors wonder if it is sustainable. TTGL is headed towards cleaning up its balance sheet, which would make it the more compelling than CPNE from a top line vs market cap perspective- SIENA is nothing but a problem – it is ridiculous that they can’t get the financials filed in a timely manner. Indicative of bad management.
“this company could end up being debt free and buy-out a cumbersome capitalization structure. How much money are we talking about? Some of the figures being batted around are larger than TTGL’s current market cap. I remain amazed that nobody else has caught onto that yet. I never assume anything until a check is written, but the possibility is just too big for me to ignore. ”
I read that on the SCN blog -and he/she has been touting that for a while. However, i have never heard you mention this fact.. is this accurate?
Thanks.
Editor: About $15 million would make it very palatable- would clean up this mess considerably. They are supposed to get the funds from the rebate on the excise taxes, but it is taking forever. In the meantime, the excess supply of stock is coming from the convertible debt financiers.
I can tell you that in my opinion I’m not really confident that the company has actually reached profitability. Not yet anyway. When you look at the latest quarterly report the positive earngs are primarily attributable to the “Gain on extinguishment of debt” of $7.79 million. If you look at the revenues minus the actual costs of doing business the company is still posting a loss. The loss from operations before interest expense was $736,000 and if you include interest expense of $1.4 million the loss is much worse. So, I’m not confident they’re currently making any money. As an investor, I need to see a real profit, and not one as a result of a one time gain on debt extinguishment.
The other significant consideration is the registration of the sale of stock, i.e. the SB-2 filed with the SEC on March 8, 2007. There are alot of potential shares for sale (8,140,000) and if they were to actually hit the market this wouldn’t bode well for the share price. This is not a large volume stock, and any potential sale would likely depress the price until these new shares are absorbed.
So, I think you’ve got a couple of reasons right there for a lower overall stock price.
While one can never say with confidence whether a stock will rise or fall, I will say that in this case I can’t say that Titan Global has convinced me to stick around as an investor.
Editor: The balance sheet is very confusing, and problematic. I am told the SB2 has a very exaggerated amount of stock- most of which has not been issued yet. Apparently, the biggest seller- Cornell, is only entitled to 1 million of the shares, which could also depress the stock price. The interest expense is also exaggerated because the stock has gone up in price- As the price went up, their interest cost went up in a non-cash format. The whole thing is convoluted and confusing, and needs to be cleaned up for fund managers to embrace this situation. I can’t say for sure if they have real earnings, however, I know they have positive cash flow from operations, which means they will be around for a long time.
I see this stock continues to drop in price. Do you have any more insite as to why, or do you still believe it is a stock worth holding.
Thank you.
Editor: As I said in both the weekend edition and the last BLOG, the stock is a great long term hold, but if you have a shorter term time horizon it is a sell. It is at my SSL and showing no signs of garnering any interest. Fundamentals suggest a much higher stock price. You simply have to decide if you want to be long term and not worry about where it trades, or protect your capital and move on.
more favorable news after friday closing… comments on the news and the technicals on this stock? i sincerely hope we found a bottom here at $1…
Editor: My SSL on this one was $1.04. When it got down to $1 the last time, I suggested wait for a bounce if you wanted to sell. It did bounce into $1.15 range. Nothing has changed in my view. If you want to be cautious and preserve your capital, I believe the stock should be sold right now. If you like the company and are willing to stay in long term, don’t worry about the short term sell off. It’s your money, so you have to decide how you are willing to invest.
It is curious to me that Titan Global would announce a favorable re-negotiation of a relationship with Sprint Nextel on Friday after closing hours. This is not to suggest that the claim is not true. However, it seems the company may have thought that it could be interprated in a negative way and wanted investers to digest it over the weekend to appreciate its inherent value. The reaction so far shows they may have been correct.
Editor: I believe their timing related to the stock dropping south of $1. I know that’s a threshold they don’t want to violate as it relates to one of the debt instruments. They are in registration right now. They are registering 4 million shares on behalf of a fund, but none of those shares are issued yet. It’s convertible debt. Once the registration statement is effective, all they have to do is issue 1 million shares and the debt is paid. They never have to issue the other 3 million. As long as the stock is $1 or more. Another balance sheet improvement, which is the key for this one. Again- much better company than stock at this point in time.
news makes sense – recent downward move in price relates to TTGL’s conflict with tier 1 it seems…
now that it is resolved – i hope to see it move gradually higher…
$20 M lower in revenue – in itself seems negative but given the market cap of $50M it does not seem like this was about revenue all along but about margins and earnings. They are still on pace to meet or exceed previously guided EBITA – I am hopeful that this is a pivot point in the stock price (going higher)
your thoughts pls on this mixed news….
thanks
Editor: I believe it is a non-event. The problem with this one is not the top line- it is I in EBITDA- Interest. The company simply needs less debt and less interest in cash and shares. If they raise money from the Excise tax settlements, and use it to pay down the debt, and get the word out to the market, we should be off to the races. I believe the stock would be worth about $4.
I understand Titan Global is currently in arbitration with AT&T about the fees they have been paying that they were not required to pay. Do you have any information that this is correct and if they finished it in June like the arbitrator wanted to.Being as June is just about over.
Editor: Last I heard from Bryan Chance, there was some sort of arbitration scheduled, and I believe I heard June. However, I can’t confirm for certain and don’t know if there is or was an outcome.
Great news after the close today. Very pleased that they finally received proceeds from the FET excise tax refund and even more pleased they are using it to pay down debt. It is impressive that they have paid down $11.5 millions in less than two years. I am long on this stock and I believe this company has the most stable, transparent and sound business of most of the stocks we follow on this board. When will you do an update on TTGL?
Editor: Will do a BLOG today, and some follow up soon. You are right- great numbers as I have been saying all along.