Imagine UMAX looking into acquiring a private company that is generating $20 million in Revenues. Let's presume that the company has Net Income of $5 million. Before reading any further, please understand that this post is only speculative in nature and is not the gospel. I’ll explain why I used these numbers later within this post.
Let’s now presume the reason why the owner of that private company might be willing to do such a deal with UMAX for a certain amount of preferred shares to use as leverage to do acquisitions. Let's say for a value of $10 million even though its company is producing the numbers I mentioned in the first paragraph.
The Series B Preferred Shares converts to common at a 5 to 1 ratio and are the shares that would be used for acquisition purposes. Each Series B Preferred Share is worth .20 per share per the company’s website below. This means that with what the company knows about itself in private, they believe that UMAX is worth right now a minimum of .20 ÷ 5 which is .04 per share before any acquisition has even been placed into UMAX. See below per the UMAX website:
Quote:
www.umaxcorp.com/
Since 10,000,000 Series B Preferred Shares is worth $2,000,000 at a price of .20 per share, then by basic math, 50,000,000 Series B Preferred Shares is worth $10,000,000 that can be used to consummate such an acquisition. This was derived by using ”5” as the multiple since 5 to 1 is the conversion ratio. Since the shares are Preferred Shares and since UMAX is not a fully reporting company, any conversion for any preferred shares used can’t take place until after one year from the date issued which gives UMAX a chance to grow into its acquisitions within the market. Still… 50,000,000 Series B Preferred Shares converts into 250,000,000 common shares. If a company is bringing in the value I mentioned above, then the additional shares should be welcomed by us shareholders and the company. This is what I would term as ”Good Dilution” for a stock because it is bringing in substantial value and growth in proportion to where the company was before such an acquisition.
So one might ask… Why would a private company do this?
By remaining as a private company, you only have one arm of growth… The Operational Arm of Growth. With this arm of growth, in the example I am using above, the company would only have growth from its ”operations” only.
By becoming a public entity and having shares in the public company allows you to have an additional arm of growth… The Equity/Stock Arm of Growth… along with the already existing… Operational Arm of Growth. With this additional arm of growth, in the example I am using above, the company would have growth from its operations and the additional equity/stock arm of growth from the value place into its 250,000,000 public shares (from 50,000,000 Series B Preferred Shares) that would not have existed otherwise.
Let’s break this down a step further to better understand the financial worth for the private company going public under the UMAX construct.
Let me start by saying that the Outstanding Shares (OS) is the key denominator that is used to assess a fundamental valuation through the computation of an Earnings Per Share (EPS):
Net Income ÷ Outstanding Shares (OS) = Earnings Per Share (EPS)
The EPS is what is used by the market to determine where a stock should trade by multiplying that stock by a Price to Earnings (P/E) Ratio which is the growth rate for a particular Sector or Industry. For those new for understanding what a P/E Ratio is, read the links below that hopefully will help:
investorshub.advfn.com/boards/read_msg.aspx?message_id=57154170
http://www.investopedia.com/terms/p/price-earningsratio.asp
The OS for UMAX is last reported to be 518,400,000 shares so this is what we will consider for the purpose of this post. Let’s presume that an acquisition is done where UMAX acquires a company for 50,000,000 Series B Preferred Shares that would after one year, would be ”eligible” to convert into 250,000,000 common shares. Because of this, it is fair to consider the OS of 518,400,000 shares for UMAX because as long as the company continues to generate revenues and profits exponentially, then I’m sure they would realize that the longer they don’t convert their Series B Preferred Shares, the greater the value they would be yet further down the road because such would keep the OS from growing. This would also make UMAX look more attractive for additional acquisition candidates looking to mirror the process. This is important because again, the OS is the key denominator used to assess the valuation of a company; the lower the OS is kept, the greater the valuation of the stock. Consider these Key Variables to better understand what’s following…
Key Variables
** Net Income = $5,000,000
** OS = 518,400,000 Shares
** Conservative P/E Ratio = 15
This means a speculative value of below…
EPS x P/E Ratio = Fundamental Share Price
$5,000,000 Net Income ÷ 518,400,000 (OS) = .0096 EPS
.0096 EPS x 15 Conservative P/E Ratio = .144 Per Share Price Value
Here’s the beauty about this model… Now let’s presume that UMAX finds another company similar or few companies similar in value that’s willing to be acquired under the very same premise. Then the per share value of UMAX would continue to grow ”exponentially” as per company/acquisition with such a similar value is acquired by UMAX to mirror the chart below for consideration:
UMAX acquires 1 company = .144 Per Share Price Value
UMAX acquires 2 companies = .288 Per Share Price Value
UMAX acquires 3 companies = .432 Per Share Price Value
UMAX acquires 4 companies = .576 Per Share Price Value
UMAX acquires 5 companies = .72 Per Share Price Value
And so on… and so on… and so on… until they feel that they have enough companies under their business model. Now let’s calculate the worth of the private company’s Series B Preferred Shares if ever converted to 250,000,000 commons shares based on the model above for 1,2,3,4,or 5 acquisitions of the same likeness and considering that each company would allow UMAX to grow to certain heights before converting their shares into common shares:
250,000,000 from 1 Acquisition = $36,000,000 in Common Shares Value
250,000,000 from 2 Acquisitions = $72,000,000 in Common Shares Value
250,000,000 from 3 Acquisitions = $108,000,000 in Common Shares Value
250,000,000 from 4 Acquisitions = $144,000,000 in Common Shares Value
250,000,000 from 5 Acquisitions = $180,000,000 in Common Shares Value
To play around with the UMAX potential, based upon the model that I created to consider above, use the Substitution Property to sub in and out certain numbers for Revenues and/or Net Income amounts or any other key variable that gets officially released by the company to get an idea of what the value of UMAX would be as a company upon any announcements of acquisitions completed that’s brought into the company.
I said I was going to explain why I used the numbers in the first paragraph so here goes. I considered the numbers I used in the first paragraph of this post from ”only” a ”speculative” starting point just in case the company that UMAX is considering to acquire is the company that is listed within the profile of the new member (Robert Haltom) that UMAX brought on board to help the company within the link below:
(Again, this is only speculation unless the company confirms otherwise.)
Quote:
http://www.otcmarkets.com/otciq/ajax/...easeDocumentById.pdf?id=17163
http://investorshub.advfn.com/boards/...msg.aspx?message_id=117761460
While providing management oversite to these new companies, Mr. Haltom directed and facilitated a complete organizational turn-around for National Product Sales (NPS) of Salt Lake City Utah. Over a 12 month period, Haltom’s prowess and tenacity in business development and customer growth brought new accounts and life to a 30 year old company resulting in $20 million dollars in new revenues to a small Utah company while growing the retail customer base from 1,500/daily to 2,800/daily. Over the ensuing 24 months, more than 250 new full-time jobs were added as a result of this successful turnaround.
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