Buyback Shares explained: Regarding questions in P

Buyback Shares explained:  Regarding questions in PR about buyback and retirement of shares,which have been twisted to mean something negative.

In the PR's,"buyback" applies to buying back ca 60% of float, whereas RETIREMENT applies to retiring possibly the same % of BOD(Board/insider) shares.

This is a rather common procedure when companies make the transition to substantial revenues. The best companies in the 1 to 2 dollar price range reduce shares to ca 20-50 million because otherwise shares are undervalued vis a vis book value and revenues and thus prevent hostile parties from buying the company cheap on the open market etc.

There are 2 different things that will be occurring
1)BUYBACK of 60% of the float
2)RETIREMENT of a % of BOD shares-they don't "buy back" these because they already own them-thus the wording STRUCTURED PLAN COMBINATION of buyback [of float] AND RETIREMENT [they retire BOD shares in a structured manner as % of float is retired]

Examples of structure:
1) for every share of float bought back,one BOD share will be RETIRED
2) for every 10% of float bought back, 10% of BOD shares will be retired
They also say they don't see themselves on OTCBB past 2011-this is an important clue-because,in the calculations I and ITMD worked out, the only way they will have sufficient share price to move to major index in next 12-18 months is to retire a significant % of shares held by the directors also.

The PE ratio could easily be 50% or more higher on major exchange because pinky land penalizes revenue producing companies(who are no longer speculative,while usually-but not in CWRN's case- ridiculously rewarding speculative future income w share price 20 to over 100 times book value)-which is one reason they would want to move to a major exchange ASAP.

By RETIRING BOD shares in a STRUCTURED ratio IN COMBINATION w BUYBACK,they increase share price sufficiently to move to a major exchange(w one dollar min share price) in possibly 15 months-otherwise perhaps twice as long or more.
So retiring BOD shares in COMBINATION w buyback of float actually increases BOD (and float)valuation because they will get a higher PE ratio on major exchange and thus insider shares AND float will be worth more than they retired.

Nov 22 PR:
2. Review the issued and outstanding public share structure and vote on the number of common shares that will be made available to the public[that is,decide how many shares they want available in the float, for]. The Company is contemplating a treasury BUY BACK program for sixty (60%) percent of the public free trading common shares[FLOAT] in year 2011.

Officers, Directors and Affiliates [all of which are insiders] currently hold over sixty (60%) of the outstanding common shares . The B.O.D. has voted to incorporate a STRUCTURED Plan that will provide for a COMBINATION of BUYBACK and RETIREMENT of COMPANY[i.e,BOD shares] common shares that will balance[probably keep the same % of insider shares vs the float] the control of voting shares in favor of the Management. At this time all of the Officers, Directors and Affiliate company Pan Am, each holding more than ten (10%) percent of the outstanding shares and are subject to SEC rules regarding trading of said common shares.

3. Review the common share count percentage held by affiliates and insiders[w a view toward retiring a % of such shares]....

By consent; the Directors of LLC., U.S.A. shall RETIRE by deleting a percentage of common shares now held[by Board] as[at the same time as float is bought back,company shares will also be retired in a structured plan COMBINATION] new common shares that are accumulated through the public market[i.e,buyback] beginning in the later part of the first quarter of 2011.

This is referring to retiring a % of insider shares.
If they buyback 60% float,they may also retire 60% of insider shares to maintain same % ownership by insiders vis a vis the float.
The PURPOSE is to REDUCE TOTAL SHARES ASAP to raise share price to facilitate the earliest possible move to a major exchange ,where the games played by certain negative special interest groups will not be efficacious.

PR points on the subject:
9-30 PR: 'item #3 Review share count held by affiliates /insiders"-what for-Bob and his family are the insiders -they already know # shares they have, so in context of item 2, see:

11-22-10 PR item #2 talks of buyback and then says BOD hold over 60% of common shares.
"The BOD has voted to incorporate a STRUCTURED PLAN that will provide for a COMBINATION of BUYBACK AND RETIREMENT OF [the companies-that is insiders] common shares[i.e,BOD shares]......

The previous ref to 60% ratio implies they will keep same ratio(make sure BOD has voting control-normal)
BOD voted to retire BOD shares in COMBINATION w buyback.

The ingenuity of people w ulterior motives to misdirect/destroy is amazing.
The buyback and retiring of perhaps 60% of TOTAL[both insider and float] shares is an EXCELLENT thing that will greatly BENEFIT ALL SHAREHOLDERS.
There is no cancellation of all shares as somebody intimated.

posted by microcaps