$XTRN$ STOP & READ: QUOTE: [b]"XREE has secured a $7 million equity line of credit from Ascendiant Capital Partners to build out its service."[/b]
Las Vegas Railway Express Inc (XTRN), the company developing a luxury train service called the “X Train,” from the Los Angeles basin to Las Vegas, exploded recently due to a buyout offer from X Rail Entertainment, Inc (XREE). In the press release, it was stated that shareholders of XTRN would be paid $20 million in a combination of cash and shares of XREE. We, like other traders on iHub, did our own research to establish the total amount being received. In this article, we will tell you everything you need to know,
Business
We checked the company website and found the business objectives of the company and the reasons to justify the train service. Have a look:
“We plan to offer a train service between Las Vegas and the Los Angeles metropolitan area by hiring Amtrak to haul our passenger cars for a fee. The proposed service, called the “X-Train,” will introduce a “Las Vegas” style experience on the train, while traversing the route in approximately 5 – 5 ½ hours.There has been no regular passenger rail service between the Los Angeles and Las Vegas areas for over 18 years. The only major highway between Los Angeles and Las Vegas is Interstate 15 (“I-15”). Of the more than 12 million annual visitors from the Southern California/Los Angeles market, 94% use automobile transportation to Las Vegas via this corridor every year.”
Source
Once we understood the business of XTRN, we wanted to know the reasons to justify its acquisition by XREE. We found out that the buyer is actually a direct competitor. We checked its website and saw that it offers “rail services from metropolitan areas in the US to resort gaming/casino destinations“. XREE has secured a $7 million equity line of credit from Ascendiant Capital Partners to build out its service.
Recent Developments
The merger
On May 23, 2017, the company announced that it had received an offer to acquire 100% of the company for $20 million in cash and stock of XREE. We did not have access to any acquisition contract, and the amount of shares of XREE was not specified. We made the following calculation in order to obtain the amount of money that XTRN shareholders would receive:
Merger contribution: 20 million
Number of shares outstanding (annual report): 783,520,592 shares
Contribution per share: $0.0255
Is $0.0255 a combination of shares and cash? Yes. In this case, if you are only interested in receiving cash, you may sell the shares right after you receive them. Investors willing to continue with the company, as the “X-Train” project seduced them, may keep them. At the end of the day, we believe that the final combination will keep developing the same idea.
The press release did not explain the synergies that the merger may bring, but noted that the consolidation will benefit shareholders.
“This consolidation of interests is being done to benefit the many shareholders who invested in the project of running trains between LA and Las Vegas and who may have had their equity diminished. We just want all those who helped us get here have an opportunity to participate in the rewards of execution on this project.” Source
Market reaction – Is there an opportunity?
The share price as of May 24, 2017 is $0.0019. Thus, the total returns if we buy now and get paid when the merger closes would be substantial. Why is this happening? In our opinion, the market did not believe the transaction. This can occur for several reasons. Let us review them.
The buyer has no cash to pay: in the balance sheet, the total amount of cash owned by XREE is $202,000. This may mean that the rest would have been paid in shares. The share price of XREE is worth $3.9, but it may decrease once the company discloses the amount of shares to be issued. The market does not have all the information about the merger yet, so we believe that it did not push up the shares of XTRN. If all the details are released, the jump may be substantial.
The buyer is not known: The market sometimes ignores companies that are too small or quite unknown. This is a micro-cap stock, so don’t expect everybody to know XREE.
Many market participants did not get to know the merger announcement: it is quite likely that shareholders did not get to know the news yet. In the following weeks, once the whole market gets to know the deal, the share price may be pushed up to be close to the offer price.
The buyer did not obtain the financing: this is quite likely as well. The buyer did not show any commitment from a bank that may lend money to acquire XTRN. Perhaps this information will be released soon. If the buyer puts out a commitment, the share price may jump.
Conclusion
Las Vegas Railway has a project that has caught the interest of a direct competitor, X Rail Entertainment. Both companies are trying to launch similar services, and it seems that the new merger between the two is an interesting idea. The SG&A expenses and R&D costs will be reduced, perhaps the business combination may bring some synergies, and the company will be bigger. Thus, banks will prefer the company (the credit risk will be lower). We calculated the offer price and saw that the XTRN share price is quite far from it. Hence, we tried to understand what was the problem. In our opinion, the press release issued did not disclose all the necessary information, thus the market is not fully recognizing its value yet. If the companies finally mention the amount of shares that shareholders will receive or show a commitment from a bank, the share price may jump. To sum up, stay alert, something good may be about to happen.
Las Vegas Railway Express Inc (XTRN), the company developing a luxury train service called the “X Train,” from the Los Angeles basin to Las Vegas, exploded recently due to a buyout offer from X Rail Entertainment, Inc (XREE). In the press release, it was stated that shareholders of XTRN would be paid $20 million in a combination of cash and shares of XREE. We, like other traders on iHub, did our own research to establish the total amount being received. In this article, we will tell you everything you need to know,
Business
We checked the company website and found the business objectives of the company and the reasons to justify the train service. Have a look:
“We plan to offer a train service between Las Vegas and the Los Angeles metropolitan area by hiring Amtrak to haul our passenger cars for a fee. The proposed service, called the “X-Train,” will introduce a “Las Vegas” style experience on the train, while traversing the route in approximately 5 – 5 ½ hours.There has been no regular passenger rail service between the Los Angeles and Las Vegas areas for over 18 years. The only major highway between Los Angeles and Las Vegas is Interstate 15 (“I-15”). Of the more than 12 million annual visitors from the Southern California/Los Angeles market, 94% use automobile transportation to Las Vegas via this corridor every year.”
Source
Once we understood the business of XTRN, we wanted to know the reasons to justify its acquisition by XREE. We found out that the buyer is actually a direct competitor. We checked its website and saw that it offers “rail services from metropolitan areas in the US to resort gaming/casino destinations“. XREE has secured a $7 million equity line of credit from Ascendiant Capital Partners to build out its service.
Recent Developments
The merger
On May 23, 2017, the company announced that it had received an offer to acquire 100% of the company for $20 million in cash and stock of XREE. We did not have access to any acquisition contract, and the amount of shares of XREE was not specified. We made the following calculation in order to obtain the amount of money that XTRN shareholders would receive:
Merger contribution: 20 million
Number of shares outstanding (annual report): 783,520,592 shares
Contribution per share: $0.0255
Is $0.0255 a combination of shares and cash? Yes. In this case, if you are only interested in receiving cash, you may sell the shares right after you receive them. Investors willing to continue with the company, as the “X-Train” project seduced them, may keep them. At the end of the day, we believe that the final combination will keep developing the same idea.
The press release did not explain the synergies that the merger may bring, but noted that the consolidation will benefit shareholders.
“This consolidation of interests is being done to benefit the many shareholders who invested in the project of running trains between LA and Las Vegas and who may have had their equity diminished. We just want all those who helped us get here have an opportunity to participate in the rewards of execution on this project.” Source
Market reaction – Is there an opportunity?
The share price as of May 24, 2017 is $0.0019. Thus, the total returns if we buy now and get paid when the merger closes would be substantial. Why is this happening? In our opinion, the market did not believe the transaction. This can occur for several reasons. Let us review them.
The buyer has no cash to pay: in the balance sheet, the total amount of cash owned by XREE is $202,000. This may mean that the rest would have been paid in shares. The share price of XREE is worth $3.9, but it may decrease once the company discloses the amount of shares to be issued. The market does not have all the information about the merger yet, so we believe that it did not push up the shares of XTRN. If all the details are released, the jump may be substantial.
The buyer is not known: The market sometimes ignores companies that are too small or quite unknown. This is a micro-cap stock, so don’t expect everybody to know XREE.
Many market participants did not get to know the merger announcement: it is quite likely that shareholders did not get to know the news yet. In the following weeks, once the whole market gets to know the deal, the share price may be pushed up to be close to the offer price.
The buyer did not obtain the financing: this is quite likely as well. The buyer did not show any commitment from a bank that may lend money to acquire XTRN. Perhaps this information will be released soon. If the buyer puts out a commitment, the share price may jump.
Conclusion
Las Vegas Railway has a project that has caught the interest of a direct competitor, X Rail Entertainment. Both companies are trying to launch similar services, and it seems that the new merger between the two is an interesting idea. The SG&A expenses and R&D costs will be reduced, perhaps the business combination may bring some synergies, and the company will be bigger. Thus, banks will prefer the company (the credit risk will be lower). We calculated the offer price and saw that the XTRN share price is quite far from it. Hence, we tried to understand what was the problem. In our opinion, the press release issued did not disclose all the necessary information, thus the market is not fully recognizing its value yet. If the companies finally mention the amount of shares that shareholders will receive or show a commitment from a bank, the share price may jump. To sum up, stay alert, something good may be about to happen.
1
