Wow, yesterday was a rough day. 475 million, or almost ½ a billion shares traded and we didn’t even see .0002. As a matter of fact, you couldn’t have sold your shares for .0001 yesterday even if you wanted too because we are sitting at no bid. Those are the kind of days that make you scratch your head, which is now bald because you have just pulled out the last strands in frustration and anger over what is going on with this stock. I’m with you my fellow HIMRer’s, and for the life of me I haven’t a clue as to why our PPS is sitting at this level on the heels of a $40 million concession announcement. But I do have some thoughts on the matter that I’d like to share with you.
First, we have to realize there is the equivalent of 750 Billion shares available to trade on the open market at any given time considering the common shares and Class C preferred shares that could be converted at any given time. At that level the $40 million concession equates to roughly $.00005 (four zeroes) per share which does not account for any and all expenses that the company will incur will operating the concession. We have been given no estimates of these expenses, but I would say the expenses will be extremely high considering this is the first concession and the foundation/infrastructure will be have to laid during this initial phase. So, I would say we’d be lucky to realize a net profit of $4 million, or 10% on this concession, keeping in mind that a new company is not expected to realize a net profit until its 4th year of operation. This would equate to a stock value of roughly .000005 (five zeroes). It is more likely that the totality of the $40 million will be expensed by the company during the course of concession and they will still exit the fiscal year with a loss, meaning the theoretical value of the stock is $0 (zero). In other words, the true value of the stock at this time is found in the potential of the company. If you believe in what HIMR is doing than I think you should continue buying shares as you can afford, while in complete understanding this is a baby company who, just this past week, began to crawl. It’s going to take time for them to walk and run, but I believe they will get there.
Second, why would someone sell their shares at this level when the company is demonstrating amazing potential, is taking the necessary steps to position itself as a leader in the industry, and has a solid business plan that should produce great results……….I mean dollars on the penny? Well, the answer that makes me handle this situation a little better, as outlined in the preceding paragraph, is that HIMR still has a long way to go. How long will it take them? Too long for my liking, but I believe in this company, the goals they have set for themselves, the work they are doing, and the successes they’ve already achieved. Do I think something needs to be done about the share structure? Yes, absolutely. Do I think there is something that can be done right now address this issue? Not really, outside of using a small portion of the concession or take on additional debt, to start buying back shares. But is there any “real” money left over from the concession to accomplish this? Probably not, see preceding paragraph. If they could somehow manage to enact a buy-back, now is definitely the time. I mean $1 million could take 10 Billion shares, at a PPS of .0001, off the market, but you have to keep in mind this would only represent a 1.3% reduction in all shares available to trade on the open market under the current share structure. They would have to do this roughly 58 more times, or come up with another $58 million, to buy back all shares available to trade on the open market.
Third, I don’t believe HIMR is selling shares at this time. Why would they sell low just buy back high? This philosophy is totally contrary to the buy low, sell high rule we are all familiar with. If they sold right now the level would be .0001 and they would have to buy back at .0002 or higher, which would represent a 100% premium paid on their investment. Yes, the possibility is there for a PPS buy-back price of .0001, but what do you think will happen to the PPS when the company announces its intention to buy-back shares? The PPS will shoot up, just like it did late last year when they announced share reductions. If I were them, I would utilize the concession(s) as a means to secure additional funding, with which a variety of spending options would present itself, all for a reduced premium based on the interest rate of the loan. I tried to research what the interest rate on the $350K they just borrowed was, but the PR didn’t disclose that information. I would estimate somewhere between 18% and 21%, so why would they pay between 79% and 82% more to fund their operations by selling stock? This would make no business sense.
Lastly, at this time the 10 day average trading volume of HIMR is 250 million shares. This represents only .03%, or .0003, of all available shares to trade on the open market switching hands each day. At that rate it would take 3,333 days, or 9.13 years, for all of the shares to sold/bought at least one time. This is a long time in my book, and HIMR management should step in, realize the detriment all of these available shares are reeking on the company, and formulate a comprehensive plan to get the OS levels to an acceptable level. Why do you think North Cal told them to get their share structure under control before they would partner with them? In my book that would be 1 Billion shares or less at this time, but that isn’t likely to happen any time soon as it would represent a 750% decrease in the OS at today’s levels.
What to do??? (My humble suggestions only)
I’ve heard some of you say, until the OS is addressed and controlled by HIMR management the only thing we can do is wait and believe. I believe this philosophy to be partially correct. As of yesterday, I have adopted a two-legged approach in trading HIMR stock. The first leg involves holding a sizeable amount of shares long as I believe in this company and that someday the stock will take off. The second leg involves buying a number of shares, in my case 5 million, at .0001 and immediately placing a GTC (good ‘til cancelled) sell order for those 5 million shares at .0002. This accomplishes a couple of things. First, at .0001 it has lowered my overall price per share which is always a good thing. Second, if the stock gets back to the .0002 level, which I believe it will in the near future as it was just trading at those levels late last week, I have doubled my initial investment from $500 to $1,000. This extra $500 has just paid for some of those long shares I am still holding in reserve for the big move up.
So let’s say I currently hold 10 million shares at a cost basis of .0002, utilizing the above trading method, it would take 4 trading cycles to cover the cost of my long HIMR position, minus any commissions. In essence, if everything worked out and you could complete enough trading cycles, you would be holding a long position in HIMR at the cost of commission. Even if you were only able to complete one or two trading cycles you are still lowering your cost basis, which is ALWAYS a good thing. Any time you can get 100% on your investment you are doing GREAT. Today, people put large amounts of money in CD’s at 1.5% interest just to earn $100 in 12 months. We have the possibility to make that $100, or more, in a much shorter amount of time.
As always the viewpoints expressed in this post are only my opinion and no one should make trading decisions based solely on the information and suggestions found herein.
