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EVillageProwler · March 10, 2003 1:04AM

THREAD

EVP

sinin1 · March 10, 2003 1:19AM

That is interesting - if I read it correctly, they feel having $10 million in advance money available, they could generate $10 more per year in profit? Would that be from greater value items being sold?->increase sales gross for commisions?

kranky · March 10, 2003 1:24AM

It could also be from attracting more items to their auctions.

tradedollarnut · March 10, 2003 2:10AM

I have to admit I don't understand why the stock is falling on that announcement. It briefly equalled the all time low today. The announcement is not bad news at all - basically saying they have the capacity to borrow on their equity and they are going to use that capacity to build the business.

I wonder if Bowers is selling off his shares?

EVillageProwler · March 10, 2003 2:19AM

When I read that, two things came to my mind right away:

1. That CU has the ability to borrow, and...
2. That they are compounding their overall lousy financials with debt.

I'm no corporate credit analyst (my brother is, though!), but I guess the stock dropped because of #2.

EVP

tradedollarnut · March 10, 2003 2:24AM

EVP - their P&L's have been bad, but their balance sheet is still superb. Adding that amount of debt to the equation will not significantly impact the ratios and may positively affect the profits. I see it as a good move.

MrEureka · March 10, 2003 2:30AM

I also see no reason for the news to affect the stock price. It's more likely that the stock is falling because of last week's retracted tender offer.

dragon · March 10, 2003 2:30AM

TDN,

CLCT is not really the type of stock that trades on news (good or bad), nor does it follow the general market or Nasdaq, either up or down. In fact, I think I can remember one time that CLCT came out with earnings and the stock did not even trade the following day.

kranky · March 10, 2003 2:31AM

<< <i>I wonder if Bowers is selling off his shares? >>

If he does, it's probably going to be obvious. As of last October, he owned about [edit] 500,000 shares [/edit] (a little over 8% of outstanding shares), and the average daily volume is only 13,000 shares.

[edited the number of shares to adjust for the recent reverse split]

dorkkarl · March 10, 2003 3:38AM

doesn't this sort of thing often precede a filing for bankruptcy?

K S

Lakesammman · March 10, 2003 3:47AM

Looks like simply a LOC backed by future receipts, not debt to do something stupid like pay higher salaries. Looks like pos. news to me - they need to do something like this to remain competitive with Heritage.

truthteller · March 10, 2003 4:00AM

There is no single entitity that would buy Bowers shares, so he could only sell small amounts at a time. You need buyers for a stock to trade or sell at a HUGE discount. I'll bet he is paid money not to sell his stock. CU raising a credit line is a good thing for the auction division. Taking that money from the auctions to pay bills is a bad thing.

TRUTH

tradedollarnut · March 10, 2003 4:11AM

Bowers only owns 500,000 or so shares after the reverse split.

There is no single entitity that would buy Bowers shares

Not necessarily true - depending on the discount to market offered.

kranky · March 10, 2003 4:18AM

<< <i>Bowers only owns 500,000 or so shares after the reverse split. >>

Ooh, I should have remembered to make the adjustment when the proxy report I checked was dated Oct 2002! Thanks, TDN.

dragon · March 10, 2003 4:21AM

Don't forget to file form 13D within 10 days.

IrishMike · March 10, 2003 5:45AM

Being a banker, you know I couldn't stay out of this thread. This is not necessarily a good or bad move, it is one of those business decisions that could work out very well for the company if they can generate additional income. If however they don't they have now to answer to outsiders, i.e. the suits or us bankers. Today the company is closely held, meaning two or three of the shareholders are really calling the shots. Along with a credit facility that large are going to come some rules, which the officers of CLCT are going to have to sign off on. There will be some do's and don'ts as well as some ratios to maintain.

If they now have professional managers in place who can not only manage the business, but see that the banker's are kept happy and can develope more auction business then all this makes sense. I am sure this has been recommended to them by folks who have carefully analyzed the opportunity.

The downside is storing the ego in the shed, for no longer will they have as much freedom to make decisions, which may be a good thing. Sometimes it's like a blind date who turns into a stalker.

DCAMFranklin · March 10, 2003 6:15AM

<< <i>That is interesting - if I read it correctly, they feel having $10 million in advance money available, they could generate $10 more per year in profit? Would that be from greater value items being sold?->increase sales gross for commisions? >>

Sinin1- They said "additional revenue", not profit. Significant difference.

MrEureka · March 10, 2003 6:27AM

There is no single entitity that would buy Bowers shares

There is no single entity that would tell a market maker that they would buy 500,000 shares of CLCT, even at a reasonable discount. It would send the market dramatically higher before many shares were bought. Likewise, QDB could never tell a market maker that he would sell 500,00 shares at a premium, much less a discount! That's why big deals like these almost always get done without the market makers.

It's the same in the coin market. Can you imagine what would happen if you advertised on CCE (or elsewhere) that you wanted to sell 5,000 PCGS MS65 Saints at current levels? You might sell a few coins right away, but the market would be 30% lower in days. Likewise, you could never advertise your willingness to buy such a large quantity, at any price. That's why big deals have to be quietly negotiated, one-on-one.

It's an interesting problem. One day, we'll have to talk about Eureka's solution!

DCAMFranklin · March 10, 2003 10:20AM

Andy- I have to strongly disagree. According to Lycos Finance, here a few very large transactions by insiders:

1. 3/05/02 David Hall 200,000 shs proceeds of $252,373
2. 3/05/02 Van Simmons 100,000 shs. proceeds of $125,373
3. 6/14/02 Van Simmons 42,500 shs. proceeds of $39,500
4. 6/12/02 David Hall 248,000 shs. proceeds of $224,773
5. 9/10/02 David Hall 520,830 shs. proceeds of $385,414

Seems like someone is able to handle placing the large transactions for them.

MrEureka · March 10, 2003 11:46AM

Andy- I have to strongly disagree. According to Lycos Finance, here a few very large transactions by insiders:

Those don't necessarily reflect individual transactions. More than likely, they represent registrations of the intent to sell shares. Insiders must file before selling, and only then may they conduct sales in any manner they see fit. If the shares are sold into the market, an individual registration could represent months of smaller sales. For that matter, the shares did not necessarily even sell.

Edited to concede that about a million shares traded on Sept 15, 2002, so big deals CAN take place. However, given that the market didn't move much on that day, you can bet that the deal was prearranged.

tradedollarnut · March 10, 2003 12:08PM

Actually the market did move quite a bit that day. If I remember correctly, the stock was trading around 70 cents early in the day and then the big transaction took place at around 50 cents. Then, right before closing, a few more small transactions propped it back up around the open price.

So, yes, to move that many shares required a substantial discount.

MrEureka · March 10, 2003 12:13PM

If I remember correctly, the stock was trading around 70 cents early in the day and then the big transaction took place at around 50 cents.

I double checked and you're right, but still you have to believe that the deal was prearranged, albeit at a steep discount.

SarasotaFrank · March 10, 2003 12:14PM

Having a little experience in this field, I would say this latest news regarding the ability to incur debt has not been well received.

Irish Mike knows better than I on this part, but I believe (from limited experience) banks are developing a real distaste for companies associated with what are generally perceived as "collectibles".

"I am XYZ company, I am going to pile on some additional debt, I deal in collectibles the cost of which are tied to someone's impression of its worth"

I am running.

The reverse split, wide spreads, discounted placements, lack of a market, perception of a market subject to swings all add up to train wreck.

MrEureka · March 10, 2003 12:16PM

The volume was, after all, about twice the amount DH registered to sell. Since the volume is double counted - once for the purchase and once for the sale - the number of shares traded is only half the reported volume.

DCAMFranklin · March 10, 2003 1:03PM

ttt

Coinosaurus · March 10, 2003 1:34PM

Well, regardless of what the market thinks, would YOU personally loan money to CU? And if so, on what terms?

tradedollarnut · March 10, 2003 1:37PM

Yes, without a doubt - with the proper covenants. Despite the recent losses, the company's financials are rock solid. $18M tangible equity, no debt. The only concern would be if the coin market totally crashed.

IrishMike · March 10, 2003 10:19PM

There aren't really any comparisons out there in the market to CLCT. If you examine the companies that are compared with CLCT in doing analysis you will find that none of them remotely resemble them. Banks don't necessarily run from a certain segment, what concerns them is the earning streams of a company,its tangible net worth and the ability to pay back debt. TDN is correct, the company is very liquid and can pay back debt easily assuming the money does what it is supposed to do. If you have sharp coin guys buying the right coins, guessing the market correctly and advancing funds to the right consigners then this plan should add to the bottom line.

It will all boil down to the capability of management. In the short run companies can sometimes survive less than stellar management, but in the long run they all go under. The founders of CLCT made a bold move in going public. The jury is still out on whether it was a smart move or whether this kind of business will support a public market. To quote Dr. Phil, " how has this been working?" They have recognized the need for changes, made them and let's all hope they do well.

Check out this thread about CU

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