Aug 27, 2010 10:04 AM PDT
Even though the home price slide accelerated during the first three months of 2009, plunging a record 19.1% during the quarter compared to Q1 2008 (according to a report issued today by the S&P through its Case-Shiller National Home Price index) the Conference Board said today its Consumer Confidence Index, which had dramatically increased in April, zoomed past economists' expectations to 54.9 from a revised 40.8 in April. The reading marks the highest reading since last September, three months before the official start of the recession, when the level was 61.4. That followed an 18.2% drop last quarter
Still, with such good news overtaking the bad and the markets headed higher, many companies are trying to stay afloat until that confidence turns into jobs and spending and a renewal of orders and an increase in demand for services.
That has led a lot of Small Caps into some very fundamental, even traditional ways of raising capital. Several private, Small Cap companies have issued corporate bonds like El Pollo Loco, a 400-plus California fast-food chain. It recently closed an offering of $132.5 million aggregate principal amount of 11 3/4% senior secured notes due 2012. The Notes were issued at a price equal to 98% of their face value. Creative; yes. William Lyon Homes recently extended an offer for its cash tender offer to purchase its outstanding 7 5/8% Senior Notes due 2012, its 10 3/4% Senior Notes due 2013 and its 7 1/2% Senior Notes due 2014. Interest payments can swallow up revenues.
Publicly traded companies, including most financial and brokerage institutions are redeeming and repurchasing agreements at a precedent.
The following three Small Cap Stocks have taken different avenues to keep money coming in through the door and I like their sense of taking positive steps until demand rebounds.
First there is Pure Bioscience (PURE) http://www.purebio.com/ trading on the Nasdaq in the $2 range.
PURE has announced that it has entered into definitive documents contemplating the sale of up to a total of $3 million of its common stock and warrants to institutional investors in a registered direct offering. Under the terms of purchase agreements, PURE will sell up to 1,418,440 newly issued shares of its common stock and warrants to purchase up to 496,454 shares of its common stock. The shares of common stock will be sold at a per share price of $2.115 per share and investors will receive warrants to purchase 0.35 shares of common stock at an exercise price of $2.37 per share for each share of common stock they purchase in the offering. The purchase price per share represented an approximate 11% discount to PURE's average closing bid price of the trailing five days ending May 21, 2009. The warrants are immediately exercisable and will expire five years from the date of issuance. After fees and expenses, the net proceeds to PURE are expected to be approximately $2.79 million. The net proceeds from the offering will be used for working capital.
PURE Axen and Axen30 hard surface disinfectant products are sold for commercial, industrial, and consumer applications, including; restaurants, homes, and medical facilities. PURE has a market cap of $$65M and is close to its 52-week low of $1.64 of 04-15-09. It is right at its 50-day and 200-day moving average and has trailing twelve month revenues of $1.64M. Its shares out and float are near-parity.
Also creating dollars, by issuing rights, is USA Technologies (USAT) http://www.usatech.com/ trading on the Nasdaq in the $2 range.
USAT is a true leader in the networking of wireless non-cash transactions. USA Technologies has strategic partnerships with Mastercard International, AT&T Mobility, and Coca-Cola Enterprises, Inc. USAT supplies cashless, remote management, reporting, and energy management solutions to the unattended point of sale market like: vending machines, kiosks, personal computers, photocopiers, and laundry equipment.
USAT recently announced that it has filed a registration statement with the Securities and Exchange Commission for a proposed rights offering relating to transferable subscription rights to purchase up to $15 million of USAT common stock and warrants. Holders of USAT's Common Stock on the record date for the rights offering would be eligible to participate. USAT plans to use the proceeds from the rights offering for general corporate purposes, including working capital and its Quick Start Program for customers.
USAT has a market cap of $32M and is well below its 52-week high of $6.46 0n 06-05-08. In the $2 trading range, USAT is near its 50-day and 200-day moving average and has trailing twelve month revenues of $13.4M. Its shares out versus float ratio is near-parity.
Finally, there's a regional restaurant group called J. Alexander's (JAX) http://www.jalexanders.com/ trading on the Nasdaq in the $5 range.
JAX has casual dining restaurants in Alabama, Arizona, Colorado, Florida, Georgia, Illinois, Kansas, Kentucky, Louisiana, Michigan, Ohio, Tennessee, and Texas. As of December 28, 2008, it operated 33 J. Alexander's full-service restaurants.
JAX recently announced that it had successfully closed new senior secured credit facilities with Pinnacle National Bank and repurchased 808,000 shares of its common stock from Solidus Company, L.P. and an affiliate at a price of $3.60 per share, using proceeds of a term loan under the credit facilities.
The new credit facilities consist of a three-year $5,000,000 revolving line of credit, which may be used for general corporate purposes, and a $3,000,000 term loan, which funded the stock repurchase. The revolving line of credit replaces the Company's previous line of credit. The credit facilities will be secured by liens on certain personal property of the Company and its subsidiaries, subsidiary guaranties and a negative pledge on certain real property.
Amounts borrowed will bear interest at an annual rate of 30-day LIBOR plus an initial margin of 450 basis points, with a minimum interest rate of 4.6%. Interest percentage is key to the restructuring of all corporate debt.
JAX has a market cap of $33M and at $5 is on the high side of its 52-week trading price markers. It is above its 50-day and 200-day moving averages and its trailing twelve month revenues are $140M. Its shares out versus float ratio is near-parity.
