New Credit Agreement
Requirements Makes Titan Highly Speculative
Investors with high risk tolerance looking to make multiples
on their investment seek out highly speculative stocks. There are thousands of
these stocks available on the over the counter bulletin board and pink sheet
market, trading at pennies per share.
Investors are looking at these micro cap stocks that mostly trade below
a $10 million market capitalizations and hope the underlying businesses can
grow to $100 million valuation one day over the long term. The common denominator among these stocks is
the inability for these businesses to generate enough internal operational cash
flow to grow. These companies are all
out seeking financing from Wall Street firms, on both the debt and equity
side. Will Titan do another Underwriting soon?
Titan Machinery was a little private reseller of agriculture
and construction equipment located in the mid west prior to it successfully going
public in December 2007.
By Titan being a publicly traded company it was able through
the years to raise equity and debt to compensate for their inability to
generate operational cash flow. Since
February 1,2009 Titan has generated over $517 million in Negative Operational
Cash flow.
- FY2010 Negative $47 million Operational Cash Flow
- FY2011 Negative $35 million Operational Cash Flow
- (FY2012 Q2) Equity Underwriting 4.2 million shares @ $28.75
- FY2012 Negative $182 million Operational Cash Flow
- (FY2013 Q2) Debt Underwriting $150 million Convertible Note
- FY2013 Negative $115 million Operational Cash Flow
- FY2014 Negative $82 million Operational Cash Flow
- FY2015 Q1 Negative $54 million Operational Cash Flow
Since Wells Fargo has recently made two amendments to the
$150 million Credit agreement, Titan’s risk of violating these new covenants
has increased substantially. Unlike most high risk micro cap securities that
have low market capitalization with high upsides, Titan Machinery trading near
$16 per share has an even higher risk
with an $330 million downside if it was to default on its note.
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