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Wilhelmina International, Inc. Message Board

  • lavender_ace12 lavender_ace12 Aug 7, 2012 1:03 AM Flag

    Repurchase & Financial Analysis, New Perspective

    Float before repurchase 29.66 million minus 8 million repurchase = 21.66 million shares current float (repo at $0.126).

    8 million shares 7/31/12: Company repurchase at $0.126 per share

    14.55 million shares 7/31/12: Newcastle Partners purchase at $0.13 per share (rounded from $0.126) the float (stock available for public trading) was decrease by about 27% with the repurchase. Then a large order constituting more than half of the remaining float is filled. Assuming the best case scenario on 7/31/12, this moved the stock a precious little 2 cents (day's low $0.105, day's high $0.125). This sounds like a disaster to me, with heavy selling reacting to the purchases.

    In comparison, Microsoft has 7.58 billion in float. If the company repurchased 2 billion shares and then somebody bought another 3.74 billion on the open market, the stock would probably increase ten-fold.

    Remember, for every buyer, there is a seller so 22.55 million shares also got dumped. The filing said that the repurchase was done through a market-maker, and since there were no institutional (market makers) listed as major holders, the market maker must have sold the stock short. Market makers aren't in the business of losing money so they must think they can re-buy the shares in the near future for less than $0.126--this means they expect the stock price to continue its yearly trend downwards, and The Street is rarely wrong.

    Something doesn't make sense about this company's financial statements:

    1. More than half of its assets are "Goodwill" or "Intangible Assets"

    2. While sales are growing net receivables are growing much faster

    3. Little cash on hand for such a cash intensive business

    4. Net receivables are always about 50% less than payables

    Everybody knows that a $100 model booking is invoiced to a client for $120 (20% commission). The model management company then collects this $20 plus another $20 from the model--this leaves the company with $40 and the model $80. Thus, when they report "gross billings" of $55.5 million (as done in 2011), it means that the company is left with $18.5 million for operating expenses. We recently learned via court papers that in addition, the president had a bonus scheme worked out as a percentage of gross billings over a certain hurdle. The top bookers also get a commission on their bookings along with other mother agencies/independent scouts. Oh yeah, then there's rents, scouting travel, other salaries, office expenses, Esch's escrow pmt... Oh, and top models don't pay 20%, more like 12%-15% and the big campaign clients don't pay 20% either. With everybody taking a piece of the action little is left to run the business and less (if anything) for investors.


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