Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: RE: [CANSLIM] VRNT and new offering
Date: Mon, 26 May 2003 21:11:15 -0500
Previous Article (by Subject): [CANSLIM] VRNT and new offering "Jerome Buckmelter"
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Hi Jerome,
The parent, Comverse, owns 79% (about 18.5m shares) of the common. That is, VRNT
is a spinoff, though the parent retains controlling interest. This is the same
kind of situation you see when looking at APOL and their spinoff, UOPX, for
example. When you view managment ownership in this case, you have to know that
they own 700K shares of a very small pool available, as only 21% of the common
(about 4.9m shares) is actually available for general ownership. As a business
strategy, the reason a company is spun off in the first place is to allow it to
function as a stand alone business, separate from the less focused businesses in
which the parent is involved. That focus allows a the spinoff to concentrate on
their core competencies and develop their competitve advantage to the fullest so
as to compete more effectively. In other words, it wouldn't make sense to judge
VRNT's business based on whether or not the parent itself (CMVT), which is far
less focused and in other businesses all together, is itself a CANSLIM quality
business. That's essentially judging a business based on the quality of its
shareholders rather than on the merits of the business itself.
In a primary offering all the proceeds go to the company. Why would they sell
more shares? To raise capital for various business needs. (They could have also
issued debt to do the same thing but then they have the additional cash flow
requirements to service the debt.) As to the offering, the best way to figure
out why they're floating a primary is to read the S-3 statement itself. In this
case, they state the proceeds will be used as follows:
"We intend to use the net proceeds to finance the growth of our business and for
general corporate purposes. We may also use a portion of the proceeds for
acquisitions or other investments." Reference: (
http://ccbn.tenkwizard.com/filing.php?repo=tenk&ipage=2160683&doc=1&num=7&total=
106&count=1&pg=zc7Jz8nHzNHOz8rMxs3Kzc/P&TK=VRNT&CK=0001166388&FG=0&FC=000000&BK=
FFFFFF&SC=ON&TC1=FFFFFF&TC2=FFFFFF&LK=0000FF&AL=FF0000&VL=800080 )
The additional 5m shares will raise the total outstanding shares from 23.4 to
28.4m shares, so it's not quite as dramatic as it seems when you say they're
"doubling the float." While increasing the number of outstanding shares by 5m
will dilute the earnings, it is diluted across the total *outstanding* shares,
not just the float. In practicality, they must then invest the dollars raised
wisely to grow the business. If they do that, then they have *leveraged* the
additional capital to the betterment of the business, and that will translate
into accelerated growth, which is exactly what you want to see in a CANSLIM
quality stock. Given that common stock represents residual interest in the
business, this is the quintessential us of "other people's money." In the short
run, the additional shares in float can take a bit of time to absorb into the
market place, and you may see price fall back a bit. In the long run, however,
if the proceeds are used appropriately and investors see promise in the business
as a result, they will bid up the price of the shares, which is again exactly
what you would want to see in a CANSLIM quality stock.
In the DGO/IBD figures, they state the management ownership as a % of
*outstanding* shares, and both bank and mutual fund ownership as a % of the
*float.* You'd have to show a specific example where fund ownership was >100% so
that we could look at it.
Katherine
-----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Jerome Buckmelter
Sent: Monday, May 26, 2003 12:48 PM
To: 'CANSLIM LIST'
Subject: [CANSLIM] VRNT and new offering
I've noticed that VRNT has recently registered a public offering for 5,000,000
common shares. They currently have 3.98 million shares in the float and 23.4
shares outstanding. Management owns only 3% (i.e., 700, 000 shares). What
would be the status of the remaining shares? Could they all be registered as
stock options? Why would the company want to double the float? Wouldn't
doubling the float significantly diminish the price per share? Should this
action be considered negative for the stock?
Also, Verint is owned as a subsidiary of Comverse Technologies which isn't
doing well in terms of CANSLIM criteria. What possible impact could this have
on the stock?
Lastly, a general question: once in a while I notice that IBD indicates that
fund ownership may exceed 100% for a given stock. How is that possible?
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<DIV><SPAN class=3D524404001-27052003>Hi Jerome,</SPAN></DIV>
<DIV><SPAN class=3D524404001-27052003></SPAN> </DIV>
<DIV><SPAN class=3D524404001-27052003>The parent, Comverse, owns 79% =
(about 18.5m=20
shares) of the common. That is, VRNT is a spinoff, though the =
parent=20
retains controlling interest. This is the same kind of situation you see =
when=20
looking at APOL and their spinoff, UOPX, for example. When you view =
managment=20
ownership in this case, you have to know that they own 700K shares of a =
very=20
small pool available, as only 21% of the common (about 4.9m =
shares) is=20
actually available for general ownership. As a business strategy, the =
reason a=20
company is spun off in the first place is to allow it to function as a =
stand=20
alone business, separate from the less focused businesses in which the =
parent is=20
involved. </SPAN>T<SPAN class=3D524404001-27052003>hat focus allows a =
the spinoff=20
to concentrate on their core competencies and develop their competitve =
advantage=20
to the fullest so as to compete more effectively. In other words, it =
wouldn't=20
make sense to judge VRNT's business based on whether or not the parent =
itself=20
(CMVT), which is far less focused and in other businesses all together, =
is=20
itself a CANSLIM quality business. That's essentially judging a business =
based=20
on the quality of its shareholders rather than on the merits of the =
business=20
itself.</SPAN></DIV>
<DIV><SPAN class=3D524404001-27052003></SPAN> </DIV>
<DIV><SPAN class=3D524404001-27052003><SPAN =
class=3D524404001-27052003>In a primary=20
offering all the proceeds go to the company. Why would they sell more =
shares? To=20
raise capital for various business needs. (They could have also issued =
debt to=20
do the same thing but then they have the additional cash flow =
requirements to=20
service the debt.) </SPAN>As to the offering, the best way to figure out =
why=20
they're floating a primary is to read the S-3 statement itself. In this =
case,=20
they state the proceeds will be used as follows:</SPAN></DIV>
<DIV><SPAN class=3D524404001-27052003></SPAN> </DIV>
<DIV><SPAN class=3D524404001-27052003>"We intend to use the net proceeds =
to=20
finance the growth of our business and for general corporate purposes. =
We may=20
also use a portion of the proceeds for acquisitions or other =
investments."=20
Reference: ( </SPAN><SPAN class=3D524404001-27052003><A=20
href=3D"http://ccbn.tenkwizard.com/filing.php?repo=3Dtenk&ipage=3D216=
0683&doc=3D1&num=3D7&total=3D106&count=3D1&pg=3Dzc7Jz=
8nHzNHOz8rMxs3Kzc/P&TK=3DVRNT&CK=3D0001166388&FG=3D0&FC=3D=
000000&BK=3DFFFFFF&SC=3DON&TC1=3DFFFFFF&TC2=3DFFFFFF&=
LK=3D0000FF&AL=3DFF0000&VL=3D800080">http://ccbn.tenkwizard.com/f=
iling.php?repo=3Dtenk&ipage=3D2160683&doc=3D1&num=3D7&tot=
al=3D106&count=3D1&pg=3Dzc7Jz8nHzNHOz8rMxs3Kzc/P&TK=3DVRNT&am=
p;CK=3D0001166388&FG=3D0&FC=3D000000&BK=3DFFFFFF&SC=3DON&=
amp;TC1=3DFFFFFF&TC2=3DFFFFFF&LK=3D0000FF&AL=3DFF0000&VL=3D=
800080</A> )</SPAN></DIV>
<DIV><SPAN class=3D524404001-27052003></SPAN> </DIV>
<DIV><SPAN class=3D524404001-27052003>The additional 5m shares will =
raise the=20
total outstanding shares from 23.4 to 28.4m shares, so it's not quite as =
dramatic as it seems when you say they're "doubling the float." While =
increasing=20
the number of outstanding shares by 5m will dilute the earnings, it is =
diluted=20
across the total *outstanding* shares, not just the float. In =
practicality, they=20
must then invest the dollars raised wisely to grow the business. If they =
do=20
that, then they have *leveraged* the additional capital to the =
betterment of the=20
business, and that will translate into accelerated growth, which is =
exactly what=20
you want to see in a CANSLIM quality stock. Given that common stock =
represents=20
residual interest in the business, this is the quintessential us of =
"other=20
people's money." In the short run, the additional shares in float can =
take a bit=20
of time to absorb into the market place, and you may see price fall back =
a bit.=20
In the long run, however, if the proceeds are used appropriately and =
investors=20
see promise in the business as a result, they will bid up the price of =
the=20
shares, which is again exactly what you would want to see in a CANSLIM =
quality=20
stock.</SPAN></DIV>
<DIV><SPAN class=3D524404001-27052003></SPAN> </DIV>
<DIV><SPAN class=3D524404001-27052003>In the DGO/IBD figures, they state =
the=20
management ownership as a % of *outstanding* shares, and both bank and =
mutual=20
fund ownership as a % of the *float.* You'd have to show a specific =
example=20
where fund ownership was >100% so that we could look at =
it.</SPAN></DIV>
<DIV><SPAN class=3D524404001-27052003></SPAN> </DIV>
<DIV><SPAN class=3D524404001-27052003>Katherine</SPAN></DIV>
<DIV> </DIV>
<DIV><SPAN class=3D524404001-27052003> </SPAN><FONT face=3DTahoma=20
size=3D2>-----Original Message-----<BR><B>From:</B>=20
owner-canslim@lists.xmission.com =
[mailto:owner-canslim@lists.xmission.com]<B>On=20
Behalf Of </B>Jerome Buckmelter<BR><B>Sent:</B> Monday, May 26, 2003 =
12:48=20
PM<BR><B>To:</B> 'CANSLIM LIST'<BR><B>Subject:</B> [CANSLIM] VRNT and =
new=20
offering<BR><BR></DIV></FONT>
<BLOCKQUOTE dir=3Dltr style=3D"MARGIN-RIGHT: 0px">
<DIV class=3DSection1>
<P class=3DMsoNormal><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; FONT-FAMILY: Arial">I‘ve noticed that =
VRNT has=20
recently registered a public offering for 5,000,000 common =
shares.<SPAN=20
style=3D"mso-spacerun: yes"> </SPAN>They currently have 3.98 =
million=20
shares in the float and 23.4 shares outstanding. <SPAN=20
style=3D"mso-spacerun: yes"> </SPAN>Management owns only 3% =
(i.e., 700, 000=20
shares).<SPAN style=3D"mso-spacerun: yes"> </SPAN>What would be =
the status=20
of the remaining shares?<SPAN style=3D"mso-spacerun: yes"> =
</SPAN>Could=20
they all be registered as stock options?<SPAN style=3D"mso-spacerun: =
yes"> =20
</SPAN>Why would the company want to double the float?<SPAN=20
style=3D"mso-spacerun: yes"> </SPAN>Wouldn’t doubling the =
float=20
significantly diminish the price per share?<SPAN=20
style=3D"mso-spacerun: yes"> </SPAN>Should this action be =
considered=20
negative for the stock? <o:p></o:p></SPAN></FONT></P>
<P class=3DMsoNormal><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; FONT-FAMILY: =
Arial"><o:p> </o:p></SPAN></FONT></P>
<P class=3DMsoNormal><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; FONT-FAMILY: Arial">Also, <SPAN=20
class=3DSpellE>Verint</SPAN> is owned as a subsidiary of <SPAN=20
class=3DSpellE>Comverse</SPAN> Technologies which isn’t doing =
well in terms of=20
CANSLIM criteria.<SPAN style=3D"mso-spacerun: yes"> </SPAN><SPAN =
style=3D"mso-spacerun: yes"> </SPAN>What possible impact could =
this have on=20
the stock?<o:p></o:p></SPAN></FONT></P>
<P class=3DMsoNormal><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; FONT-FAMILY: =
Arial"><o:p> </o:p></SPAN></FONT></P>
<P class=3DMsoNormal><FONT face=3DArial size=3D2><SPAN=20
style=3D"FONT-SIZE: 10pt; FONT-FAMILY: Arial">Lastly, a general =
question:<SPAN=20
style=3D"mso-spacerun: yes"> </SPAN>once in a while I notice =
that IBD=20
indicates that fund ownership may exceed 100% for a given stock.<SPAN=20
style=3D"mso-spacerun: yes"> </SPAN>How is that possible?<SPAN=20
style=3D"mso-spacerun: yes"> =20
</SPAN><o:p></o:p></SPAN></FONT></P></DIV></BLOCKQUOTE></BODY></HTML>
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