RE: [CANSLIM] VRNT and new offering


From: "Jerome Buckmelter" <jsjbuck@myexcel.com>
Subject: RE: [CANSLIM] VRNT and new offering
Date: Mon, 26 May 2003 21:24:13 -0700

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Katherine,
Wow!  What an education on outstanding shares and spin-offs.  I'm
awestruck!  Spencer makes a point that I never considered.  Has the
public offering been factored into the future estimates?  Should I do
that as Spencer suggests or do you think the analyst have already
factored the public offering into the estimates?  Thanks again for the
thorough response to my inquiry.  It is really appreciated.
Jerome
 
- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com] On Behalf Of Katherine Malm
Sent: Monday, May 26, 2003 7:11 PM
To: canslim@lists.xmission.com
Subject: RE: [CANSLIM] VRNT and new offering
 
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
<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&F
G=0&FC=000000&BK=FFFFFF&SC=ON&TC1=FFFFFF&TC2=FFFFFF&LK=0000FF&AL=FF0000&
VL=800080>
&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=FFF
FFF&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 class=3DSection1>

<p class=3DMsoNormal><font size=3D2 color=3Dnavy face=3DArial><span =
style=3D'font-size:
10.0pt;font-family:Arial;color:navy'>Katherine,<o:p></o:p></span></font><=
/p>

<p class=3DMsoNormal><font size=3D2 color=3Dnavy face=3DArial><span =
style=3D'font-size:
10.0pt;font-family:Arial;color:navy'>Wow! <span
style=3D'mso-spacerun:yes'>&nbsp;</span>What an education on outstanding =
shares
and spin-offs. <span style=3D'mso-spacerun:yes'>&nbsp;</span>I&#8217;m
awestruck!<span style=3D'mso-spacerun:yes'>&nbsp; </span>Spencer makes a =
point
that I never considered. <span =
style=3D'mso-spacerun:yes'>&nbsp;</span>Has the
public offering been factored into the future estimates? <span
style=3D'mso-spacerun:yes'>&nbsp;</span>Should I do that as Spencer =
suggests or
do you think the analyst have already factored the public offering into =
the
estimates? <span style=3D'mso-spacerun:yes'>&nbsp;</span>Thanks again =
for the
thorough response to my inquiry.<span style=3D'mso-spacerun:yes'>&nbsp; =
</span>It
is really appreciated.<o:p></o:p></span></font></p>

<p class=3DMsoNormal><font size=3D2 color=3Dnavy face=3DArial><span =
style=3D'font-size:
10.0pt;font-family:Arial;color:navy'>Jerome<o:p></o:p></span></font></p>

<p class=3DMsoNormal><font size=3D2 color=3Dnavy face=3DArial><span =
style=3D'font-size:
10.0pt;font-family:Arial;color:navy'><o:p>&nbsp;</o:p></span></font></p>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DTahoma><span
style=3D'font-size:10.0pt;font-family:Tahoma'>-----Original =
Message-----<br>
<b><span style=3D'font-weight:bold'>From:</span></b>
owner-canslim@lists.xmission.com =
[mailto:owner-canslim@lists.xmission.com] <b><span
style=3D'font-weight:bold'>On Behalf Of </span></b>Katherine Malm<br>
<b><span style=3D'font-weight:bold'>Sent:</span></b> =
</span></font><st1:date
Month=3D"5" Day=3D"26" Year=3D"2003"><font size=3D2 face=3DTahoma><span =
style=3D'font-size:
 10.0pt;font-family:Tahoma'>Monday, May 26, =
2003</span></font></st1:date><font
size=3D2 face=3DTahoma><span =
style=3D'font-size:10.0pt;font-family:Tahoma'> </span></font><st1:time
Hour=3D"19" Minute=3D"11"><font size=3D2 face=3DTahoma><span =
style=3D'font-size:10.0pt;
 font-family:Tahoma'>7:11 PM</span></font></st1:time><font size=3D2 =
face=3DTahoma><span
style=3D'font-size:10.0pt;font-family:Tahoma'><br>
<b><span style=3D'font-weight:bold'>To:</span></b> =
canslim@lists.xmission.com<br>
<b><span style=3D'font-weight:bold'>Subject:</span></b> RE: [CANSLIM] =
VRNT and
new offering</span></font></p>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'><o:p>&nbsp;</o:p></span></font></p>

<div>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>Hi Jerome,<o:p></o:p></span></font></p>

</div>

<div>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>&nbsp;<o:p></o:p></span></font></p>

</div>

<div>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>The parent, Comverse, owns 79% (about 18.5m
shares)&nbsp;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)&nbsp;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.<o:p></o:p></span></font></p>

</div>

<div>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>&nbsp;<o:p></o:p></span></font></p>

</div>

<div>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>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:<o:p></o:p></span></font></p>

</div>

<div>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>&nbsp;<o:p></o:p></span></font></p>

</div>

<div>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>&quot;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.&quot; =
Reference:
( <a
href=3D"http://ccbn.tenkwizard.com/filing.php?repo=3Dtenk&amp;ipage=3D216=
0683&amp;doc=3D1&amp;num=3D7&amp;total=3D106&amp;count=3D1&amp;pg=3Dzc7Jz=
8nHzNHOz8rMxs3Kzc/P&amp;TK=3DVRNT&amp;CK=3D0001166388&amp;FG=3D0&amp;FC=3D=
000000&amp;BK=3DFFFFFF&amp;SC=3DON&amp;TC1=3DFFFFFF&amp;TC2=3DFFFFFF&amp;=
LK=3D0000FF&amp;AL=3DFF0000&amp;VL=3D800080">http://ccbn.tenkwizard.com/f=
iling.php?repo=3Dtenk&amp;ipage=3D2160683&amp;doc=3D1&amp;num=3D7&amp;tot=
al=3D106&amp;count=3D1&amp;pg=3Dzc7Jz8nHzNHOz8rMxs3Kzc/P&amp;TK=3DVRNT&am=
p;CK=3D0001166388&amp;FG=3D0&amp;FC=3D000000&amp;BK=3DFFFFFF&amp;SC=3DON&=
amp;TC1=3DFFFFFF&amp;TC2=3DFFFFFF&amp;LK=3D0000FF&amp;AL=3DFF0000&amp;VL=3D=
800080</a>&nbsp;)<o:p></o:p></span></font></p>

</div>

<div>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>&nbsp;<o:p></o:p></span></font></p>

</div>

<div>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>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 &quot;doubling the float.&quot; 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
&quot;other people's money.&quot; 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.<o:p></o:p></span></font></p>

</div>

<div>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>&nbsp;<o:p></o:p></span></font></p>

</div>

<div>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>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 &gt;100% so that we could look at =
it.<o:p></o:p></span></font></p>

</div>

<div>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>&nbsp;<o:p></o:p></span></font></p>

</div>

<div>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>Katherine<o:p></o:p></span></font></p>

</div>

<div>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>&nbsp;<o:p></o:p></span></font></p>

</div>

<div>

<p class=3DMsoNormal =
style=3D'mso-margin-top-alt:0in;margin-right:0in;margin-bottom:
12.0pt;margin-left:.5in'><font size=3D3 face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>&nbsp;</span></font><font size=3D2 =
face=3DTahoma><span
style=3D'font-size:10.0pt;font-family:Tahoma'>-----Original =
Message-----<br>
<b><span style=3D'font-weight:bold'>From:</span></b> =
owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]<b><span =
style=3D'font-weight:bold'>On
Behalf Of </span></b>Jerome Buckmelter<br>
<b><span style=3D'font-weight:bold'>Sent:</span></b> =
</span></font><st1:date
Month=3D"5" Day=3D"26" Year=3D"2003"><font size=3D2 face=3DTahoma><span =
style=3D'font-size:
 10.0pt;font-family:Tahoma'>Monday, May 26, =
2003</span></font></st1:date><font
size=3D2 face=3DTahoma><span =
style=3D'font-size:10.0pt;font-family:Tahoma'> </span></font><st1:time
Hour=3D"12" Minute=3D"48"><font size=3D2 face=3DTahoma><span =
style=3D'font-size:10.0pt;
 font-family:Tahoma'>12:48 PM</span></font></st1:time><font size=3D2 =
face=3DTahoma><span
style=3D'font-size:10.0pt;font-family:Tahoma'><br>
<b><span style=3D'font-weight:bold'>To:</span></b> 'CANSLIM LIST'<br>
<b><span style=3D'font-weight:bold'>Subject:</span></b> [CANSLIM] VRNT =
and new
offering<o:p></o:p></span></font></p>

</div>

<blockquote =
style=3D'margin-top:5.0pt;margin-right:0in;margin-bottom:5.0pt'>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'>I&#8216;ve noticed that =
VRNT has
recently registered a public offering for 5,000,000 common shares.<span
style=3D'mso-spacerun:yes'>&nbsp; </span>They currently have 3.98 =
million shares
in the float and 23.4 shares outstanding.<span =
style=3D'mso-spacerun:yes'>&nbsp;
</span>Management owns only 3% (i.e., 700, 000 shares).<span
style=3D'mso-spacerun:yes'>&nbsp; </span>What would be the status of the
remaining shares?<span style=3D'mso-spacerun:yes'>&nbsp; </span>Could =
they all be
registered as stock options?<span style=3D'mso-spacerun:yes'>&nbsp; =
</span>Why would
the company want to double the float?<span =
style=3D'mso-spacerun:yes'>&nbsp;
</span>Wouldn&#8217;t doubling the float significantly diminish the =
price per
share?<span style=3D'mso-spacerun:yes'>&nbsp; </span>Should this action =
be
considered negative for the stock? <o:p></o:p></span></font></p>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'><o:p>&nbsp;</o:p></span></fo=
nt></p>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'>Also, Verint is owned as a
subsidiary of Comverse Technologies which isn&#8217;t doing well in =
terms of
CANSLIM criteria.<span style=3D'mso-spacerun:yes'>&nbsp;&nbsp; =
</span>What
possible impact could this have on the =
stock?<o:p></o:p></span></font></p>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'><o:p>&nbsp;</o:p></span></fo=
nt></p>

<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DArial><span
style=3D'font-size:10.0pt;font-family:Arial'>Lastly, a general =
question:<span
style=3D'mso-spacerun:yes'>&nbsp; </span>once in a while I notice that =
IBD
indicates that fund ownership may exceed 100% for a given stock.<span
style=3D'mso-spacerun:yes'>&nbsp; </span>How is that possible?<span
style=3D'mso-spacerun:yes'>&nbsp; </span><o:p></o:p></span></font></p>

</blockquote>

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