Thursday, August 31, 2006

Threats to Advanced Nutraceuticals Delisting Attempt: Attack of the 499ers

Ticker: ANII
Price: $3.50
Mkt Cap: $16.7 million
Ent Val: $19.4 million
Ent Val/Ebitda: 4.8
P/E: 9.5

There's never a dull momemt in our bizarre little Cheap Stocks World. You may recall our recent research on ANII, their desire to get below 300 shareholders in order to delist, and the subsequent increase in the buyout price for post 1 for 500 split fractional shares.

The company announced today in an 8K filing that there's been a significant number of investors purchasing 499 share lots. Why you might ask? These investors want to exploit the buyout price for post split fractional shares ($4.00 per pre split share), recently (and quietly) raised from $3.25, while the current share price hovers around $3.50. May seem like a measly profit of $245 before commisions, but 200 bucks is still 200 bucks.

At Cheap Stocks, we took a different view of the delisting, and purchased in 500 share increments...we want to own this company after the reverse split. If there is a reverse split....

The problem is that ANII estimates that there were 170,000 shares recently bought in 499 share increments. That means the company will have to find another $680,000 in cash to buyout these shares. Unfortunately, the company's senior lender only approved $1,000,000 in funds to take out post-split fractional shares. That may leave the 499ers as well those as of us who intended to be owners of a free-from SarBox, free-from SEC filing, profitable company, out in the cold.

The company has not decided how to proceed, but has laid out a few options: 1)to delay or cancel the reverse split, and with that, the delisting is history, 2)seek approval from the senior lender to increase funds available to purchase fractional shares, or 3)change the reverse split ratio.

We are in favor of the third option, and suggest that ANII change the split to 1 for 499. Nothing against you 350 or so 499ers, you saw opportunity, and you pounced. That's what capitalism is all about.

*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.

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