Is SPF's management LYING to raise money?
SPF is trying to sell hundreds of millions of dollars of its stock to shareholders and an investment fund. It is trying to sell those shares at $3.05 while representing its bookvalue is around $10 per share.
Last night it notified some old convertible holders of the offer to provide notice if they want to convert around $8 per share. What a nice gesture...
Management represents its homebuilding inventory at around $2 Billion dollars. Most of those dollars is allocated to land. It also has around $2 Billion of debt and payables.
We know that land in some of SPF's markets has sold for around $0.20 on the dollar. Since December 31st, 2006, SPF has impaired about $1 and a half billion of assets. Since then it has reduced inventory by about 50%. Therefore, one can logically deduce that a relatively small percentage of the reported value of SPF's current assets have been impaired.
Further, SPF recently liquidated an entire community of upscale homes for over 40% off. The community was open for over a year and never sold a home. It had 5 models and 8 specs of million plus homes when all the homes were sold in one morning. By selling homes at such a discount, it probably had a devasting effect on value of the remaining dozens of lots yet to be built upon.
Based on the above, and other known information, it would be reasonable to discount SPF's assets a blended 50% and estimate that the fair value of SPF's current assets is really $1 Billion or less and not the $2 Billion management represents. If such is the case, SPF's book value would be NEGATIVE and not the $10 management represents on its books.
IS IT POSSIBLE, SPF IS TRYING TO RAISE HUNDREDS OF MILLIONS OF DOLLARS WHEN THE VALUE OF ITS ASSETS ARE OVER $1 BILLION DOLLARS LESS THAN MANAGEMENT IS REPRESENTING ON THE BOOKS???
SPF's board and management has engaged in this type of potentially outright deceptive behavior for well over a year. It was making incredible earnings projections when it NEW it was liquidating homes in auctions at below minimum bid pricing and NEVER disclosing this the shareholders as insiders sold shares and the price since dropped from $30 to $3.
Now SPF wants to raise hundreds of millions of dollars. Over the last few years, management and the board have extracted tens of millions of dollars for themselves in salaries, bonus, and severence packages.
Wouldn't you think if hundreds of millions of dollars were really going to be raised, an independent appraisal of assets would be obtained to make sure what people thought they were buying was really worth as represented?
It that too much to ask management to provide a fair value of its assets before asking its shareholders and a fund to pony up over half a billion dollars in cash????? REPEAT: OVER HALF A BILLION DOLLARS!!!!!!
Which is it SPF, is fair value really $10 per share or is it NEGATIVE???????
If in fact it is negative and these jokers are concealing this from investors, what should be the consequence to management and the board be?????
As CAPs players, we must expose this kind of behavior to help identify which companies to potentially green thumb or red thumb.