Micro-Cap CYGT In Bed with AOL
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INSIDERS' BLOG: We've come across and interesting micro-cap stock trading on the pinks, Cygnus eTransactions Group, Inc. (OTC: CYGT). Yesterday, after the bell the company announced an agreement with America Online, Inc. to provide theme park and attraction ticket sales throughout AOL CityGuide, a leading provider of local entertainment information online, available free on the Web at aolcityguide.com.
Our first response when we saw this news was, "Oh brother, another pinky trying to pump there junk." But a deeper look suggested that there may be legitimacy to the story.
Like any good reporter (not) we picked up the phone and put in a call with the company. My first question - "How many shares are outstanding?" - hoping I'd find out that there is 500 million shares outstanding and the market cap is $350M and be done with it. Nope, there are quite few shares out at 37 million, but that puts the market-cap at about $26 million, which while not dirt cheap, given the company has no history, may not be all that out of whack. Okay, so my next question, "Did your company just buy some ads on AOL and your now claiming to be in a marketing alliance with the online giant?� - I�ve seen this a million times - The company told me that this is not just an advertising or marketing agreement, but they are building a co-branded page that will allow AOL visitor to buy tickets to theme parks and other attractions. They said the feature will be available in May, but they did not give an exact date. What about competition? Are they just another late-comer to the party? The company said competition includes Ticketmaster, but said TM focuses more on concerts and sporting events instead of theme park and attraction ticket. They also said Tickemaster search results will launch a page that will give you results of all events in a local area, whereas their results are more targeted and user-friendly and will give results only on the events the customer wants. Some of the company�s clients already include Universal Studios and Cedar Point, so that lends a bit more credibility to the story.
What about the negatives? Well the most obvious is the financial health of the company, which we can�t get a good read on since it trades on the pink sheets and is not required to file with the SEC. The company did however tell us they are in the process of getting an audit from KPMG. The also recently disclosed in a press release that they achieved positive cash flows from operations for the first time in the first quarter, although no numbers were given. They also said Q1 revenues rose by more than 30% versus last year, but again no numbers were given. There is also a major problem because the stock is so thinly traded; there is little market maker representation and the spread is very wide. Another problem, as with many small companies, is possible dilution. The company said they have no current plans to offer stock, but may do so in the future as they look for acquisitions to grow.
All in all though, CYGT may be something risk adverse investors may want to add to their radar as it looks like a story that, if it gets out, can really drive the stock.
Our first response when we saw this news was, "Oh brother, another pinky trying to pump there junk." But a deeper look suggested that there may be legitimacy to the story.
Like any good reporter (not) we picked up the phone and put in a call with the company. My first question - "How many shares are outstanding?" - hoping I'd find out that there is 500 million shares outstanding and the market cap is $350M and be done with it. Nope, there are quite few shares out at 37 million, but that puts the market-cap at about $26 million, which while not dirt cheap, given the company has no history, may not be all that out of whack. Okay, so my next question, "Did your company just buy some ads on AOL and your now claiming to be in a marketing alliance with the online giant?� - I�ve seen this a million times - The company told me that this is not just an advertising or marketing agreement, but they are building a co-branded page that will allow AOL visitor to buy tickets to theme parks and other attractions. They said the feature will be available in May, but they did not give an exact date. What about competition? Are they just another late-comer to the party? The company said competition includes Ticketmaster, but said TM focuses more on concerts and sporting events instead of theme park and attraction ticket. They also said Tickemaster search results will launch a page that will give you results of all events in a local area, whereas their results are more targeted and user-friendly and will give results only on the events the customer wants. Some of the company�s clients already include Universal Studios and Cedar Point, so that lends a bit more credibility to the story.
What about the negatives? Well the most obvious is the financial health of the company, which we can�t get a good read on since it trades on the pink sheets and is not required to file with the SEC. The company did however tell us they are in the process of getting an audit from KPMG. The also recently disclosed in a press release that they achieved positive cash flows from operations for the first time in the first quarter, although no numbers were given. They also said Q1 revenues rose by more than 30% versus last year, but again no numbers were given. There is also a major problem because the stock is so thinly traded; there is little market maker representation and the spread is very wide. Another problem, as with many small companies, is possible dilution. The company said they have no current plans to offer stock, but may do so in the future as they look for acquisitions to grow.
All in all though, CYGT may be something risk adverse investors may want to add to their radar as it looks like a story that, if it gets out, can really drive the stock.
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