05-08-02
RTO Online
Rent Way stock (RWY)
exploded today on the heaviest trading seen since July of 2001. 600,000
shares traded hands as Rent Way rocketed past it's 52 week high to close at
$11.25 per share, up over 15% for the day.
This move was in advance of tomorrows earnings release and may signal the
streets anticipation of better than expected results.
Listen to the
conference call online HERE
RWY stock has nearly doubled in price in the last 60 days. This is unusual
considering the relative absence of press releases concerning the upcoming
earnings release and conference call. It may also be investors following the
lead of Calm Waters Partnership.
Rent Way announced a Private Investment Public Entity or 'PIPE'.
This is when a
private investor or mutual fund buys common stock of a company at a discount to
the current market value per share. (See
details of the deal HERE) A PIPE is sometimes frowned upon by other
investors because the Private Investor can sell shares quickly at a huge profit.
Rent Way's deal with Calm Waters may be more restrictive. Calm Waters cannot
sell their shares until Rent Way registers the stocks.
While Rent Way may have
incentives to do so, they are in no hurry. According to sources. Rent Way has
one objective...Lower the cost of financing. They intend to accomplish this by
reducing debt. By reducing debt, they will be able to negotiate a better
interest rate with banks. The company's current debt of $300mm has interest
rates as high as 15%. These high rates are a function of Rent Ways high risk
factors brought on by 'accounting irregularities'.
By raising private capital,
Rent Way hopes to be in a better bargaining position with banks when refinancing
discussions resume. The question remains...how many private investment deals of
this magnitude can be made? This single transaction equals nearly 15% of the
company's stock?
Despite Rent Way's recent performance, the company's stock still remains far
from its high of $32 in July of 2000.
The good news...it's on the move. Rent Way's performance has improved and
expenses are at historically low levels. Increased emphasis and laser like focus
on the fundamentals of "Rent and Collect" will serve them well over the next
year. end
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