Shares of PriceSmart
Given the same-store sales results it's reported recently, that's perhaps surprising -- last night it said January "comps" rose more than 11%, bringing its 17-week total gain to upwards of 8% -- but a closer look sheds light on the story.
Late last month the company said it sold more than 6.8 million shares of its stock in a rights offering, in which shareholders were given the right to increase their ownership. The first stage of the two-step deal, which ended Jan. 24, raised nearly $50 million in cash for the company, which had only about $20 million in cash, equivalents, and restricted cash on the books as of Nov. 30 and has a recent history of substantial outflows.
But the shares were trading above $7 when the deal was announced; investors pulled them past $9 apiece through early November before the company announced full fiscal year (ended Aug. 31) losses. Operating performance appears to have improved in Q1, and December sales, while not as good as January's, were strong nevertheless. This company has some promise -- strong demand for its shares, if at bargain prices, is encouraging -- but management acknowledges challenges in some of its overseas markets.
Perhaps most encouraging, at least from management's perspective, is that it stands to bring even more cash in down the road: The rights offering grants investors the opportunity to pick up further stock at $8 per stub through the rest of 2005. Not surprisingly, that's right about where PriceSmart shares have sat for almost two months now.
Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.