Do you constantly watch the largest percentage gainers to see what is exciting Wall Street? If you do, tiny micro-cap (there are less than 1 million shares outstanding) mini-conglomerate Greenbriar
Prior to October, the sleepy little company comprised assisted living facilities, a factory outlet mall in Gainesville, Texas, and a bunch of low-output (stripper) oil and gas wells in Eastern Texas. It was hardly anything to get excited about, and a five-year chart confirms that. Ah, but look at the action over the last couple of days.
The big news is that Greenbriar, with 39 employees, is adding cable TV to its conglomeration. Gone are the days of comparing the company to get-up-and-go competitors such as Sunrise Assisted Living
On October 12, Greenbriar announced that via acquisition, it would indirectly own and control 74.8% of CableTEL (drum roll, please), the largest cable television provider in Bulgaria. The company breathlessly reports that CableTEL has launched Bulgaria's "first, fully connected fiber optic backbone ring, which, when completed, will cover the entire country with connections to its major cities." That sounds expensive and high-risk, doesn't it?
The indicated price is $31.5 million (for 31,500 shares of newly designated 2% Series J preferred stock with a liquidation value of $1,000 per share). If shareholders approve this deal next year, the company would redeem the preferred shares for 8.8 million common shares. That translates into the preferred shareholders owning 89% of the total issued shares!
Greenbriar shareholders need to do a lot of due diligence. What are the business and political prospects in Bulgaria? Does the company have the experience to build and operate a vertically integrated communications company? Who are the competitors and what is the prospect for leased fiber? Will fiber be overbuilt in Bulgaria?
For now, Wall Street seems to love the deal. But, unlike Motley Fool Hidden Gems prospects, which have well-established business plans and are free cash flow engines, Greenbriar is radically restructuring. Buyers should be careful -- unless they have a clear understanding of Bulgaria and its communications markets.
For related Fool analysis, see:
- Dueling Fools: Foreign Investing Bear's Den
- Foreign Threats to U.S. Profits
- Hunting for Hidden Giants
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Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.