Since September 2019, PBS Holding Inc. (PBHG) has surprised the market with impressive stock volume. More than 600 million shares are currently changing hands almost every day since some days. Stock demand appears to be back on this name, which is making the share price creep up to multi-year highs. Difficult to explain and impossible to categorize, PBS Holding has only released very recently the acquisition of a non-profit organization, Professionals For American Youth, Pfay.org., (www.prosforyouth.org). We wonder whether this announcement was enough to create such a tremendous market reaction.
WHAT’S PBH’S BUSINESS MODEL
PBS Holding Inc. aims to acquire and develop revenue producing projects. Inorganic growth appears to be what the market expects from PBS’s management. Strategic mergers and acquisitions can bring rapid growth to companies. With this in mind, we will study the future transactions executed by PBS Holding very carefully.
THE ACQUISITION OF PROFESSIONALS FOR AMERICAN YOUTH – PRICE ANALYSIS
On October 15, 2019, Professionals For American Youth was acquired. The non-profit organization was presented as a high-profile platform, which will enhance the sales of the company’s nutraceuticals, sports, and entertainment products. The acquisition was made with preferred stock. PBS Holding has not increased its share count or used debt. As a result, stock dilution may not pressurize the share price. Read the lines below for further details on the transaction:
“We had renegotiated and retired debt and notes in order to give the ‘Holding Company’ a greater chance and opportunity for success. By acquiring the companies with our preferred, and not doing ‘mergers’ per se, this will protect us and help to achieve our goals and company’s plans without the fear of ‘notes’ and reverse stock splits looming and/or being dictated by new management.” said Edward Vakser, Chairman /CEO, PBS Holding Inc.
As shown in the chart below, the market did appreciate the acquisition. On October 15, 2019, the stock volume increased to more than 0.3 million shares exchanged. If the company continues to deliver acquisitions of this type, we don’t see why stock volume and price would not creep up.
See below for more on the share price dynamics of PBS:
SOME IN THE MARKET RAISED CONCERNS ON THE TRANSACTION
In principle, a non-profit organization should not make any profit from its activity. Consequently, some IHUB members did not understand the acquisition. Will PBHG profit from the acquisition of an entity that cannot distribute dividends?
“How exactly does a “for profit” company acquire a “non-profit”??? And how exactly does that benefit shareholders? My guess what he “acquired” a client who’s willing to collaborate with on fudraisers. Could be he hopes this non-profit will buy some of his old inventory to use as fundraisers. Or could be he purports to create new stuff that their board members will sign/ endorse and sell for fundraisers.apparently by giving them a stake in PBHG as further incentive. Time will tell.” said Kool Aid Man From iHub
Let’s read the press release once again. PBS Holding did not say that it would profit from Professionals For American Youth. The company said that it acquired a platform. It seems that PBS Holding expects to use the non-profit organization to increase its visibility. At the same time, the company will be helping young students fight drugs and gang problems. Where is the problem?
“Pros For America’s Youth (PFAY) was founded by Mark Hannah in West Virginia in 1988. PFAY moved to Arizona where it enlisted the support of many former professional athletes to help in the anti-drug and gang problems that were facing our youth. After several years of going from high school to high school, introducing our program to the students that were “high risk,” we recognized that the problem started at a much younger age. We found that most drug problems are “gradual bad habits” that often start with smoking. We have made studies on tobacco use and found that this is a major health issue facing the youth of this country. Kids look up to athletes and will listen to a former or current professional athlete about almost any subject.” Source: prosforyouth.org
With a market capitalization of $1.8 million, the company does not report positive book value. After the new transaction, we would expect the company to report new financial statements soon. Yes, that should be the next step. Otherwise, it may be difficult for the market to justify the most recent share price spike.
Previous Financial Analysis:
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Disclosure: We hold no position in PBS Holding Inc. either long or short, and we have not been compensated for this article.