Friday, June 10, 2016

Data Group Developments

There have been some interesting developments in the situation at Data Group (DGI) since I last wrote about them just 10 days ago!

First, most of the private placement is complete. The bad news is that management appears to have little respect for shareholders, by buying in at such an advantageous price, lower than anything they could have gotten in the market. The good news is that the company's CEO is now a significant shareholder using $1.5 million of his own money, and so is unlikely to wipe shareholders out (again).

Not all of the private placement is complete, however, and I view that as good news for shareholders. Because a significant shareholder (KST) also wants to participate, "disinterested" (that's the rest of us, even though we are very interested!) shareholders get to vote on whether this gets to happen. The vote is a clear no for me, as it looks to me like these guys are trying to benefit at the expense of other shareholders: the price of the private placement is 44% lower than the current stock price! What a rip-off!

And finally, a reverse-split is up for a vote. I usually don't believe these mean much, but this is a rather extreme case. If you follow the daily percentage price changes in the stock, you know why. This deserves a yes vote in my opinion, as it will remove the penny stock stench this name currently gives off.

Hopefully, the days of this stock trading at 1.5 cents (or $1.50 after the reverse split) are over!

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