I wanted to get a quick article out on ALPP, so don’t worry this won’t be a super dense one 😊.
But I finally had a chance to read through the proxy statement issued by ALPP on January 18th. I did see some chatter at the time this was issued, but I was under the throngs of COVID at the time and haven’t had a chance to write it. But I’d be remiss if I didn’t still write a short article on it.
This proxy statement was an announcement of the upcoming shareholder meeting at the end of March, as well as a couple items for the shareholders to vote on. Items included voting for their auditor and executive compensation.
This thing was probably up there with reading the phone book in terms of boring. But it had one interesting tidbit for the shareholders to vote on. ALPP is voting to raise its authorized share count from 195m to 295m.
The idea is that if shareholders approve, ALPP will have another potential 100m shares to issue to raise capital for acquisitions and reinvest in the business.
Read Between the Lines
Now, the increase in authorized shares probably seems like a bummer for a lot of ALPP investors. And I flipped back through the Discord from when this was issued, and a lot of people were unhappy with it. Stocktwits of course had a field day with it.
Before we all get ahead of ourselves, let me quote the filing:
Having an increased number of authorized but unissued shares of our Class A Common Stock would allow us to take prompt action with respect to corporate opportunities that develop, without the delay and expense of convening a special meeting of stockholders for the purpose of approving an increase in our capitalization. The newly authorized Class A Common Stock would be available for issuance from time to time as determined by our board of directors for any proper corporate purpose. Such purposes might include, without limitation, issuance in public or private sales for cash as a means of obtaining additional capital for use in our business and operations, and issuance as part or all of the consideration required to be paid by us for acquisitions of other businesses or assets.
… We believe this will place us in a better position to react quickly in response to corporate opportunities that may develop. Notwithstanding the foregoing, as of the date of this Proxy Statement, we had no obligation to issue such additional shares, and there are no plans, proposals or arrangements currently contemplated by us that would involve the issuance of the additional shares to acquire another company or its assets, or for any other corporate purpose stated.
Bold sentences added by me.
What is ALPP telling us here? First, they’re saying that because they were starting to brush up on their authorized share count maximum, it could hinder a potential big acquisition that would require more shares than were authorized. It’s basically just a flexibility move for the company. That’s all.
Furthermore, they’re saying that right now there are no plans to issue more shares for an acquisition. In other words, there are no acquisitions near completion which will be completed using shares to raise capital.
Just to be clear then, they’re saying there are no current plans to issue another 100m in shares right now. But that day may come as the company executes on its strategy.
Implications and My Take
I feel like a broken record sometimes, but I still hear people saying it. So I’ll say it again: Not all dilution is bad.
If you haven’t read my articles on how ALPP has raised capital, I recommend you do that. I get into the details on dilution there.
But if I could sum it up, it’s this: If you trust management to properly reinvest, and any new shares are issued at or near market price, then the dilution is not bad. Period, end of story.
In this specific case, I actually like that they’re increasing the authorized share count. Why? Basically, for the same reasons they outlined in the filing. I don’t want the company scrambling to getting a shareholder vote on authorizing more shares if the deal of the century comes by.
This gives ALPP great flexibility to execute acquisitions without having to worry about something silly like the authorized share count. This company isn’t some scam that’s issuing shares to pay themselves and bleed their investors dry. They’re going to reinvest this money for accretive acquisitions and effective reinvestment in the business.
Either way, even if you’re still the biggest anti-dilution person out there, ALPP has already said that there aren’t any specific acquisitions in mind for issuing new shares. So it could be months, or maybe even years, before we crack the 200m issued shares mark and start getting into this new batch of 100m additional authorized shares.
So there you go, I’ve said my piece! I’m a little late to the party here, but I figured it needed to be said 😊. Thanks for reading!
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DISCLAIMER – AT THE TIME OF WRITING THIS ARTICLE I HAVE A LONG POSITION IN $ALPP. THIS ARTICLE IS NOT FINANCIAL ADVICE AND IS INTENDED ONLY FOR EDUCATIONAL PURPOSES. I AM NOT A FINANCIAL ADVISOR. AT THE TIME OF WRITING THIS ARTICLE, PERSONS AFFILIATED WITH THE COMPANY ANALYZED ABOVE MAY BE PROVIDING MONETARY COMPENSATION AS MONTHLY PATRONS THROUGH MY PATREON. THIS COMPENSATION IS NOT PROVIDED IN RETURN FOR ANY SERVICE, WRITING ABOUT A PARTICULAR TOPIC, AND/OR FAVORABLE OR UNFAVORABLE OPINIONS. MY PATREON SUPPORTERS HAVE NO INFLUENCE ON THE CONTENT OF MY ARTICLES.