Todor Pichurov

GLOBAL DIGITAL SOLTN (OTCMKTS:GDSI) Clambers Up the Chart

by Todor Pichurov November 4, 2015

In yesterday's session Global Digital Solutions Inc (OTCMKTS:GDSI, GDSI message board) kept climbing the charts. The stock put on another 26% and stopped at $0.0063 by the closing bell. This is the second day in a row that GDSI rips up the chart in double digit percentages.

The company's stock has been on a devastating streak over the past few months. In late October, a news release reversed that and now GDSI is doing a bit of sideways drifting. The reason GDSI managed to push away from $0.001 per share in October was the announcement that the company signed an acquisition deal with a privately held Brazilian company called Grupo Rontan Electro Metalurgica, S.A.

Rontan is a company working in the special service vehicles field, including rescue, fire and military vehicles. According to GDSI's PR, the privately held company churned out an impressive $128 million in 2014 revenues.

What is more interesting about the acquisition deal is the confusing way it's structured. To acquire Rontan, GDSI will pay $26 million in cash over 48 monthly installments, as well as $26 million in stock to be issued at $1.00 per share – a ridiculous premium compared to GDSI's market price. The final component of the payment includes an earn-out payable within 10 days of GDSI receiving Rontan's audited annual financials for the years between 2017 and 2019.

The transaction is not quite finalized yet, as there is an extra closing condition, stipulating the closing date will come within 10 business date from the moment when GDSI receives an “unqualified opinion” of Rontan's financial statements for 2013 and 2014.

Traders are obviously excited about the deal, even though there's still no information what Rontan's bottom line is.

Those wondering why GDSI slipped down the charts the way it did between August and now, this may have something to do with the terrible dilution that has been going on. GDSI had 112 million OS at the end of June. An October 7 Schedule 13G showed that the outstanding share count had grown to over 280 million.

Comments 0

Type the characters that you see in the box (5 characters).