QUESTION
- With current rate of dilution will share price ever give people a profit?
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ANSWER
This is a very important question, and on many people’s minds. It requires a thorough answer.
The “current” rate of dilution is a temporary condition. The rate varies according to conditions. At the moment, the low share price causes the dilution to speed up, however a share price increase even to where it was this time last year, at over a cent, would cause dilution to slow down to only 20% of the “current” pace.
The current share price is very low because there is skepticism by the market about whether a substantially higher market cap is justified, perhaps even doubting whether the company can really make it to the next level of product acceptance in the USA, and not only survive, but thrive. The “market” is waiting for a national account.
This is important to the market because sales revenue that would come from deployment of the product in the thousands of U.S. paint departments that major home improvement banners represent (not to mention other types of banners) would provide Winning Brands’ working capital, rather than the capital markets providing that working capital. This massive deployment can be achieved with just one or two “majors”. Until we achieve shelf space with a USA major retailer there will be some skepticism about the company and its lead product, i.e. whether Winning Colours 1000+ Stain Remover will ever “make it really big”.
When we do achieve a national listing with a top rated retailer(s), then perceptions will improve dramatically for several good reasons. That will be the most natural basis for a significantly higher baseline for the share price and consequently lower dilution.
The most important reason for a higher share price at that time is the simple arithmetic. The “market” knows that gaining a 300% increase (or more) in sales over our current figure of $500K will be relatively easy with access to thousands of stores that are centrally managed in their purchasing and logistics procedures. The “market” knows that merely obtaining such an account(s) is a game changer. Then when you add the impact of access to 4,000 additional independent stores that will come with the Do-it-Best activation that’s being worked on now, we will be looking at the biggest positive impact on the company’s natural cash flow in Winning Brands’ history. The “market” knows that the best way to negotiate attractive share subscriptions is to stop needing them. The “market” is smart – it knows that the current share price will be far too low if those circumstances exist.
As a back-up plan, we are not making ourselves dependent upon securing those majors for our long term success. Our product is going to continue to gain traction regardless. It is no accident that Winning Brands has been so hard at work earning the interest, and listings, of independent stores. It’s a slower, less efficient process. It has taken us more than two years to secure 1,000 independents in the USA, whereas a single big box listing would have delivered twice that number, overnight. However – and this is important – the effort is worthwhile because this ensures that we will have solid ground under our feet regardless of what happens. Every additional independent store, or little local group of a few stores adds up and creates, ultimately, the same cash flow. The “market” is smart about that too. If we get that number up high enough to become self sufficient, then the same goals can be accomplished. We only need to reach 10% of America’s households to be a $100 Million brand.
The other aspect of your question, dealing with the amount by which the share price has to increase for current shareholders to do well is interesting too. First, a little “myth busting”. Most people do not have a high adjusted cost base. Since the company began trading as WNBD, the aggregate volume of all trades has exceeded the entire outstanding share count, many times over. Over 4 billion shares were traded in the last 2 years alone. There has been enormous churning of share ownership. By far the vast majority of shares have been purchased for far less than 2 cents – particularly for those who have averaged down so that they can benefit from a more rapid capital gain in due course. Accordingly, if/when our shares return to even the 2 cent figure, the vast majority of portfolios will be very green.
As to whether, with over 2B shares outstanding, the share price can increase to 2 cents again – simple arithmetic shows that this is feasible. The current market capitalization is approximately $2.7 Million. At earlier times, WNBD had a market cap as high as $100 Million. If as a result of securing major national accounts and being truly on our way with substantial sales increases, and profit, then this would seem more reasonable than in the past when we were just getting started. Even with today’s float, this would equate to a share price that is more than 30 times higher than the current level – considerably more than 2 cents.
It is a characteristic of the speculative markets, and in particular penny stocks, that such things are wildly unpredictable. No one, and I mean no one, should buy our shares against their better judgement. Winning Brands is only suitable for the toughest speculators who understand the risks, but like the odds, based on their own assessment of the situation. It has been said many times that this level of the capital markets is like the wild west of investments – and justifiably so. But then again, there are plenty of pioneers who did quite well by packing up and heading out to that wild west and staking their claim.
My job is to ensure that there is honest hard work going on, planning and building, for those who want to participate in our potential, whatever the risks. But I have always kept a great big sign at the edge of town that makes it plain that anyone who does not want to be here should not waste their time or ours.
For those who do want to be here, I intend to work as hard as necessary to accomplish our goals for the rest of us.
For anyone considering the purchase of Winning Brands shares, please do your due diligence, heed the explicit warnings that have always been on our Investor Page at www.WinningBrands.com cautioning in plain language that there are risks associated with a company at this stage of development that may make a junior public company unsuitable for most investors.
