EGMI Update: The Sun will Come Up Tomorrow

Today was a complete flushing of the stock on all time record volume.  Administrative blunders over the last 45 days starting with the Chairman Lord Steinberg’s passing, CFO resigning, and proxy vote pushback has taken the stock down 45% from its peak on October 16^th.  It has been a feeding frenzy for bashers and shorts as they have had plenty of ammo to drive down the stock to ridiculous levels with little to no rebuttal from EGMI.  Shorts are a lot like cockroaches, when you see one there are fifty others under the rug and the thing you have to do is just put on the shit kickers and step on them.  I prefer a hopping motion lifting both feet off the ground so you can kill more all at once.  The stock is back to trading at 10x the current after tax EPS run rate, with $13m in cash, no debt, and on the verge of a record Q4 2009 which will likely show 40%+ sequential improvement from Q3 2009.  A normal stock would trade at a 20-30 PE with this type of revenue and EPS growth combined with a Fort Knox balance sheet.   But all the administrative blunders have drawn scrutiny to the numbers themselves and I would like to nip that in the butt.  First off Lord Steinberg, a well known hundred millionaire, who is known for making his investors in Stanley Leisure Ltd something like 24% ROI per year over 10-12 years invested heavily in EGMI.  This guy is known for his meticulous nature and only investing his pennies where he saw dollars in the future.  He made his last open market purchase only a few months ago around the current stock price $1.25, and this was before China LotSynergy definitive agreement and POKEN distribution deal.  This guy was a smart cookie, a sorely missed smart cookie.  I bring this up because he looked through this company with a fine toothed comb from top to bottom.  If there was any inkling of corporate malfeasance this guy would have not invested a nickel let alone buy 4 million shares in the open market since March 2009.   I believe the company has really fallen prey to a series of bad circumstances that would have been squashed by now under normal circumstances.  My male intuition tells me (male intuition= 50/50) the company is working on something else which is the real reason for the proxy delay (ie they need to include it in the proxy).  I believe his because I’ve met Lee Cole before, and he is not one to sit by and let administrative blunders take down the company he created.  If it were just administrative BS, I think we would have had a new CFO/new directors weeks ago.   No I think something else caused the last delay in the proxy.  Something positive is brewing.  I have no idea what it is or could be, but I met a lot of the old regime that turned this company around back in 2007.  They are cut throat capitalists that get things done, which is what attracted Lord Steinberg in the first place.  I’m as annoyed and angry by the fall in the stock as anyone, but the current price is without merit.  I don’t know what the stock will do tomorrow or the next day.  I added more stock at $1.10/1.11 today and will do the same tomorrow.  The baby has been thrown out with the bath water, and I believe we will be rewarded in the next few weeks.

Disclosure:  LONG EGMI