By David Polonitza
Yesterday I sent a letter to Itex‘s management regarding a possible share buyback. Due to the fact that I do not own greater that 5% of the outstanding shares in the company, I did not file it with the SEC, but I feel that it still should be made public. Itex is a very well run company that specializes in barter transactions. I have yet to hear back from management, but I hope that they take my suggestions into consideration.
February 7, 2007
Attn:Steven White
Eric Best
John A. Wade
Alan Zimmelman
ITEX Corporation
3326 160th Ave SE Suite 100
Bellevue, WA 98008
Dear Sirs: My name is David Polonitza. I am a private investor that currently holds 300,000 shares directly, and another 142,600 shares by friends and family, representing 2.4% of current shares outstanding.
This letter is consistent with my investment process of, when appropriate, having discussions with the companies in which I make investments.
I have owned stock in ITEX since July 2004, and have been quite pleased with management’s ability to stabilize the company and create shareholder value. The divestiture of company owned offices combined with the BXI merger and resources spent on strengthening the ITEX marketplace have increased the intrinsic value of the company greatly.
In my opinion, now is the time for the company to conduct a major share repurchase either in the open market or through a tender offer. With few capital requirements and a lack of sizable acquisition candidates still remaining due to the acquisitive nature of competitors (namely International Monetary Systems), I feel that a return of capital to shareholders through share repurchases would be the best use of the company’s capital.
The company’s shares are currently trading at 7 times their enterprise value, which I feel undervalues the company significantly. In an aggressive share repurchase program, 20-40% of the company’s shares could be retired, significantly increasing the value of the remaining shares as the company continues to execute and grow. The stability of the company’s cash flow leads me to believe that the company’s balance sheet could endure an increase in debt of $5 million dollars without any significant impact to the company’s operations and could be paid back over a 5-year time period.
I would be very interested on your thoughts as to a large share repurchase program.
Sincerely,
David Polonitza
http://polonitza.blogspot.com/
The Easy Way To Retire Early
You can retire early from the lottery, luck, or loving family member who leaves you a fortune.
But for the rest of us, there are dividends. While everyone chases big name dividend kings, they’re missing the real royalty: dividend legends.
It’s a rare class of overlooked income machines that you could buy and hold – forever.
Click here now to see two that could help you retire early, without any luck required.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
