Everlast Raising Cash to Shore Up Balance Sheet

Everlast (EVST-NASDAQ), the boxing and fitness company (and cult stock), has filed to sell up to $33 million worth of stock for both the company and for holders via Piper Jaffray (before the overallotment).  It will pay back $21 million of its $25 million four-year senior term facility, repay $2.3 million on a mortgage for its Missouri manufacturing facility, repay $7 million under a factoring agreement, and use the rest for working capital.

Its current market cap is roughly $83 million, so this is dilutive if you just take it at face value.  If you delve farther into the company balance sheet you will see that this actually shores up the balance sheet and brings the debt down basically to normal current operating liabilities with what will be close to no long-term debt.  If it can manage to grow its cash a bit and add a little more onto its cash positions then this will be fairly hard not to look at as a win-win scenario.

Usually shares sell off whenever there is a large offering like this that hits the tape, but this may give newer investors that have been waiting for a reason to own it a chance to get in.  That won’t be any comfort if there is a big drop after the filing tonight, but this may end up getting some buzz back into the stock after it raised 2007 guidance last month. 

The company has had impressive growth from 2004 to 2006.  Its shares are up almost 100% from its 52-week lows and up more than 4-fold from its lows about 18 montsh ago.  It closed today up 1.9% at $20.37 and its 52-week range is $11.05 to $21.82.  As a reminder, microcaps often act much different compared to other stocks on secondary offerings and this has seen no real after-hours activity.  This only traded 15,795 shares today.

Jon C. Ogg
March 22, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.