Cash Systems Crashes & Global Cash Access Buys It for Pennies on the Dollar

Cash Systems had its challenges, but the floor really dropped in March 2008. On February 29, 2008 the stock was trading at $4.02 a share. By the end of March 2008, the stock had fallen to 52 cents a share. During the next couple of months the stock hit a new low of 32 cents when Global Cash Access offered 50 cents a share on June 13, 2008. The company was running at a loss; however, it was its financial structure that caused its failure. Cash Systems had a two year loan from Bank of America which it refinanced with private institutional investors with a due date of 2011. The new agreement had trigger points (financial covenants) tied to the stock price and profitability. Unfortunately, those trigger points sunk the company. One kicked in March 18, 2008. The market was anticipating the stock to drop. The stock started dropping after February 29th when it was at $4.02. By March 18, 2008 the stock had dropped to $1.24. On March 18, 2008 the company announced that it had amended the debt agreements and 1,140,000 shares traded (20 times normal) that day. The next day, March 19th 226,000 shares traded and stock dropped to 99 cents and on March 20th, 1,848,000 traded and the stock dropped to 59 cents. In three weeks the value of the company dropped 85%. On June 13, 2008 Las Vegas-based Global Cash Access announced that it was buying Cash Systems for $33 million, $21 million to pay off the notes and 50 cents a share to the stockholders, pennies on the dollar.

John Laub is the President of the CEO-CFO Group.

1. “Global Cash Access, Inc. to Acquire Cash Systems, Inc. Acquisition to Give GCA Greater Scale to Compete in Electronic Payments Market.” Global Cash Access Press Release. Business Wire. June 16, 2008.

2. Cash Systems Inc. 8-K. Filed on March 18, 2008.

3. Cash Systems Inc. 10-Q. Filed on November 9, 2007.

4. Cash Systems Inc. 10-Q. Filed on August 9, 2007.

5. Yahoo Finance. Cash Systems Inc. Stock Chart.