On Nov. 7, Ammo, Inc., (POWW) based in Scottsdale, AZ, announced that it had reached a settlement with the Urvan Group, headed by Steve Urvan, who was the largest single shareholder of Ammo, Inc. after he had sold his company Gunbroker.com to Ammo, Inc in an all-share deal to Ammo. The deal was simple: there will be no break up of the company into two public companies.

Moreover, the annual meeting will be set for Dec. 15 (as it had been delayed), and Steve Urvan gets to add two people to the 7-person board (giving him 3 out of 9 votes now).

No Break-Up

As I implied in my recent article in Talkmarkets on Oct. 28, about the opposition to the planned break up of the company into two companies - the planned spinoff of Ammo, Inc. from Gunbroker.com didn't make sense. Both companies would have higher operating expenses.

Moreover, as there was strife between the CEO of Ammo Inc, Fred Wagenhals, and Steve Urvan, former CEO of Gunbrokers (and the Chief Strategy Officer of Ammo Inc until he left the position during the strife last month and also a board member) the two largest shareholders, an agreement was reached to find a new CEO of the company.

This seems like a perfectly rational solution and hopefully, the two parties can now get along with a new CEO, the company will be able to find synergies and work together even better. After all, as I pointed out in my former article, both companies, Ammo, Inc., the munitions manufacturer, and Gunbroker, an online gun auction company, are growing very quickly.

In fact, the whole process of thinking through a split into two companies helped reveal secrets about the company's growth. They were displayed in the slide presentation and CEO Fred Wagenhal's letter to shareholders. 

For example, there it was revealed that the ammo company expects sales to grow 37% YoY for the year ending March 2023. Ammo Inc was going to change its name to Action Outdoor Sports. It's not immediately clear if it will still do this.

Source: Slide presentation, page 3

In addition, the online gun auction business, which was going to change its name to Outdoor Online, expects sales to grow 34% for the quarter ending March 2023. Moreover, the company projects $109.5 million adj. EBITDA this year, although it does not break out which company will provide the majority of that cash flow.

None of this would have been revealed if the two companies were not initially talking about splitting up.

Going Forward

As it stands, Ammo Inc. is still set to reveal its financial results for the quarter ending Sept. 30 (its fiscal second quarter) on Nov. 14, after the market closes. In addition, the annual meeting will be held a month later on Dec. 15.

Hopefully, the company will disclose its plans going forward, now that both parties have agreed to patch things up. I suspect that a lot of that depends on the choice of the new CEO, who will replace Fred Wagenhals.

For example, will the name changes of both companies go into effect? How much money will the company save by not separating into two units that are publicly traded? More importantly, what is the new sales and EBITDA outlook? Can both companies find some synergies to enhance their operation as one public gun and ammo company (as originally planned in the merger a year ago)? For example, does the ramp-up of ammo manufacturing in the new Wisconsin plant hurt the company's cash flow prospects - which can be financed internally with the sales gains at Gunbroker - or will it have to rely on debt to finance this production ramp-up?

Shareholders obviously want to know more about this and how profitable the company expects to become going forward. That is why all eyes now are on the results that will come out on Nov. 14.

Meanwhile, check out the preferred stock (POWWP), as I discussed in my previous article on POWW on TalkMarkets, as it trades with an 8.75% coupon and is near its par price of $25 per share.

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