Reporting Announcement or Publicity Stunt

Mar 13, 2014
Whether Global Digital Solutions (OTC-QB: GDSI) was announcing serious plans to launch an acquisition of Remington Outdoor Group or not, their announcement (made as per SEC requirements) certainly brought the company to the attention of both the firearm and financial industries.

There's not much doubt how Remington Outdoor Group feels about the 8-K filing and revelation that GDSI had made an unsolicited offer to purchase Freedom Group for "$1.082 billion in cash and shares of GDSI's common stock".

As we reported would happen in Wednesday's editions of the Outdoor and Shooting Wires, a confidential internal memorandum regarding the GDSI announcement was sent to Remington employees by Remington Outdoor Group's CEO, George Kollitides.

The Outdoor Wire was provided a copy of that memorandum in which Kollitides tells employees:

"Yesterday, a small, unknown investment entity publicly announced its desire to acquire the Remington Outdoor Company. If this wasn't disruptive to our employees and customers, we would not acknowledge the news and recognize it for what it is: a publicity stunt from an agenda-driven group with no credible financing options."

In his memorandum, Kollitides also reminded employees that the company "ran a sales process last year which generated offers from established and credible buyers. After careful evaluation of those offers, our agents concluded that the best course was to recapitalize our Company, providing liquidity to those investors desiring to exit."

"Nothing," Kollitides continued, "has changed from that strategy."

Rather than focusing on the "publicity stunt" Kollitides challenged employees to "focus on building the best, most innovative products to support our military, police and law-abiding citizens."

Nothing further has been released by GDSI. But a report by Bloomberg BusinessWeek assistant managing editor and senior writer Paul Barrett reported his unsuccessful attempt to speak with GDSI chairman and chief executive Richard Sullivan. The attempt ended with an apparent transfer to a cellphone that ultimately hung up on him. That, Barrett wrote, was "strange and not encouraging."

The report also caused some consternation in Huntsville, Alabama. That where Remington last month announced a $110 million expansion that would, ultimately, bring 200 new jobs to the booming northern Alabama city.

According to reports in Alabama media, Huntsville officials have "been in contact with Remington" and assured there were no negotiations. The whole matter, officials say, "has been characterized (by Remington) as a PR play for a company known to be anti-firearms."

Is GDSI anti-firearms?

Depends on how you read their own description of the company.

It appears to be betting/investing heavily in a technology that reportedly uses cloud-based technology that will be scaled-up so as to be capable of controlling anything from secure military communications to individual firearms. That is "smart gun technology" an anathema to gun rights groups, firearms manufacturers and a vast majority of private gun owners.

The company also describes itself as a leader in "cyber arms manufacturing, complimentary security and technology solutions and knowledge-based, cyber-related, culturally attuned social consulting in unsettled areas " (emphasis added).

When it comes to unsettled areas, gun control, or perhaps gun controls, would appear to be in their wheelhouse.

So is there a serious effort underway to acquire as many as three firearms-related companies by a small company in Florida?

Maybe. The announcement itself offers clues for a variety of plausible actions. That in itself is a clue as to several potential reasons why they sent their required 8-K to the SEC.

Required by SEC regulations, it is not unheard of in the fringes of the securities industry for companies to use a reporting requirement as a de facto marketing piece.

Of course, that position hinges on a couple of other purely speculative conditions:

GDSI would need to be releasing their "required document" in hopes of deliberately creating enough of a furor inside the firearms industry that deep-pocketed supporters of the anti-gun movement became aware of the company, their technology and intent in regards to the firearms industry.

"Technological convergence is the future in the cyber/smart arms arena," they write, "and we're eager to leverage our proven history of success by helping Freedom and others navigate the transition from analog to digital."

Putting digital controls into individual firearms -and having the requisite database to manage them, would certainly pique the attention of anti-gun supporters. Such a system minimally necessitates creation of a firearms inventory/registry. Ultimately, that system might ultimately become capable of electronically rendering guns with so-called smart technology unusable.

Raising hot-button topics might lead to sufficient capitalization -from the anti-side of the gun rights debate. Should that long-shot pay off, GDSI could potentially raise the capital necessary to make a run at some company or companies in the firearms industry .

After all, the GDSI announcement repeatedly mentions Remington and "two other related companies."

Purely for speculative purposes, it's probably worth remembering that former New York City Mayor Michael Bloomberg, now a private citizen, but no less a gun control advocate, has a net worth several times the annual revenues of Remington. For some time, a few industry leaders have quietly confided their concerns that Bloomberg might turn his wallet on the gun industry instead of bankrolling various anti-gun groups.

Reading closely through the GDSI announcement, there is a piece of copy inside a lengthy and occasionally overly-detailed press release that many , myself included, read the first time as requisite boilerplate language:

"All three proposed acquisitions are subject to completion of due diligence, completion of satisfactory acquisition agreements and other customary conditions, including financing."
--Source: GDSI corrected release from PRNewswire

In other words, intent to conduct a deal is stated; but cash, the essential ingredient to all their plans, is not currently in hand.

Our attempts to contact someone at GDSI have been no more successful than Mr. Barrett's at Bloomberg/BusinessWeek. Announcing a billion-plus planned acquisition and then becoming very hard to reach really isn't a credibility builder. But any reports of "unsuccessful attempts to reach senior officials at GDSI" keep the company and its plan- for whatever the reason- in the public eye.

As always, we'll keep you posted.

--Jim Shepherd