Company X imposes a high sales quota achievement on its dealer because the dealer wanted exclusivity. The dealer may not have indicated it could achieve those sales but a term is a term, if not achieved he loses exclusivity. Company X then goes to the board and impresses them that a forecasted sale is in the signed contract because that was the minimum commitment. Except the Company did not declare that the commitment does not have a financial implication - if the commitment was not met, the dealer could just walk away -it wasn't the case that the dealer would have to make good financially (like a take or pay contract). So if I was board member, would I have reasonably accepted your forecast just because you either imposed that onto the dealer or reached a mutual agreement. But if after 3 months of signing, your dealer was on track to achieve the sales quota you set, yes you could reasonably make that a forecast but not at the outset because you had a minimum sales commitment- would have been different if it was a minimum offtake/purchase agreement.
Similar with GSW, they signed contracts and announced them but there were clauses that allowed customer to do trials and to opt out without buying any services if it did not meet their requirements , fair enough commercial structure but it created an impression amongst holders that they were material contracts with revenue materialising (it may or it may not but not in the near term the market was expecting). Hence, if revenues are not reasonably close to achievement or deals may not have material impact, they would need to declare as is instead of leaving the market to believe what they want to believe. And GSW and BUD holders have too long wanted to believe what they wanted to believe so that too is the underlying issue. GLTAH, be wary!.
BUD Price at posting:
21.5¢ Sentiment: None Disclosure: Not Held
