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Nicholas is at loss to explain stock gain

Company chairman Peter Vosotas had a rare problem on his hands Wednesday when shareholders of Nicholas Financial Inc. gathered at the Countryside Country Club for their annual meeting: The stock is doing great and he can't explain why.

The beaten-down shares of the car-finance company gained more than 50 percent last month, including a 31 percent spurt last week that led all Tampa Bay area companies. Vosotas passed out photocopies of the "Tampa Bay Ticker" stock chart from Sunday's St. Petersburg Times like a proud new father handing out cigars. He held up a poster board showing Nicholas outperforming the Standard & Poor's 500 in 1999.

But explaining it was another matter.

"God was with us," he said, cheerfully acknowledging the mystery of it all to a friendly audience of about 45, most of them company employees or directors. He treated them to a rambling overview of Nicholas' business followed by a sandwich buffet on the company tab.

Nicholas' stock performance always has been a bit of a puzzle. Last month's price gain followed a glowing financial report, with revenues up 36 percent and net income up 93 percent for the fiscal first quarter over the same quarter last year. But Nicholas has had lots of great quarters in the past that nobody seemed to notice. Even after the recent run-up, a price of $5.12{ a share is only about eight times last year's earnings per share.

Part of the problem is that Nicholas' specialty _ lending to car buyers with blemished credit _ is out of favor on Wall Street because of well-publicized accounting problems and bankruptcies at other companies.

The even bigger problem is that Clearwater-based Nicholas is very tiny. With only 2.3-million shares outstanding, the stock doesn't trade at all some days, and anything over 3,000 shares traded is a big day.

Last fiscal year the company bought back 14,500 of its shares on the open market in an effort to boost the price before concluding the initiative was counterproductive.

"There are not enough shares out there in the first place," Vosotas said.

Chief financial officer Ralph Finkenbrink said the recent run-up might be due to something as simple as one of the company's shareholders recommending the stock to a few friends.

"Without any volume, if someone steps up and buys 5,000 shares, the stock goes up," he said.

Vosotas said he rejected paying stock promoters and investor relations consultants to boost investor interest.

Instead, he said Nicholas simply plans to keep growing. The company, which has 12 branches in Florida and three in Georgia, plans to open branches in West Palm Beach and suburban Atlanta and to move into North Carolina with three branches.

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