Entries categorized as ‘Net Cash’

Update on Trident Microsystems (TRID): Q4 FY 2009 Outlook

May 19, 2009 · Leave a Comment

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Trident Microsystems announced an update to its outlook for the fourth quarter of fiscal year 2009.

Trident’s outlook for the fourth quarter of fiscal year 2009, described below, is based on current expectations, includes expected results from the recently completed acquisition of certain consumer business division assets from Micronas.

� Net revenues are expected to be in the range of $15 to $18 million.

� Gross Margin in the low 30% range.

� Non-GAAP operating loss is projected to be in the range of $15 to $17 million.

� The company expects to end the quarter with a cash balance of approximately $177 to $182 million.

TRID currently has $55 million in liabilities, and it is trading at a market cap of $92 million, well below the company’s net cash value.

  trid balance

Off-Balance Sheet Arrangements 

Lease Commitments
The Company leases facilities under noncancelable operating lease agreements, which expire at various dates through 2012. At March 31, 2009, future minimum lease payments under these non-cancelable operating leases for the remaining three months of fiscal year 2009, fiscal years 2010, 2011, and 2012, were as follows: $0.4 million, $0.9 million, and $0.6 million and $0.1 million, respectively. Rental expenses for the three months ended March 31, 2009 and 2008 were both $0.4 million. Rental expenses for the nine months ended March 31, 2009 and 2008 were $1.1 million and $1.2 million, respectively.


Purchase Commitments 


At March 31, 2009, the Company had purchase commitments in the amount of $9.3 million that were not included in the Condensed Consolidated Balance Sheet at that date. Among the $9.3 million of purchase commitments, $1.6 million of these commitments were to UMC, its principal foundry. Purchase commitments represent the unconditional purchase order commitments with contract manufacturers and suppliers for wafers and software licensing.

Shareholder Derivative Litigation

Trident has been named as a nominal defendant in several purported shareholder derivative lawsuits concerning the granting of stock options. The federal court cases have been consolidated as In re Trident Microsystems Inc. Derivative Litigation, Master File No. C-06-3440-JF. A case also has been filed in State court, Limke v. Lin et al., No. 1:07-CV-080390. Plaintiffs in all cases allege that certain of the Company’s current or former officers and directors caused it to grant options at less than fair market value, contrary to its public statements (including its financial statements); and that as a result those officers and directors are liable to the Company. No particular amount of damages has been alleged, and by the nature of the lawsuit no damages will be alleged against the Company. The Board of Directors has appointed a Special Litigation Committee (“SLC”), composed solely of independent directors, to review and manage any claims that the Company may have relating to the stock option grant practices investigated by the SLC.

Regulatory Actions

The Department of Justice (DOJ) is currently conducting an investigation of the Company in connection with its investigation into its stock option grant practices and related issues, and the Company is subject to a subpoena from the DOJ. The Company is also subject to a formal investigation by the SEC on the same issues.


Disclosure: We do not own TRID, but it is part of our ValueHuntr Portfolio.

Categories: Net Cash · Special Situations · Update
Tagged: Net Cash, TRID, Trident Microsystems

Soapstone Networks Reports Q1 2009 Results

April 30, 2009 · 2 Comments

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GAAP loss from continuing operations for the first quarter ended March 31, 2009 was $8.1 million, or $(0.55) per share, compared to a GAAP loss from continuing operations of $5.5 million, or $(0.37) per share, in the prior year’s first quarter. Including income from discontinued operations, GAAP net loss for the first quarter ended March 31, 2008 was $3.7 million, or $(0.25) per share. Because there is no income from discontinued operations after December 31, 2008, GAAP net loss for the quarter ended March 31, 2009 was the same as GAAP loss from continuing operations for the same period.



Highlights from Conference Call


- Cash, cash equivalents and marketable securities totaled $82.3 million at March 31, 2009.


- The company, which said in February it was exploring strategic alternatives, expects severance and related costs of about $500,000 in the second quarter.

- Management sees overall incremental savings of about $3.0 million during 2009 as a result of the job cuts announced April 14, in addition to the $5.0 million in savings it expects from a workforce reduction it announced in February. Since Feb 12, 2009 permanent headcount has been cut by about 10 percent and contractor workforce by about 75 percent.

Updated Valuation


Not much has changed since our March 9, 2009 post on SOAP, with the exception of nearly $8 million cash burn relative to the December 31, 2008 results. Because of this, net-cash value has been reduced to $5.33/share, a substantial difference compared to its current market price of $3.63/share. We added SOAP to our portfolio when it was trading at $2.86, for an unrealized gain of nearly 27%.



SOAP's Balance Sheet as of March 31, 2009



Categories: Net Cash · Update
Tagged: SOAP, Soapstone Networks

Vanda Pharmaceuticals Reports Q1 2009 Results

April 29, 2009 · Leave a Comment

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VNDA reported a net loss of $6.5 million for the first quarter of 2009, compared to $7.5 million for the fourth quarter of 2008. Total expenses for the first quarter of 2009 were $6.6 million, compared to $7.7 million for the fourth quarter of 2008. Research and development (R&D) expenses for the first quarter of 2009 were $2.3 million, compared to $3.6 million for the fourth quarter of 2008. The decrease in R&D expenses in the first quarter of 2009 relative to the fourth quarter of 2008 is primarily due to the decrease in regulatory consulting and other professional fees.

As of March 31, 2009, Vanda’s cash, cash equivalents, and marketable securities totaled approximately $42.6 million. As of March 31, 2009, a total of approximately 26.7 million shares of Vanda common stock were outstanding. Net loss per common share for the first quarter of 2009 was $0.24, compared to $0.28 for the fourth quarter of 2008.


On November 6, 2008, Vanda submitted a Complete Response to the not approvable action letter that the Company received from the U.S. Food and Drug Administration (FDA) on July 25, 2008 regarding iloperidone. The FDA accepted the Complete Response for review and has set a new target action date of May 6, 2009. Pending a response from the FDA, Vanda is concentrating its efforts on the design and evaluation of clinical development options for tasimelteon, its compound for sleep and mood disorders, including Circadian Rhythm Sleep Disorders.


On February 13, 2009, shareholder Kevin Tang, Managing Director of Tang Capital Partners LP, sent a letter VNDA’s board urging them to immediately cease operations and return all remaining cash to shareholders. Kevin Tang disclosed his 15% stake in VNDA along with his associates in an amended 13D notice. Mr. Tang has said he plans to nominate two members to the company’s board and seeks to replace the company’s CEO. If Tang’s attempt to liquidate the company is successful, shareholders would receive nearly $1.42/share cash return, a potential 40% gain relative to VNDA’s current market price of nearly $1/share.


Cash & Cash Equivalents: $42.6M

Total Liabilities: $3.9M


Liquidation Value, excluding PPE: $38.7M ($1.42/share)

Current Market Price: $26.2M ($0.98/share)




Disclosure: We do not have an actual position in VNDA.

Categories: Activist · Net Cash · Special Situations · Update · Value Investing
Tagged: Kevin Tang, Liquidation, Net Cash, Update, Vanda Pharmaceuticals, VNDA

Facet Biotech Corporation (NASDAQ: FACT)

April 15, 2009 · 3 Comments

We are adding Facet Biotech Corporation to our ValueHuntr Portfolio. FACT is a company with a market cap of $239M ($9.72/share) with $295M ($12.00/share) of net-cash as of December 31, 2008. On December 18, 2008, Facet Biotech completed its spin-off from PDL BioPharma, Inc. (PDL). PDL capitalized Facet with $405 million in cash and cash equivalents and contributed to Facet its biotechnology operations and related assets, including four clinical-stage programs, research and development capabilities and protein engineering technology assets.  Our estimates indicate FACT is worth at least $14/share at liquidation, which means the company is currently trading at a substantial discount to its intrinsic value.




FACT is a biotechnology company focused on developing therapeutics for cancer and immunologic diseases. Its products include Daclizumab, Volociximab, Elotuzumab, PDL192, and PDL241. Daclizumab is a humanized monoclonal antibody, with a potential in a range of inflammatory diseases, including multiple sclerosis. It can be used as a maintenance therapy for organ transplant. Volociximab is a chimeric monoclonal antibody, with a potential in treating a range of solid tumors and its role in angiogenesis also aid in the treatment of age related macular degeneration (AMD). Elotuzumab is a humanized monoclonal antibody used to treat multiple myeloma. PDL192 is a humanized monoclonal antibody used to treat tumor indications including pancreatic, colon, lung, renal, breast, head, and neck cancers. PDL241 is a humanized monoclonal antibody, with a potential in immunologic diseases. In January, following the completion of a previously announced strategic business review, Facet announced that it would restructure to focus in the therapeutic area of oncology and significantly reduce its operating costs.




On December 18, 2008, Facet Biotech completed its spin-off from PDL BioPharma, Inc. (PDL). PDL capitalized Facet with $405 million in cash and cash equivalents. However, the company is burning cash at a very rapid rate. The company anticipates cash utilization of approximately $95 to $100 million for 2009, which is a reduction from the $110 million previously announced in January of 2008. FACT management also anticipates 2009 total costs and expenses of $140 to $160 million, which includes $22 to $25 million of anticipated depreciation, amortization and stock-based compensation, as well as approximately $4 million in anticipated employee-related restructuring charges related to the company’s previously announced restructuring activities. We estimate that the company is worth at least $14/share at liquidation, which indicates a potential 46% gain at liquidation relative to the company’s current market price.





In a conference call with Facet’s management on March 26, 2009, Roderick Wong expressed dissatisfaction over the company’s business plan and burn rate, and suggested dividend payment of up to $15 per share and sale of the remaining assets of the company. Additionally, Wong proposed the appointment of an alternate slate of five directors, including Wong himself, Philip R. Broenniman, Robert L. Chapman, Jr., David Gale, and Bradd Gold.  The five nominees collectively own 124,828 shares of Facet, or about 0.5% of the company, and would replace the entire 5-member board FACT currently has in place.

In an email to employees, Facet CEO Faheem Hasnain shared his views regarding Wong’s proposal and it is clear that he disagrees with Wong’s plans:

Dear Facet Team Members,

As you may have seen, a press release was issued by one of our stockholders yesterday. The stockholder proposed an alternate slate of directors for the Facet board, in advance of our annual stockholder’s meeting in May, and called for the company to issue a substantial cash dividend followed by a sale of the company.  Late last week, we also received a letter from this stockholder that included his alternate director slate.  We issued a press release earlier this morning indicating we had received the nomination notice.  It is our policy to listen to all of our stockholders and our Board is in the process of evaluating the notice. Although we thoughtfully evaluate stockholder input, we believe we are headed in the right direction strategically and do not believe these proposals are currently in the best interests of the company and our stockholders.

Given all that you have endured over the last couple of years, I realize that this information may be unsettling to many of you. But let me assure that we have a solid strategy in place — our goal for Facet is to build an oncology-focused biotech company that is committed to developing drugs to improve patient lives — and we have the support of our board of directors.  The most important thing we can do is to continue to focus on our day-to-day responsibilities while working to achieve our goals.

FACT responded to Roderick Wong with the following letter:

Dear Dr. Wong:


We are in receipt of your letter dated March 26, 2009 and the accompanying notice of your intent to nominate directors at our 2009 Annual Meeting of Stockholders.  We welcome the input of our stockholders, and our Board has considered the suggestions articulated in your letter and March 30, 2009 press release.


Our Board and management remain firmly committed to increasing the value of the Company to our stockholders.  To this end, our Board has regularly evaluated the Company’s business plan as well as strategic alternatives to create value for our stockholders since the Company’s spin-off less than four months ago.  In this regard, we note the following:


-          Facet has undergone a rigorous analysis of its strategy, both in connection with our recent spin-off and subsequently.


-          Our goal has been to focus on therapeutic areas that we believe hold the greatest opportunity for us to create meaningful value for our stockholders.  As a result of our continued review and analysis, we are focusing our efforts on oncology.


-          We believe our development programs and technology capabilities represent substantial potential value for our stockholders.  Indeed, our collaborations with Bristol-Myers Squibb and Biogen Idec on certain of our development programs validate the value of these programs.  We firmly believe that by continuing to advance these and other programs, as well as our proprietary protein engineering technology platform, we can enhance value for our stockholders.


-          Furthermore, in an effort to maintain strict financial discipline, we have aggressively lowered our cost structure.  In particular, as we recently announced, we have reduced our headcount and our overall anticipated cash utilization in 2009, thereby extending the time period for which we have funding.


We believe that our current Board, comprised of four independent directors and Faheem Hasnain, our President and Chief Executive Officer, and the management of the Company have a record of working to advance the interests of all stockholders, consistent with their fiduciary duty.


Based on our strategic review and ongoing analyses, the Board believes that our current strategic plan is the right plan to build value for our stockholders.  Since we are committed to considering all alternatives to creating value, we have reviewed your proposal for the liquidation of the Company.  We have, however, unanimously concluded that the interests of our stockholders are best served by continuing to focus on executing our current strategy.  Moreover, the Board believes that the assumptions stated in your March 30 press release with regard to the Company’s ability to distribute a significant cash dividend do not properly take into account, among other things, the Company’s significant lease and other obligations, which are detailed in the Company’s 2008 Annual Report on Form 10-K.  Further, we believe that in this current economic environment, your proposals would significantly impair the Company’s ability to realize appropriate value for its existing assets.


Accordingly, we do not believe that your suggestions are in the best interests of our stockholders.  We intend to maintain an open and active dialogue with our stockholders as we continue to work to enhance stockholder value.




Brad Goodwin

Chairperson of the Board


Furthermore, Seth Klarman, managing director of The Baupost Group, nearly doubled his stake on the company from 2.7M to 4.4M shares following Wong’s proposal according to a 13D filed on April 8, 2009. Baupost is now 17.8% owner of FACT.


Disclosure:  The ValueHuntr portfolio does not represent an actual portfolio, and it is tracked for informational and educational purposes only. We do not have an actual holding in FACT. This is not a recommendation to either buy or sell any securities.

Categories: Activist · Activist Investing · Liquidation · Net Cash · Special Situations · Value Investing
Tagged: Activist, baupost group, facet biotech, FACT, roderick wong, seth klarman, shareholder activism, Value Investing

Trident Microsystems Inc. (NASDAQ:TRID)

March 31, 2009 · 14 Comments

We are adding Trident Microsystems to our ValueHuntr Portfolio. TRID is a company whose stock is trading substantially below its net-cash value. According to its latest SEC filing the company held nearly $212M in cash with $56M in total liabilities, for a net-cash value of $156M as of December 31, 2008.  However, TRID’s market price is only $95M, nearly a 60% discount to its net cash.



TRID is a leader in integrated circuits for Digital Television. While its products are used in all kinds of displays, LCD television is its most important growth market as LCD televisions take share from plasma in the market for larger screens as well as traditional CRT television sets of all sizes. Additionally, TRID designs, develops, and markets integrated circuits (ICs) and associated software for digital media applications, such as digital television (digital TV) and digital set-top boxes (STB). The company also designs cross-platform software that allows multimedia applications to run on devices in the digital living room, including digital STBs and digital TV sets.



TRID is a net cash stock that always traded above its net asset value until this year. The company follows the typical case in Wall Street where analysts tend to emphasize earnings prospects and neglect the underlying value of assets. Once Wall Street realizes that positive earning prospects are no longer sustainable, the stock is sold off on the basis of poor earnings alone. This would never happen in the private market, where businesses tend to sale at a value equal to at least their net assets, plus a premium for earnings prospects for those which are profitable.



 On its last earnings call, TRID reported net revenues of $19.2 million for the second quarter fiscal year 2009 representing a quarterly sequential decline of 45% compared with $34.8 million reported in the September 2008 quarter and a year-over-year decrease of 74% from the $75 million recorded in the same quarter of the prior year. Revenues from their top three customers represented 67% of total revenues in the second quarter. Revenues from the largest customer, headquartered in Japan, decreased by 63% from the prior quarter and represented 34% of total revenues. Amazingly, not a single analyst asked management about the company’s cash position and what their intentions are with this cash.

For the sake of conservatism, we value TRID based its cash at hand alone, assuming all other assets such as PPE and intangibles are worthless. Our analysis indicates TRID is currently trading at 60% below its net cash value, even all long-term assets are assumed to hold no value.



Spencer Capital Management LLC, a New York-based investment partnership, announced on March 2, 2009 its intention to put forth a slate of candidates for election to the company’s board. We believe Spencer Capital will be able to realize some shareholder value in the near future. Spencer Capital is a New York-based fund advisor that specializes in deep value investing and is headed by Kenneth H. Shubin Stein, whose ascent to value investing has been nothing but ordinary.

In 2000 he founded Kenshu, LLC, the predecessor to the Spencer Capital Opportunity Fund, LP, which was formed in 2003. From 2001 to 2003 Dr. Shubin Stein managed Kenshu, LLC while also working as a portfolio manager for Promethean Investment Group, LLC. He joined Promethean after completing his internship in orthopedic medicine at Mount Sinai Medical Center in New York. Before his internship, he cofounded and managed Compo Asset Management, LLC, a U.S. based value investment partnership which was merged into Promethean. Prior to founding Compo, Dr. Shubin Stein was a medical technology analyst for The Abernathy Group in New York, an investment management firm specializing in the medical and technology sectors. Dr. Shubin Stein is a graduate of the Albert Einstein College of Medicine where he completed a 5-year medical and research program with a focus on molecular genetics. He graduated with a B.A. degree from Columbia College in 1991 with dual concentrations in Premedical Studies and Political Science. Dr. Shubin Stein holds the CFA designation and teaches an advanced investment research course to second year students at Columbia Business School.

In connection with their intended proxy solicitation, Spencer Capital Management, LLC and certain of its affiliates intend to file a proxy statement with the SEC to solicit TRID’s stockholders.



We have added TRID to the ValueHuntr Portfolio because it is trading significantly below its net-cash value, and we believe Spencer Capital, a fund that focuses on deep value investing, will be a catalyst to close this gap and thus increase shareholder value. With an estimated cash burn of $6-7 million per quarter, TRID’s net cash would stand at nearly $2.1/share at the end of 2009. We estimate the company is worth at least $2.54/share based on its cash alone compared to a current market price of $1.53/share.


Disclosure:  We do not have an actual holding in TRID. This is neither a recommendation to buy nor sell any securities]

Categories: Investing · Net Cash · Special Situations · Value Investing
Tagged: Kenneth Rubin Stein, Net Cash, Net Net, Spencer Capital, TRID, Trident Microsystems, Value Investing

Alliance Semiconductor Corporation (OTC: ALSC.PK)

March 23, 2009 · 9 Comments

At a market value of $8.3M, the company is currently trading at an 86% discount to the net cash assets the company carried on its books as of December 31, 2008. The latest balance sheet indicates that the company is holds nearly $60M in cash equivalents and short-term investments. The company’s shares are traded over the counter, so its financial situation is not widely followed by Wall Street.


It is our view that the company’s intrinsic value is equal to at least its net cash value, or $1.82/share compared to its current market value of $0.25/share,  so ALSC.PK is being added to our ValueHuntr Portfolio.




Alliance Semiconductor Corporation was originally in the business of designing and manufacturing memory and memory-intensive logic. Its product lines included Static Random Access Memory (SRAM), Pseudo SRAM (PSRAM), Dynamic Random Access Memory (DRAM), Flash Memory, and embedded memory and logic solutions. For a little while they also sold some video chipsets for PCs. However, since 2005 Alliance Semiconductor has made a significant transition from being an operating company focused on the semiconductor industry with synergistic investments in emerging companies into a holding company. In the wake of mounting losses, ALSC sold all its 3 business units (memory, mixed signal, and system).


In early 2006, as the result of a proxy contest, large Alliance shareholder Riley Investment Management effectively took control of the then money-losing and mismanaged company and installed Melvin Keating as CEO. Under Keating, ALSC has spent the past few years divesting assets and reducing expenses. After accumulating a sizeable cash hoard through a series of asset sales, Alliance has returned value to shareholders over the past year through a series of special cash dividends. Since July of 2007, ALSC has returned a total of $4.37 a share in cash dividends to shareholders.





We estimate that ALSC’s intrinsic value at liquidation to be nearly 600% greater than the current market value, excluding costs associated with the dissolution and liquidation of the company’s assets. The company has no long-term liabilities, and minimum near-term commitments to fulfill. Additionally, nearly all of ALSC’s current assets are in the form of cash or short-term investments.  







On September 3, 2008 Alliance Semiconductor Corporation issued a press release announcing that its Board of Directors has determined to begin proceedings to dissolve the corporation. Melvin Keating, President and CEO, noted that the company has for some time been considering whether to re-invest in another business or to liquidate and distribute its net assets to shareholders. Mr. Keating noted that the amount and timing of additional distributions to shareholders is uncertain, especially because the company’s holding of auction rate certificates will need to be monetized in an orderly manner. Bryant Riley, Alliance’s chairman, noted that since the new board took office, Alliance had sold its operating businesses and its venture capital portfolio, and had liquidated its holdings in two publicly traded semiconductor companies. To conserve cash and reduce costs, Alliance has substantially reduced its staff and the amount of office space it leases.





Alliance Semiconductors is a stock traded over the counter, so it has been widely neglected by Wall Street and the general market. Given that the company has already decided to pursue liquidation and has taken the right steps to preserve cash, we believe this is a rare opportunity where substantial returns and a high probability of realization are both present. We estimate that the company’s value at liquidation ($1.82/share) is at least 600% than the current market value of $0.25/share. ALCS has been added to our ValueHuntr Portfolio.



[Full Disclosure:  We do not have a holding in ALSC.PK. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]


Categories: Liquidation · Net Cash · Special Situations · Value Investing
Tagged: Alliance Semiconductor, Liquidation, Net Cash, Net Net, Small Cap, Special Situations, Value

The 10 Most Promising Net Cash Stocks

March 18, 2009 · 9 Comments

It wasn’t uncommon for Ben Graham, the creator of value investing, to invest in stocks in which the liquid assets on the balance sheet (net of all debt) were worth more than the total market capitalization of the company (also known as “net nets” to Graham followers). This means that Graham was effectively buying businesses for nothing, and in some cases, for less than what the businesses would sell at auction.


For this article, we focus on what Ben Graham called “secondary stocks”. We define a secondary stock as one having no claim to fame, prominence, or general popularity. Hence, it is likely to be ignored by the stock market generally and left for dead when the disparity between price and intrinsic value may in fact be the greatest. There is no guarantee or law of market action by which the price can be counted upon to adjust itself eventually to its intrinsic value. Therefore, our focus is on companies with a catalyst in place. These are our picks:



10.  GSI Group (GSIG)


GSI Group Inc. supplies precision motion component products, lasers, and laser-based manufacturing systems to the electronics, semiconductor, medical, aerospace, and industrial markets worldwide. Its Precision Technology segment offers lasers that are used for welding, cutting, drilling, surface marking, and engraving of metal and plastic parts.


As of yesterday’s close, GSIG had a market cap of roughly $33M, with a reported $183M in cash. However, the Company announced on December 4, 2008, that it had identified errors in the recognition of revenue from sales to a customer in the first and second fiscal quarters of 2008 in the Company’s Semiconductor Systems Segment. Therefore, Form 10-Q for the periods ended March 28, 2008 and June 27, 2008 should no longer be relied upon. Though the company seems cheap in the books, investors should be aware that these numbers are simply not reliable at the present time.


But the catalyst we have identified gives us a bit more confidence that the company is indeed cheap, despite its accounting troubles.  Stephen W. Bershad, the CEO of Axsys Technologies (AXYS), recently filed a 13D, an activist filing, after buying 3.3 million shares of GSIG in the open market. Because Bershad’s position as a CEO of a major defense contractor, and an industry insider with extensive knowledge in the defense industry, makes it likely that GSIG is at least undervalued.


9. Ocean Power Technologies (OPTT)


Ocean Power Technologies, Inc. engages in the development and commercialization of proprietary systems that generate electricity by harnessing the renewable energy of ocean waves. The company’s product portfolio includes utility PowerBuoy system, which is designed to supply electricity to a local or regional electric power grid; and autonomous PowerBuoy system that is designed to generate power for use independent of the power grid in remote locations. Its customers include public utilities, independent power producers, and other governmental entities and agencies.


The company has a market value of $54.6M (5.35/share) with $55.4M in current assets, of which nearly 53.4M is in the form of cash or cash equivalents. Total equity is roughly $87M, of which $32M is in the form of long-term investments.


The catalyst is that according to Reuters, the Federal Energy Regulatory Comission has issued some 170 preliminary permits for 10,000 megawatts of potential power generation from offshore projects. One of those is an OPTT project off the Oregon coast, which will create a 1.5 megawatt power station to supply electricity to about 2,500 homes. The project would have 10 buoys with pistons in a cylinder to slide up and down as the buoys move over waves in the water, generating electricity in the process. An underwater cable would then transmit the power.

The negative is that after visiting OPTT headquarters in Pennington, NJ a few months ago, I was unimpressed with the quality of the buoys. Corrosion is a big issue still unsolved, and maintenance costs associated with placing and retrieving floating buoys in the open sea is extremely high. Therefore, operating expenses are a threat to the little cash the company has on its balance sheet.


8. Soundbite Communications (SDBT)


SoundBite Communications, Inc., an automated voice messaging services provider, engages in the provision of on-demand, integrated multi channel communications solutions in the United States. It offers integrated voice, text, and e-mail messaging solutions that enable clients in delivering the message to the customer. The company offers its services to various organizations in industries, such as collections, financial services, retail, telecom and media, and utilities to send messages annually for collections, customer care, and sales and marketing applications.


The company has a market value of $25.4M (1.64/share) with $45.3M in current assets, of which nearly $37.4M is in the form of cash or cash equivalents. Total equity is roughly $47.5M. As of yesterday’s close, the company is trading at a 55% discount to its cash holdings with no outstanding debt.


Though there is no active catalyst for SDBT, venture capital firms NBVM GP LLC, Mosaic Venture Partners LP, and Commonwealth Capital Ventures LLP own more than 50% of the company’s shares. In my view, these venture firms will not hesitate to liquidate the company if it runs into trouble in the future, since shareholders will at least be getting the cash it has on its balance sheet.



7. Inhibitex, Inc. (INHX)


Inhibitex, Inc., a biopharmaceutical company, engages in the development of differentiated anti-infective products to prevent and treat serious infections. Its products include FV-100, a nucleoside analogue prodrug that is in Phase I clinical trial for the treatment of varicella zoster virus, the causative agent for herpes zoster, or shingles, and chicken pox; HIV Integrase Inhibitors class of anti-retroviral agents, which are in preclinical stage for the treatment of HIV.


The company has a market value of $9M (0.23/share) with $33.9M in current assets, of which nearly $33.1M is in the form of cash or cash equivalents. Total equity is roughly $30.4M. As of yesterday’s close, the company is trading at a 72% discount to its cash holdings (0.76/share) with only 5.8M in total liabilities.


Though there is no active catalyst for INHX, the Biotech Value Fund owns nearly 13% of the company’s shares. The fund is particularly known for its current activist dispute with Avigen, Inc, where the fund is trying to replace the entire board of directors to improve shareholder value.



6. Xtent, Inc. (XTNT)


XTENT, Inc. is a medical device company focused on developing and commercializing innovative customizable drug eluting stent (DES) systems for the treatment of coronary artery disease (CAD). CAD is the most common form of cardiovascular disease and the number one cause of death in the United States and Europe.


According to the company’s latest 8-K, XTNT had cash, cash equivalents and short-term investments of $19.1 million as of December 31, 2008. with almost no debt. After certain adjustments to its balance sheet, we believe the company could be worth at least $15M in either liquidation or a merger. This represents a nearly 37% discount to the company’s current market value of $10M.


The catalyst is that On January 23, 2009, XTNT announced it plans to engage Piper Jaffray & Co. to help the company pursue strategic alternatives which may include the sale of some or all of the company’s assets or other types of merger or acquisition transactions intended to maximize shareholder value. the company notified 115 employees out of its total employment base of 121 employees that their positions would be eliminated effective March 23, 2009. This represents a 94% reduction in labor expenses, which will allow the company to slow the rapid cash burn of approximately $5M per quarter, and help preserve cash while it pursues strategic alternatives.


5. Technology Solutions Company (TSCC)


Technology Solutions Company provides business solutions for healthcare, manufacturing, and financial services industries in the United States. It offers business solutions primarily to the key processes and operations at the organizations.


On February 10, 2009, TSCC announced that its Board of Directors decided to liquidate the company’s assets and to dissolve the company, after extensive and careful consideration of the company’s strategic alternatives and analysis of the prevailing economic and industry conditions. The Board estimated an initial cash payout of nearly $2.00 per share. However, my estimates show that nearly an additional $0.55/share will be paid out after liabilities and liquidation costs are accounted for. The submitted preliminary proxy statement regarding the company’s liquidation states the following:


We currently estimate that, if we are able to dispose of substantially all of our non-cash assets, the aggregate amount of all liquidating distributions that we intend to pay to TSC stockholders will be in the range of $2.39 to $2.69 per share of TSC common stock. We currently anticipate that the majority of the remaining proceeds from the liquidation would be distributed by the end of 2009, and that any additional proceeds would be distributed by way of a final liquidating distribution, either from the Company or the Liquidating Trust, within three years after the approval of the Plan of Dissolution


 Our quick estimate for liquidation proceeds looks as follows:

Cash: 3.11 (100% at liquidation)

Receivables: 0.45 (50% at liquidation)

Other assets: 0.45 (20% at liquidation)

Less Liabilities of 0.49

Less Liquidation costs of 0.38


= $2.55/share

Less initial $2.00/share payout


= $0.55/share payout remaining


At a current market value of $2.25/share, the company is trading at nearly 15% discount to its liquidating value.



4. Trident Microsystems (TRID)


Trident Microsystems, Inc. designs, develops, and markets integrated circuits (ICs) and associated software for digital media applications, such as digital television (digital TV), liquid crystal display television (LCD TV), and digital set-top boxes (STB).


The company has a market value of $91.2M ($1.45/share) with nearly $212M in the form of cash or cash equivalents. Total liabilities are $17.8M, so the company is currently trading at a 53% discount to its net cash value.


The catalyst is that New York investment partnership Spencer Capital Management LLC has indicated that it intends to nominate an alternate slate of candidates for TRID’s board. Spencer said its founder, Kenneth Shubin Stein, is leading the effort to restructure Trident’s board with the goal of improving corporate governance and repositioning the company.


3. Athersys, Inc. (ATHX)


Athersys, Inc., a biopharmaceutical company, engages in the discovery and development of therapeutic product candidates in multiple disease areas in the United States. Its product pipeline includes ATHX-105, a Phase I clinical trial product for the treatment of obesity.


The company has a market value of $16.7M ($0.88/share) with nearly $31.6M in the form of cash or cash equivalents. With total liabilities are $2.3M, the company is currently trading at a roughly 50% discount to its net cash value.


The catalyst is that Ormibed Advisors, the world’s largest healthcare activist investment firm, is ATHX’s  largest shareholder with a 20% ownership of the company’s shares.



2. Vanda Pharmaceuticals (VNDA)


VNDA is a biopharmaceutical company focused on the development and commercialization of clinical-stage drug candidates for central nervous system disorders, with exclusive worldwide commercial rights to three product candidates in clinical development. The Company’s product portfolio includes Fiapta (iloperidone), a compound for the treatment of schizophrenia and bipolar disorder; VEC-162, a compound for the treatment of sleep and mood disorders, and VSF-173, a compound for the treatment of excessive sleepiness.


According to the latest SEC disclosure, the company had $47.7M in current assets and total liabilities of $3.9M as of December 31, 2008. This means that with a net asset value of $43.8M ($1.64/share) and a market capitalization of $21.4M ($0.80/share) the company is currently trading at a 50% discount to its net asset value. VNDA has cash and cash equivalents of roughly $39M, for a net cash value of $35M (1.31/share).

The catalyst is that On February 13, 2009, shareholder Kevin Tang, Managing Director of Tang Capital Partners LP, filed an amended proxy material urging VNDA’s board to immediately cease operations. Mr. Tang has said he plans to nominate two members to the company’s board. The 13D notice discloses in the Election of Directors Proposal that Kevin Tang himself will be one of the board nominees, along with Andrew D. Levin, a principal at Tang Capital Management, LLC.



1. Soapstone Networks (SOAP)


Soapstone Networks is at the forefront of the movement to Carrier Ethernet by developing resource and service control systems that realize NGN software-provisioned services in the new Carrier Ethernet transport network. Soapstone’s common control framework decouples services from underlying network technologies. The Soapstone solution is designed to dynamically provision precise, SLA-quality services, continuously optimizing utilization of network resources to bring orderly, predictable business-driven behavior to service provider networks.


According to its Dec 31,2008 SEC disclosure, the company has $90.4M in current assets and total liabilities of $3.1M. This means that with a net asset value of $87.0M ($5.88/share) and a market capitalization of $44.3 ($2.98/share) the company is currently trading at a nearly 50% discount to its net cash value.


On February 19, 2009, the company announced that is has engaged Morgan Stanley as its advisor to assist the company in exploring strategic alternatives available for enhancing shareholder value, including but not limited to, continued execution of the company’s business plan, the payment of a cash dividend to the company’s shareholders, a repurchase by the company of shares of its capital stock, the sale or spin off of Company assets, partnering or other collaboration agreements, a merger, sale or liquidation of the company. In either of those cases, SOAP is a winner.




[Disclosure: We do not have a holding in any of the companies mentioned in this article]






Categories: Analysis · Net Cash · Special Situations · Value Investing
Tagged: Net Cash, Net Net, Secondary Stocks, Small Caps, Stocks, Value Investing