Entries categorized as ‘Special Situations’

Aspen Exploration Corporation: Liquidation May Still Have Value

January 6, 2010 · 6 Comments

Aspen Exploration Corporation (ASPN.OB) is being added to the ValueHuntr Portfolio. ASPN is an interesting special situations play we have been following for some time now. Based on yesterday’s trading price, we believe there may still be some value for shareholders in the event of a sale, merger or liquidation even after the payment of $0.73/share dividend.  For the purpose of keeping our estimates as conservative as possible, we assume at least liquidation value.

THE COMPANY

Aspen Exploration Corporation does not have significant operations. It intends to seek possible business combinations with third parties. Prior to June 30, 2009, the company operated 67 gas wells and had a non-operated interest in 26 gas wells in the Sacramento Valley of northern California and approximately 37 oil wells in Montana.

RECENT EVENTS

On November 30, 2009, Aspen held its annual meeting of stockholders in Greenwood Village, Colorado. Two proposals were submitted to the stockholders for approval as set forth in Aspen’s definitive proxy statement dated October 19, 2009. A total of 5,965,534 shares (approximately 70% of the total outstanding as of the record date) were present at the meeting in person or by proxy.

According to the 12/02/09 SEC Filing, Aspen’s stockholders did not approve the resolution to grant Aspen’s Board of Directors the discretion to dissolve the company. To be approved Delaware law required that this proposal be approved by a majority of shares outstanding and entitled to vote thereon. Although more stockholders voted in favor of the proposal than voted against it, only approximately 41% of the total shares outstanding and entitled to vote on the proposal voted in favor of its approval. As a result, Aspen maintained its corporate status and decided to explore other business opportunities.

On November 2, 2009 ASPN declared a cash dividend of $0.73/share. The news release describing the dividend said:

The distribution follows the final settlement of the sale of Aspen’s California oil and gas assets to Venoco, Inc., at which the parties made a number of immaterial adjustments to the purchase price paid at the June 30, 2009 closing, and made certain other payments that were not determined until after the closing. At the final settlement date Aspen received a net payment from Venoco, but was required to make various payments to third parties which ultimately resulted in a cash outflow from Aspen in an amount not considered to be material.

Aspen expects that after the payment of the dividend, and its anticipated operations through the end of the current calendar year, on December 31, 2009 it will have more than $3 million of working capital remaining. Aspen currently intends to utilize its remaining funds to maintain its corporate status as a reporting issuer under the Securities Exchange Act of 1934 and to explore other business opportunities. “

QUICK ANALYSIS

It is likely that if no interested buyer is found for ASPN’s remaining assets, the company will end up liquidating. Our rough estimates for an eventual liquidation, including expected operational expenses to be incurred until March, 2010 is shown below.

Currently trading at $30/share, our estimates show that there is still some value in ASPN. However, our estimates are highly dependent on the timing of the potential liquidation and on the assumptions outlined above. We believe that management will do what is right for shareholders, as the company’s CEO owns 20% of all shares.

THE BOTTOM LINE

ASPN has no significant operations, but it may have enough cash on its balance sheet to offer some value to shareholders. Although we wish we had a larger margin of safety, we believe it is likely that ASPN’s CEO will find the best deal for shareholders, or liquidate the company. As we have shown, even in liquidation the company’s value is above the company’s current price.

Categories: Arbitrage · Liquidation · Special Situations
Tagged: Aspen Exploration, ASPN, Bailey, Liquidation, Special Situations

Update: SOAP Position Closed for 49% Gain

July 30, 2009 · 1 Comment

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We have closed our position in Soapstone Networks Inc  (SOAP).  SOAP was added on March 9, 2009, when the company was trading at a 49% discount to its net cash value (see original report here). On June 15, 2009, the company announced that its Board of Directors had unanimously approved a plan of liquidation. The company declared an extraordinary cash dividend of $3.75 per share, plus $0.25-$0.75 per share in the future. Correcting for the approved initial distribution of $3.75, SOAP is trading at $0.50, which is in the middle range of the future distributions expected by management. We do not think that an additional potential gain of $0.25 justifies the risk of owning the stock, so we have closed our position for a 49% gain.

Categories: Liquidation · Special Situations · Update
Tagged: Liquidation, SOAP, Soapstone Networks

Update: Enpointed Technologies Inc. (ENPT) extends Merger Deadline

July 14, 2009 · Leave a Comment

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Enpointed Technologies Inc. (ENPT) has extended its merger completion deadline to August 14, 2009. Previously, the companyand third parties involved had set July 31, 2009 as the deadline for the completion of the merger. For more, see SEC filing.

On March 1, 2009, the company agreed to be acquired for $2.50/share in cash.

Categories: Special Situations · Update
Tagged: ENPT, Merger

Update: Life Sciences Research (LSR) to be Acquired in Going Private Transaction; Valuehuntr Exits Position

July 9, 2009 · 2 Comments

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Life Sciences Research, Inc. (LSR) announced today that it has entered into a definitive merger agreement to be acquired by Lion Holdings, Inc., an entity controlled by LSR’s Chairman and Chief Executive Officer, Andrew Baker, for $8.50 per share in cash. Mr. Baker currently beneficially owns approximately 17.5% of the outstanding shares of LSR.

On our March 16, 2009 post, we specified that LSR was a special situations play with a high probability of realization. We also pointed out that this was not a long-term play, as its mediocre earnings power did not make it a long-term value candidate. We are now closing our position on LSR, for an absolute return of 20%.

Under the terms of the merger agreement, LSR stockholders, other than Mr. Baker and his affiliates, will receive $8.50 in cash for each outstanding share of LSR common stock, representing a premium of approximately 77 percent over LSR’s closing share price of $4.79 on March 3, 2009, the last trading day prior to public announcement of Mr. Baker’s initial March 3, 2009 proposal to acquire the Company for $7.50 per share. The $8.50 per share purchase price also represents a premium of 13% over Mr. Baker’s initial proposal, and a premium of 18% over LSR’s closing share price of $7.18 on July 8, 2009, the last full trading day prior to today’s announcement.

A Special Committee consisting of LSR’s independent directors was charged with evaluating strategic alternatives for the Company and unanimously recommended approval of the merger. Based upon this recommendation, LSR’s Board of Directors (with Andrew Baker and Brian Cass abstaining), approved the merger and resolved to recommend that LSR stockholders approve the merger.

Lion Holdings, Inc. has secured equity and debt financing commitments that provide for the necessary funds to consummate the transactions contemplated by the merger agreement. The transaction is expected to close in the fourth quarter of 2009 and is subject to certain closing conditions, including approval by LSR stockholders.

 

Categories: Arbitrage · Investing · Special Situations · Update
Tagged: andrew baker, LSR, Merger, ValueHuntr

Soapstone Networks (SOAP) to Liquidate

June 16, 2009 · 1 Comment

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Soapstone Networks announced yesterday that its Board of Directors has unanimously approved a plan of dissolution and liquidation of the Company.

We added SOAP to the Valuehuntr Portfolio on March 9, 2009, after the company announced it was seeking strategic alternatives to enhance shareholder value. At the time, the company had nearly $6.0/share in cash, but trading at a market cap of $2.8/share.

As part of the decision to liquidate, SOAP has ceased the development and marketing of the Soapstone Provider Network Controller (PNC) product and has reduced its workforce by 50 to a total of 14 employees. Moreover, if the Company’s stockholders approve the Plan of Liquidation, the Company intends to file a certificate of dissolution, delist its shares from NASDAQ, sell and monetize its non-cash assets, satisfy or settle its remaining liabilities and obligations, including any contingent liabilities and claims, terminate its remaining employees throughout the wind down period, and make one or more distributions to its stockholders of cash available for distribution.

SOAP also announced that its Board has unanimously approved an extraordinary cash dividend of $3.75 per share, provided that the Board may adjust such amount at a later date to ensure there is remaining cash to satisfy potential liabilities. Such dividend will be payable after the stockholder meeting at which the Plan of Liquidation is approved by the Company’s stockholders and in connection with the filing of a Certificate of Dissolution with the Delaware Secretary of State.

The Company has analyzed its liquidation value and currently estimates that the amount of subsequent distributions to stockholders will range from $0.25 to $0.75 per share, for a total distribution, including the extraordinary cash dividend, of between $4.00 and $4.50 per share. The amount of these distributions, however, may vary substantially from these estimates based on the resolution of outstanding known and contingent liabilities and the possible assertion of claims that are currently unknown to the Company. If, prior to its dissolution, the Company receives an offer for a transaction that will, in the view of the Board, provide superior value to stockholders than the value of the estimated distributions under the Plan, taking into account all factors that could affect valuation, including timing and certainty of payment or closing, credit market risks, proposed terms and other factors, the Plan of Liquidation and the dissolution could be abandoned in favor of such a transaction.

The Board made this decision after completing an exhaustive evaluation of various strategic alternatives available to the Company for enhancing stockholder value, including but not limited to, continued execution of the Company’s business plan, the payment of a cash dividend to the Company’s stockholders, 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, or acquisition by, the Company or other strategic transaction. The Company and its external advisors, including its financial advisor Morgan Stanley & Co. Incorporated, devoted substantial time and effort in identifying potential buyers or strategic partners and entered into negotiations with several potential partners; however, that process did not yield a potential transaction which the Board viewed as reasonably likely to provide greater realizable value to its stockholders than the complete dissolution and liquidation of the Company in accordance with the Plan of Liquidation.

Categories: Liquidation · News · Special Situations · Value Investing
Tagged: Liquidation, SOAP, Soapstone Networks

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

Is XTNT a Bargain Once Again?

May 18, 2009 · Leave a Comment

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A reader sent us an email yesterday asking whether XTNT is a good investment at $0.30/share given that its Board of Directors approved a plan for liquidation and that the company stock dropped a whopping 70% after the announcement was made. Our personal opinion is that the short answer is “No“, but readers are encouraged to conduct their own research.

Some of you may recall that we opened added XTNT to our portfolio on March 17, 2009. In our article, we outlined our case for XTNT. At the time, the company was selling at $0.46/share with nearly $0.80/share in cash or cash equivalents on its balance sheet. The company had already engaged Piper Jaffray  & Co. to explore strategic alternatives and had reduced its workforce by over 96% in the process. So, in a Graham-like fashion, we concluded that the margin of safety for this investment was high as long as the cash burn rate remained under control and liquidation expenses did not exceed $50M. Two weeks later, the company was trading at $0.76/share, and we exited our position for a 77% gain. 

Five days after closing our position on XTNT, the company surged to $1.50/share, which inspired us to write our article “Selling is Harder Than Buying: A Comment on XTNT” on March 31, 2009. In the article we explained that although we would have loved to keep the company for an extra five days,  keeping the company meant going beyond, if not disengaging, not only form our core discipline, but also from our original thesis.

Yesterday, the board announced that they have approved liquidating the company, but this was not the same company we had first encountered back in March. First, the company was trading at $1.00/share, which was above our March estimate for liquidation value. But most importantly, the latest 10-Q filing indicates that the company burned through nearly $7M of cash and cash equivalents between March and May, bringing the company’s net cash value down to nearly $0.50/share. Therefore, it is clear that the company is not worth the $1.00/share it was selling for just a couple of days ago.

Furthermore, the preliminary proxy filed on May 15, 2009  indicates that employee compensation, professional fees, insurance, and operating expenses would range between $0.20/share to $0.40/share, leaving only $0.10 to $0.30 per share to be distributed among stockholders.

xtnt_liq_estimates

The precipitous drop in cash and cash equivalents in XTNT highlights two key learning points:

a) The inclusion of “expected liabilities” is necessary in estimating a proper liquidating value. These can be hard to estimate.

b) “Expected liabilities” will depend on the timing of the transaction, making timing another difficult factor to evaluate in estimating liquidation value.

Both of these points emphasize the need for a wide margin of safety when engaging in this type of investment operation. This will unquestionably force us to take another look at Eden Bioscience Corp. (EDEN), a stock in our portfolio involved on this type of transaction which has a low margin of safety relative to our estimated liquidation value.

Categories: Liquidation · Special Situations · Update · Value Investing
Tagged: Liquidation, Xtent, XTNT

Eden Bioscience Corporation (NASDAQ: EDEN)

May 8, 2009 · 4 Comments

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We are adding Eden Bioscience Corporation (EDEN) to our ValueHuntr Portfolio. On December 5, 2008 the company announced its intention to dissolve, following the board’s consideration of strategic options to maximize shareholder value. The Company intends to hold a special meeting of shareholders to seek approval of the liquidation plan on May 20, 2009. At its current market price of $1.40/share, the company is trading at a discount to our conservative estimate of $1.64/share value at liquidation.

On an April 1, 2009 DEF14A SEC filing, the company’s management estimated a total liquidating distribution of between $1.27 and $1.42 per share. In particular, they expect to make an initial distribution of up to $1.00 per share within 45 days after the effective date of dissolution, and the rest of the distribution six months after dissolution has been approved. Our analysis indicates a slightly higher liquidation value than management has provided. However, investors should be aware that the margin of safety for this particular investment is smaller than in our typical case, so a smaller portfolio allocation would be desirable if this is in fact the case.

About

Eden Bioscience Corporation is sells harpin protein-based products to the home and garden markets in the United States. The company offers Messenger, Messenger Seed Treatment, and MightyPlant with Messenger Gold products for the protection of plants and seeds, and the promotion of plant health. Its products help plants to grow through stress and improve plants uptake of nutrients. Eden Bioscience sells its products through independent distributors and retailers.

On December 5, 2008, the Board of Directors approved the complete liquidation of the business. The press release indicates the following:

Eden Bioscience Corporation announced today that its Board of Directors determined, in its best business judgment after consideration of available strategic options, that it is in the best interests of the Company and its shareholders to liquidate the Company’s assets and to dissolve the Company. The Company’s Board of Directors approved a plan of dissolution and liquidation of the Company (the “Plan”), subject to shareholder approval. The Company intends to hold a special meeting of shareholders to seek approval of the Plan and will file related proxy materials with the Securities and Exchange Commission in the near future.

The Plan contemplates an orderly wind down of the Company’s business and operations. If the Company’s shareholders approve the Plan, the Company intends to file articles of dissolution, sell or otherwise dispose of its non-cash assets, satisfy or settle its remaining liabilities and obligations, including contingent liabilities and claims, and make one or more distributions to its shareholders of cash available for distribution, subject to applicable legal requirements. Following shareholder approval of the Plan and the filing of articles of dissolution, the Company would delist its common stock from NASDAQ.

In February 2007, the Company completed the sale of its proprietary harpin protein technology and substantially all of the assets related to its worldwide agricultural and horticultural markets to Plant Health Care, Inc. Since that sale, the Company’s business strategy has been to use any revenue generated by its home and garden business to support the Company’s continued operations while it explored whether there may be opportunities to realize potential value from the Company’s remaining business assets, primarily its tax loss carryforwards. Despite its significant efforts, the Company has been unable to identify an acceptable transaction that would enable it to implement this utilization strategy. At the same time, the Company has continued to incur net losses in its home and garden business. Given these and other circumstances, the Company’s Board of Directors, after careful evaluation of strategic alternatives available with respect to the Company’s future operations, concluded that the distribution of the Company’s assets in liquidation was in the best interests of the Company and its shareholders when compared to other alternatives.

On April 3, 2009 EDEN filed the SEC proxy regarding the company’s voluntary dissolution:

Dear Eden Bioscience Corporation Shareholder:

On May 5, 2009, we filed with the Securities and Exchange Commission our quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2009 (the “Form 10-Q”). The Form 10-Q, which is enclosed with this letter, contains important business and financial information about our company and should be read carefully.

As previously announced, a special meeting of shareholders will be held on May 20, 2009, at 9:00 a.m., Pacific time, at the Country Inn & Suites By Carlson, 19333 North Creek Parkway, Bothell, Washington 98011, for the following purposes:

1. To consider and vote upon a proposal to approve the voluntary dissolution and liquidation of our company pursuant to a plan of complete dissolution and liquidation (the “Plan of Dissolution”).

2. To consider and vote upon a proposal to adjourn the special meeting to another date, time or place, if necessary in the judgment of the proxy holders, for the purpose of soliciting additional proxies to vote in favor of Proposal 1.

3. To transact such other business as may properly come before the meeting and any adjournments or postponements thereof.

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF PROPOSALS 1 AND 2.

The proposal to approve the Plan of Dissolution requires the affirmative vote of at least two-thirds of the outstanding shares of our common stock and the proposal to grant discretionary authority to the proxy holders to adjourn the special meeting requires that the votes cast in favor of the proposal exceed the votes cast against the proposal. Therefore, it is very important that your shares be represented at the special meeting.

Valuation

At $1.40/share, we believe the company is slightly undervalued relative to our estimated liquidation value of $1.64/share, which implies a potential absolute return of 17% at liquidation. Our analysis includes off-balance sheet arrangements, cash burn assumptions from March 31, 2009 filing date to date of liquidation, and the costs associated with liquidating the company’s assets.

eden_balance

Off-Balance Sheet Assets

The company may be able to realize benefits due to its tax loss carryfowards. For the sake of conservatism, we assume no tax benefits in our analysis for liquidating value. The company’s latest 10Q explains the company’s tax situation:

The Company files a U.S. Federal and certain foreign and state tax returns and did not record an income tax benefit for any of the periods presented because it has experienced operating losses since inception. The Company’s total U.S. Federal tax net operating loss carryforwards were approximately $118.8 million at December 31, 2008 and expire between 2009 and 2027. The Company’s total foreign tax net operating loss carryforwards were approximately $4.3 million at December 31, 2008, of which $1.4 million expires between 2011 and 2018 and $2.9 million does not expire. The Company has total net operating loss carryforwards in 19 states that range between $12.6 million to $2,000 per state and expire between 2009 and 2027. The Company’s total general business credit carryforwards were approximately $1.4 million at December 31, 2008 and expire between 2013 and 2026.

If the Company were to undergo an “ownership change” as defined in Section 382 of the U.S. Internal Revenue Code (the “Code”), its net tax loss and general business credit carryforwards generated prior to the ownership change would be subject to annual limitations, which could reduce, eliminate, or defer the utilization of these losses. Based upon an analysis of past changes in the Company’s ownership, the Company believes that it has experienced ownership changes (as defined under Section 382) on March 20, 1996 and October 2, 2000 and absent any other ownership changes in the future, there are no significant limitations on the Company’s future ability to use net operating loss carryforwards generated prior to those dates. The Company does not believe it has experienced any other ownership changes that would further limit its future ability to use net operating loss carryforwards generated after October 2000.

Conclusion

We have added Eden Bioscience Corporation (EDEN) to our portfolio because at its current market price of $1.40/share, the company is trading at a discount to our estimate of $1.64/share value at liquidation, which represents an expected absolute return of 17% if liquidation is approved. However, already at the upper level of the $1.27-$1.42 guidance provided by management, the margin of safety for this investment is not as large as in our typical case.

Disclosure: We currently have a position on EDEN.

Categories: Liquidation · Special Situations · Valuation · Value Investing
Tagged: EDEN, eden bioscience, Liquidation

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.

OPERATIONAL HIGHLIGHTS

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.

UPDATED VALUATION

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

En Pointe Technologies, Inc (NASDAQ: ENPT)

April 28, 2009 · 4 Comments

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We are adding En Pointe technologies, Inc. to our ValueHuntr Portfolio. On March 1, 2009, the company agreed to be acquired for $2.50/share in cash. This represents a potential 13% absolute return relative to the company’s current price of $2.22/share if the merger is materialized, which we expect it will.

 

About

 

En Pointe Technologies, Inc., through its subsidiaries, provides information technology hardware and software products and services in the United States. The company offers a range of hardware and software products, such as desktop and laptop computers, servers, monitors, memory, peripherals and accessories, operating systems, application software, and consumables and supplies. It serves large and medium sized companies, and government entities. The company was founded in 1993 and is headquartered in Gardena, California.

 

Catalyst

 

ENPT’s Board of Directors, acting upon the unanimous recommendation of a special committee comprised entirely of independent directors, has approved the merger agreement and resolved to recommend that the Company’s stockholders vote in favor of the agreement. Pursuant to the terms of the merger agreement, the Acquiror has agreed to pay to the Company’s stockholders $2.50 in cash for each outstanding share of the Company’s common stock. The merger agreement contains customary representations, warranties and covenants made by the Company, including covenants that the Company will run its business in the ordinary course of business consistent with past practice and will refrain from taking certain actions between the date of the merger agreement and the date of closing of the merger.

Conclusion

We are adding En Pointe technologies, Inc. to our ValueHuntr Portfolio because we believe the probability that the merger will consummate before the end of Q3 is fairly high. Therefore, we see this investment as one which can provide us with a quick 13% absolute return with little to no risk.

 

The proxy statement submitted by ENPT regarding the special shareholder meeting prior to merger approval can be found here.

 

 

Disclosure: We currently have a position in ENPT

Categories: Arbitrage · Special Situations · Value Investing
Tagged: Arbitrage, En Pointe Technologies, ENPT, Merger, Special Situations