ToffCap's Monday Monitor #16

Interesting event-driven trades and companies

Dec 18, 2023

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ToffCap’s Monday Monitor provides a snapshot of interesting potential investments and event-driven trades we find while turning over many rocks, with a special focus on companies that screen cheaply and catalyst trades. The list is dynamic; it continues to grow and change. If you have interesting additions to the list, feel free to contact us at contact@toffcap.com or on Twitter.

Enjoy!

Disclaimer. ToffCap’s Monday Monitor is provided for informative purposes only. No due diligence has (yet) been performed on the names on this list. The list might change strongly on a regular basis. This overview does not constitute advice; always do your own due diligence.

Important notice. We would like to publish the TMM on a weekly basis, but we need a more critical mass. If you enjoy this service, please like and hit the “share” button below. Thank you.

This will be the last TMM before the holidays. Have a good holiday season and see you next year!

The ToffCap Team

Overview

I. Company watchlist

II. Catalyst trades

I. COMPANY WATCHLIST

Interesting companies with seemingly strong upside potential we have looked at recently.

Additions this week:

Brodrene A. & O. Johansen (AOJB Denmark – DKK 1.6bn). This pitch comes straight from Alexander Eliasson. Alexander is a very smart and knowledgeable investor; if you’re not following Alex you’re just missing out. Brodrene is a distributor of home furnishing equipment (a.o. heating, plumbing, electric and water supplies). After a few stagnant years on the back of covid tailwinds, Brodrene seems set for strong growth ahead at a very reasonable valuation. You can buy a market leader at approx. 8-9x depressed net earnings (40-50% global peer discount) and 7+% yearly dividend. We seem to be on the verge of a new up-cycle, which will drive earnings growth and improved sentiment, with the share price following. Alexander has been so kind as to provide us with a short pitch, which you can find here. H/t @alexeliasson for the idea.
Roivant Sciences (ROIV US – $9.0bn). Jonathan Paxx provided a summary on a (very) recent VIC write-up on Roivant. We generally don’t publish on new VIC write-ups unless its something we’ve already been looking and adds value, but given it’s already out there we’ve figured to give you the link to what seems to be a very interesting case. Roivant will soon close a $7.25bn deal with Roche for their Telavant project. Once its closed, the company will have ample cash available, which combined with their 57% stake in Immunovant (IMVT US), will in roughly $12 per share value vs. a current share price of around $11. There’s thus a lot of free optionality for everything else that Roivant is developing. H/t @JonathanPaxx (and VIC) for the idea.

II. CATALYST TRADES

Event-driven trades and ideas.

New additions and updates

Neighbourly Pharmacy (NBLY Canada). Proposed take private for C$20.50 vs current price of c. $17.90 current. Exclusivity agreement extended to Jan 15 to complete negotiations. H/t @paddymcilvenna for the idea.
Roivant Sciences (ROIV US). On the brink of sealing a $7.25bn deal with Roche for their Telavant project. Once deal closed, cash (~$7bn) + 57% stake in Immunovant (IMVT) results in roughly $12 per share - vs. current share price of $11; hence free optionality for everything else that Roivant is developing. H/t @JonathanPaxx (and VIC) for the idea.
Silver Sun Technologies (SSNT US). Micro-cap SSNT announced a weird transaction; XPO chairman Jacobs to invest $900m in Silver Sun, Sequoia $100m, existing Silver Sun business to be spun-off. M&A shell remains (tbc QXO), setting a target of >$1bn revenues by year 1 with acquisitions is building products space.
Lazydays (LAZY US). Continued strong insider purchases (CEO and CFO). Largest shareholder has also been acquiring shares. Stock hammered over past few months.
Howard Hughes (HHH US). Another week, another purchase by Ackman (Pershing Square) of HHH. Company announced it would spin off its Seaport and other related assets. ~90% upside to NAV (according to HHH).
Velo3D (VLD US). Velo3D announced that is has started a strategic review 'to maximise shareholder value'. CEO recently left.
Ether Capital (ETHC Canada). Lots going on at cryptocurrency investor Ether Capital: CEO change, buyback announced as well as to initiate exploring strategic alternatives. Company has a strong balance sheet.
InPost (INPST Netherlands). Advent (PE) sold another stake (5%) to PPF. PPF now owns ~22%, with option for the another 10%. Shares have reacted positively (again) as 'shareholder overhang' is reduced.
Vivendi (VIV France). Trying (again) to figure out ways to reduce the conglomerate discount. Now exploring a split of the company into several entities (Havas, Canal+ and an InvestCo).
Seadrill (SDRL US). Announced a new $250m buyback (~7% of s/o). Since its (re)listing, Seadrill continues to print cash and buy back shares.
Seanergy Maritime (SHIP US). Announced a new $25m buyback, roughly 17% of market cap.
Quantasing (QSG US). Another Chinese net cash, negative EV company announced a big buyback, $20m or ~20% of market cap.
Core Scientific (CORZQ US). To emerge from bankruptcy in Jan. 2024 + right offering announced. Lots going on which will create volatility (hence opportunity).
Capstone Green Energy (CGRNQ US). To emerge from bankruptcy over next week. Will trade OTC.
Designer Brands (DBI US). Designer Brands continues to buy back shares; now roughly 30% of s/o bought back over past 12 months.
SuRo Capital (SSSS US). Continued big insider buying in this micro-cap.
African Oil Company (AOI Canada). Announced a 10% buyback + big insider purchases. AOI is ~25% net cash, very profitable and cash generative.
G-III (GIII US). Announced a buyback of 10m shares outstanding, >20% of market cap.
Icosavax (ICVX US). AstraZeneca to initiate a tender offer for all s/o at $15 p/s, incl. a contingent value right (CVR) potentially worth $5. Shares at ~$15.70.
Biglari Holdings (BH US). Insiders purchased $2.3m in shares (>4% of s/o). Biglari now owning >60% of s/o.
Spartan Delta (SDE Canada). Strong insider purchases. Stock decimated over past year; now ~$3 p/s vs $14 a year ago.
Kodiak Gas Services (KGS US). Kodiak has a large upcoming lock-up expiry ahead on Dec. 26, roughly 80% of shares outstanding.
Webcentral (WCG Australia). Recently announced the sale of core business. Stock price was up sharply, but market seems to underestimate SOTP value. Current share price ~28ct vs potentially >45ct per share SOTP. Should play out over the next few months. H/t to @TheRealDavey2 and @ClarkSquareCap for the idea. See @ClarkSquareCap for a write-up.
UPDATE: Buyback announced (10%), to commence as soon as Dec. 22, after completion of the sale of the Domains business (expected Dec. 20).
Docebo (DCBO US). Odd lot tender offer (potential $1000 to be made). Keep assessed.
UPDATE: Reminder that tender offer will expire on Dec. 28.
Lifecore Biomedical (LFCR US). Strategic alternatives. Potential buy-out. Demand for similar CDMO assets is high. Large shareholders pushing for sale. Potentially 75-100% upside.
UPDATE: LFCR recently communicated that it continues to actively evaluate strategic alternatives.
Rain Oncology (RAIN US). Busted biotech, negative EV Rain Oncology received a buy-out offer from Concentra Biosciences (Tang Capital). Shareholders to receive (if accepted) $1.25 per share + a contingent value right (CVR). Tang already owns c.15% of the company. Current share price (27 October) is $ 1.07.
UPDATE: Signed a merger deal with Pathos AI for $1.16 cash per share + a CVR with potential value of $0.17. Current share price $1.20.
LianBio (LIAN US). Net cash biotech, announcing strategic review. Interest from BMS for HCM assets. BMS set to pay LianBio $350m in a one-off fee. C. 80% of market cap currently net cash.
UPDATE: Received offer from Concentra Biosciences for $4.30 p/s in cash. LIAN rejected the offer.
Spirit Airlines (SAVE US). Merger arbitrage. Spirit / JetBlue merger uncertainty; airlines disagree with DOJ attempt to block the merger. The trial date has been set for October 16. Spirit shareholders to receive ~$ 33 / share if deal consummated (vs current share price ~$ 17). Companies confident in deal closing potential.
UPDATE: Court decision expected by year end. Spread still wide.
Yellow (YELLQ US). Currently in bankruptcy proceedings. Relatively valuable asset base with already some good bids; main uncertainty is pension liabilities. High risk/reward trade. H/t @AmadeusValue for idea and more info.
UPDATE: Positive news flow regarding (pricing of assets in) auctions; strong share price reaction so far.
Solvay (SOLB Belgium). A reminder of the upcoming separation of Solvay's Essential business (commodity products, Solvay) and specialty chemicals operations (Syensqo) on December 11. Interesting to keep an eye out given large differences in quality and growth of both companies.
UPDATE: Spin completed. Spinco trading under Syensqo SYENS. A reminder that this was a 1-1 spin. Strong share price reaction of both shares.