ToffCap's Monday Monitor #17

Interesting event-driven trades and companies

Jan 08, 2024

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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.

I. Company watchlist

II. Catalyst trades

I. COMPANY WATCHLIST

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

Additions this week:

Clark Street Value. We’re taking it a bit slow this week on the Company Watchlist side as we’re all still recovering from the holidays. That said, we want to highlight the year end review of Clark Street Value. We’ve followed CSV for almost a decade now. CSV was one of the first investing blogs out there, and one of high caliber quality. The year-end reviews are a must-read for every serious event-driven investor. As always CSV does not dissappoint, and provides (besides a consistently strong track record) a ton of interesting current opportunities. We highly suggest to dive into this one.

II. CATALYST TRADES

Event-driven trades and ideas.

New additions and updates

Sodexo (SW France). Sodexo to spin-off Pluxee in early 2024. Pluxee current growing much more rapidly at much higher margins than Sodexo. Might be interesting to keep an eye on. H/t @hurdle_rate for the idea.
UPDATE: Pluxee spin to be completed by February 1. Sodexo will hold a Capital Markets Day where medium-term guidance will be provided.
Friedman Industries (FRD US). Announced a buyback of roughly 15% of current market cap (07/01).
Core Scientific (CORZQ US). To emerge from bankruptcy in Jan. 2024 + right offering announced. Lots going on which will create volatility (hence opportunity).
UPDATE: Will emerge from bankruptcy over the next few weeks. Might be interesting to keep an eye on.
Liquida Technologies (LQDA US). Patent litigation. Could stand to gain a lot if resolved and product brought onto market. See old VIC write-up.
UPDATE: Recently won litigation against United Therapeutics (UTHR US). Secured additional funding. LQDA could be a multi-bagger if product succesfully brought onto market.
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 expanded and extended its CDMO activities with main partner Alcon. Reiterated to continue to actively evaluate strategic alternatives; still working on refiling. Trigger could be imminent.
NGM Biopharmaceuticals (NGM US). Largest shareholder Column Group interested in taking NGM private. To note is NGM's strong net cash position (roughly $160m).
Theseus Pharma (THRX US). To be acquired by Tang Capital for $4 p/s in cash + a CVR vs a current share price (05/01) of $3.97. Closing expected in February.
Atreca (BCEL US). Liquidation of asset base for 6ct + one CVR valued at 17ct; current share price (05/01) roughly 12ct.
Beyond Air (XAIR US). BIG insider purchases in this busted bio/med-tech nano-cap. M&A coming up?
Smith Douglas Homes (SDHC US). We flag the upcoming IPO of home builder Smith Douglas Homes. Market cap targeted around $1bn (mid-range); estimated p/e around 7-8x, which screens well given the profitability and relatively strong growth. IPO over next week.
Ayr Wellness (AYRWF US). Large insider purchases in this micro-cap as well.
Moatable (MTBL US). Yet another Chinese net cash, negative EV company announcing a big buyback, $15m on a $17m market cap.
System1 (SST US). Announced a ~$80m buyback program (roughly 30% of current market cap.)
Cherry Hill Mortgage (CHMI US). Announced a $50m buyback program (on a $100m market cap.)
Protect Pharma (PRTT US). Announced a buyback program of $10m of shares outstanding, on a market cap of rougly $60m. Lots going on here (Bosfor acquisition, audit progressing). Could be interesting to keep an eye on.
Oddity Tech (ODD US). Oddity has a BIG share unlock coming up (Jan. 15), where ~80% of shares outstanding will unlock.
Stratasys (SSYS US). After the busted merger agreement with Desktop Metal (DM US) and the initiation of a strategic review. Nano Dimension (NNDM US) will acquire Stratasys for $16.50 p/s, roughly 20% above the current share price (05/01).
Allovir (ALVR US). Busted biotech Allovir announced strategic alternatives. Allovir has ~$180m in net cash on a market cap of roughly $70m (though relatively high cash burn rate).
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. Received offer from Concentra Biosciences for $4.30 p/s in cash. LIAN rejected the offer.
UPDATE: CEO resigned. LianBio intends to update the market on its ongoing strategic review in Q1 24.
Innovative Food (IVFH US). Microcap Innovative Food is exploring strategic alternatives regarding its e-commerce business. A LOT of interesting stuff is going on here, and might be interesting to keep an eye out.
Parks! America (PRKA US). Interesting action at cool micro-cap Parks America. Activist Focused Compounding is actively pursuing a board takeover (reduction from 7 to 3). A special shareholders meeting will be held next month. The business operates three drive through safari parks; one is very profitable while two struggle. They could sell off the unprofitable parks and turn it into a cash cow (or other). H/t @MoS_Investing for the idea.
CorEnergy Infrastructure Trust (CORR US). Lots going on at CorEnergy Infra. Upcoming credit facility maturity, selling Mogas pipeline to Spire (SR) for $175m to address that, held up by FTC inquiry. CORR guided for sale to go through YE 2023; SR said 1Q 24 (depending on FTC). News could come any day. High probability for BK if deal does not go through. Other smaller catalyst in potential rate increase on California pipeline. H/t @theotheraharon for the idea.
Chegg (CHGG US). We notice the new short report from The Bear Cave on Chegg.
Lionsgate (LGF/A US). Spin-off of the movie / TV studio business estimated in September. Lots of action with bondholders forming a bond group to block the spin, and appear to be succeeding.
UPDATE: Now intends to spin studio business via SPAC Screaming Eagle (SCRM US).
Flex (FLEX US). Flex to spin-off 51% stake in NEXTracker (NXT US). NEXTracker is currently trading at a much higher valuation; potential large value unlock.
UPDATE: Spin completed on January 2.
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.
UPDATE: Positive news flow regarding (pricing of assets in) auctions; strong share price reaction so far.