ToffCap's Monday Monitor #23
Your regular monitor for interesting event-driven trades and companies
ToffCap’s Monday Monitor is our overview of interesting event-driven trades and companies we find while turning over many rocks. 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.
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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.
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Below you will find the new, downloadable overview of this week’s TMM. We hope you’ll enjoy it.
As mentioned before, going forward we’ll be merging the ‘Interesting Companies’ section with the event-driven section below. We will also add another overview screen in our PDF of these interesting companies; that will make it easier to track the performance and find previous highlights one might have missed. We hope you appreciate this change as we try to maintain a neat overview.
This week’s additions, highlights and updates of event-driven trades
3M (MMM US). Will spin its health care business into an independent public company ('Solventum'). Spin effective April 2.
UPDATE (April 8, 2024) 3M completed the separation of its health care business Solventum (SOLV). Shares -17% since (April 5). Classic pre-coverage period.
General Electric (GE US). GE is set to spin its energy business ('Vernova') on April 2. Will trade under 'GEV'. UPDATE (March 15, 2024) GE dove deep into the medium-term expectations of the upcoming spin-offs during the recent investor day.
UPDATE (April 8, 2024) GE completed the spin-off of GE Vernova (GEV). Shares -4% since listing (April 5). Classic pre-coverage period.
Cryo-Cell (CCEL US). Cryo-Cell announced plans to spin off its newly formed subsidiary Celle Corp to maximize shareholder value, exploring strategic alternatives post spin-off such as equity/debt financings, sale, or merger.
Bragg Gaming (BRAG Canada). Peer GAN to be taken out at >100% premium. Bragg is higher quality and profitable, trading at large discount to implied (similar) deal valuation.
UPDATE (April 8, 2024) Reviewing strategic alternatives, which may include the sale of the company or of its assets, a merger, financing, further acquisitions, or other strategic alternatives. No timetable to complete the strategic review process has been established.
Allovir (ALVR US). Classic example of a loser biotech. Share price <$1 means Nasdaq delisting is very likely (hence more forced selling). ALVR has $165m net cash on the b/s and recently significantly reduced opex (95% reduction of workforce) and the discontinuation of clinical development. Now the co is 'assessing strategic alternatives'. Next steps are potential reverse stock split to regain compliance, liquidation or take-over.
Aclaris (ACRS US). Aclaris is another one (i.c. net-cash busted biotech, -45% workforce reduction, 'evaluating strategic alternatives'). Guesstimating (mainly assumptions for cash burn going forward and value NOLs), we can see a bear-bull case of $1-3 per share here, or -20% to +140%. We highlight the write up from our friend Amadeus Value.
Reneo (RPHM US). The third on this week's list of net-cash, busted biotechs, reviewing strategic alternatives.
EML Payments (EML Australia). Interesting SOTP investment thesis from @puppyeh1. EML appears to have relatively inefficient assets that could be sold off, or the company as a whole. STOP value / share could be >$1.70 vs $1.09 current share price (October 30). Strong indications of near-term catalysts. Refer to @puppyeh1 thread (Oct. 26) for a more detailed explanation. UPDATE (Jan 21, 2024) Announced a full exit from PCSIL. Strategic review ongoing. Other assets could be next (Sentenial, perhaps clean pieces too). UPDATE (April 15, 2024) EML to sell Sentenial for $54m.
UPDATE (April 8, 2024) Stock pressured on Board changes as Connor Haley (Alta Fox Capital) leaving (hence fear AFC - 8% owner - might sell).
Ocean Wilson (OCN UK). Investment holdco trading at a significant discount to NAV. Announced strategic review of Wilson Sons ($PORT3) which might unlock value. Strong upside in case of liquidation.
UPDATE (April 8, 2024) Strategic review ongoing but company expects it to be completed in 2024.
Marlowe (MRL UK). Shares down strongly on recent results. Strategic review ongoing; company is considering sale or spin-off of TIC. Currently trading at ~6.3x FY23e ebitda, roughly 40% below peers.
UPDATE (April 8, 2024) To sell GRC software and service assets. After the deal, Marlowe will have a net cash position ~GBP200m (current market cap of c. GBP500m). The company will return at least GBP150m through share buybacks and/or dividends. There remains significant upside potential in our opinion.
Summit Midstream Partners (SMLP US). Ongoing strategic process. Sale looks most likely outcome. Announcement could be imminent as update on strategic review will be provided on March 15. UPDATE (March 1, 2024) Strategic review entered 'critical phase with high interest'.
UPDATE (April 8, 2024) Divesting Utica assets to MPLX for $625m. Stock +40% on the news.
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.
UPDATE (April 8, 2024) Approved a $1.5B stock repurchase, c. 16% of the current market cap (April 8), with the first $648m for the buy out Sumitomo Pharma.
TD SYNNEX (SNX US). Announced a $2bn buyback, roughly 19% of the market cap (05/04).
National CineMedia (NCMI US). Good ol' NCMI popped back on our screens (remember the bankruptcy exit play), this time due to a $100m buyback, roughly 19% of the market cap (05/04).
RCM Technologies (RCMT US). Announced a $50m buyback, but also a $100m shelf. RCM appears to have a solid b/s and is trading at <7x FY24e ev/ebitda, for what seems decent growth.
Fiverr International (FVRR US). To buy back $100m in shares, c. 13% of market cap (05/04). We don't know this company, but at first sight we notice the strong net cash b/s, ebitda inflection into positive territory and <7x ev/ebitda on FY24e for >30% estimated ebitda growth.
Journey Medical (DERM US). Insider buying at this micro-cap. Journey has a net cash b/s and earnings seem on the verge to inflect positively. According to Bloomberg, DERM is trading at ~2x FY25e ev/ebitda.
OmniAB (OABI US). VERY strong recent purchases by insiders. Might be interesting to keep an eye on.
Herbalife (HLF US). The lower the price goes, the more insiders seem to be buying. A lot going on here.
Journey Energy (JOY Canada). Insiders acquired some shares. Very neat, clean company with strong torque to rising commodity prices.
Seritage Growth Properties (SRG US). Liquidation. At a strong pace. Could see $10-17 per share distribution on $9.64 share price (April 5), or 'potential strategic transactions'.
Bpost (BPOST Belgium). To acquire 3rd party logistics provider Staci. Transformational acquisition.
Sapiens International (SPNS US). Exploring a sale according to Bloomberg. Engaged investment bank to gauge interest.
Rent the Runway (RENT US). If you like dumpster diving, RENT received a notice from Nasdaq stating that the company is not in compliance with the minimum Market Value of Listed Securities required for continued listing. The company has a period to regain compliance with the MVLS Requirement, and a reverse stock split at a ratio of 1-for-20 was approved. Stock massively pressured by restructuring (and leverage), but could reach ebitda break-even soon.
Edible Garden (EDBL US). Nano-cap Edible Garden intends to effect a reverse stock split of its common stock at a ratio of 1-for-20 shares, effective on April 5, 2024. Despite the horrible share price performance, revenues have actually been growing steadily. Might provide a bump as compliance is regained.
Ashford (AINC US). Ashford approved a 1-for-10,000 reverse stock split, followed by a 10,000-for-1 forward stock split. Stockholders with <10,000 shares would receive $5.00 per share in cash. Directors and officers owning 37.9% of shares are expected to vote in favor of the transaction. Stock trading at $4.66 (April 5).
Landos Biopharma (LABP US). Landos Biopharma to be acquired by AbbVie for $20.42 per share in cash + a CVR valued up to $11.14 per share. Current LABP share price $21.50 (05/04).
Rubicon Technologies (RBT US). In another dumpster dive exercise, Rubicon Technologies received a notice from the NYSE stating non-compliance with listing standards regarding market capitalization and stock price (<$1.00). The company has time to submit a plan to regain compliance, generally done by stock splits. Shares are generally pressured on these circumstances. RBT has c. $300m in debt and prefs and a market cap of $22m, on $700m revenues. 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 (Jan 7, 2024) Recently won litigation against United Therapeutics (UTHR US). Secured additional funding. LQDA could be a multi-bagger if product successfully brought onto market.
UPDATE (April 8, 2024) FDA to probably approval for PAH and ILD indications. LQDA can start to sell immediately, which is a major catalyst for growth.
Nu Ride (NRDE US). Nu Ride is the post-reorg reincarnation of Lordstown. A net-cash, negative EV, busted SPAC with $1bn in NOLs. Litigation against Foxconn. Messy but interesting.
Amplify Energy (AMPY US). Oil & Gas company trading at ~4x ev/ebitda on FY24e. Two major catalysts over the next six months: the results of Beta wells and the conclusion of the Bairoil sale. Cash flows to expect to significantly grow after FY25. Plus obvious commodity exposure.
Sun Corp. (6736 Japan). This Japanese company is the main shareholder in Cellebrite (CLBT) and trades at over 60% discount to the value of its stake and cash. Co. is looking into ways to monetize its stake/discount with the help of activist investors. H/t @SpecSitsCapMgmt for the idea.
UPDATE (April 8, 2024) We note the recent write-up of Clark Square Capital on Sun Corp. CSC is a highly recommended platform.
Bally's (BALY US). Merger arb. Takeover bid from Standard General at $15 p/s. Set up a special committee to evaluate the offer. Roughly 13% spread (15/03).
UPDATE (April 8, 2024) Bally's announced the retention of advisors in connection with the offer (and potential strategic alternatives to the offer).
Itafos (IFOS Canada). Phosphate fetilizer company, trading at <2x ev/ebitda on 2024e. Strongly reduced debt. Strategic review ongoing (since roughly a year). Just seems too cheap.
Clasquin (ALCLA France). MSC to launch tender offer for Clasquin's (remaining) shares. Chairman Yves Revol already sold his stake for €142 per share. Current share price €137 (April 5). Looks like a nice trade for a short period. H/t @Govro12 and @InvestSpecial for the idea.
Smith Micro Software (SMSI US). Smith Micro Software approved a reverse stock split of one-for-eight, effective on April 10, 2024. Trading under the new CUSIP number will commence on April 11. Might be interesting as a share price that moves <$1 often means forces selling. A reverse stock split might (partially) reverse that action.
Surf Air Mobility (SRFM US). Micro-cap Surf Air will hold its first investor day ever on June 7. Might be interesting as the stock is massively pressured (ao due to potential delesting as the share price is <$1). No idea what's real here, but Canaccord is plugging a $200m revenue estimate for FY25.
Hanesbrands (HBI US). Considering selling its Champion brands and strong rumors that it has received multiple bids. As a reminder, HBI is currently exploring strategic options.
UPDATE (April 8, 2024) To sell its Champion brand to Authentic Brands for ~$1bn.
Ascential (ASCL UK). Ascential to sell two divisions after a strategic review. Remainco valued at ~5x ev/ebitda; peers trading at >10x. H/t @ClarkSquareCap for idea and write-up.
UPDATE (April 8, 2024) Ascential revealed a plan to return GPB 850m to shareholders in a combo of tender offer, special dividend and share buyback.
Vishay Intertechnology (VSH US). Announced a $1bn buyback, roughly 20% of shares outstanding (16/02). VHS has a net cash b/s and is trading at roughly 7x 2024e ev/ebitda. UPDATE (Mar 1, 2024) Will be holding its first capital markets day on April 2. Could be interesting given relatively low valuation and what seems trough earnings. Might be bullish.
UPDATE (April 8, 2024) Hosted the first ever analyst day. VHS is looking for >$5 EPS and $700m FCF by FY28.
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 (Jan 7, 2024) 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.
UPDATE (April 8, 2024) Stock is depressed after the ‘failure’ of the sale. Might earn $80m ebitda with the expansion by FY27. At 10x (pretty low) and $200m debt (rough figs) that’s 3x in a few years…
Nuvation (NUVB US). Busted biotech SPAC with >$600m net cash on balance sheet, trading at negative EV. Currently pursuing last trials. If success, stock is cheap; if failure, NUVB becomes a cash-distribution play. To play out over next ~12 months. UPDATE. Big insider buying recently, while share price under pressure.
UPDATE (April 8, 2024) To acquire AnHeart Therapeutics. Massive stock price reaction. No clue on the impact, but sell side strongly increased TPs.
Paramount Global (PARA US). We highlight the write-up from David Katunarić on Paramount. David makes an interesting case on the potential take-out (value) of the company. Byron Allen recently offered to take PARA private for $14bn; could accelerate interested parties to make a bid.
UPDATE (April 8, 2024) In exclusive talks with Skydance according to the WSJ.
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Tremendous work. Really appreciate what you’re putting out.
Thank you for your report on DRX. I invested on your report and I am doing very well. I look forward to your future ideas.