ToffCap's Monday Monitor #24
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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As promised, we added a new section highlighting situations that are not exactly event-driven, but interesting nonetheless.
This week’s additions, highlights and updates of event-driven trades
Maersk (MAERSKB Denmark). As a reminder, Maersk will spin Svitzer Group in the near-term (effective spin date April 30). Very profitable unit (c. $250m ebitda in 2023 at almost 30% margins).
Gaming Innovation (GIG Norway). Operates two divisions; GiG Media which is going strong, recently achieving record revenue, player intake and ebitda growth, and Platform & Sportsbook a relatively more commoditized business. GIG is on track to split the units; the spin should be completed in. Overall upside of >100% as >50% upside just on Media alone, while the rest is 'free'.
Magnora (MGN Norway). Will spin its legacy oil divisions from the 'green' divisions. These kinds of splits are generally very good opportunities, as one of the two parts could be pressured a lot. Extra AGM in mid-Feb.
UPDATE (April 22, 2024) All seems ready for the split (structure, approvals, etc). Split (~70%) to be completed in Q2, probably June.
Zuora (ZUO US). Reports out (ao Reuters) that Zuora hired Qatalyst Partners to explore a potential sale and that founder/CEO Tien Tzuo could participate in the transaction.
Carr's Group (CARR UK). Following an internal review, CARR announced that it will split the company in order to unlock value. Co currently exploring options to maximize shareholder value.
Nordstrom (JWN US). The WSJ reported that members of the Nordstrom family are considering a take private bid. The company formed a special committee to evaluate options, working with Morgan Stanley and Centerview. Pretty muted share price reaction.
23andME (ME US). Evaluating options. Might split company. Stock price strongly under pressure given continued cash burn. Net cash balance sheet. Split goodco/badco might create an interesting opportunity.
UPDATE (April 22, 2024) CEO Anne Wojcicki (~49% voting control) stated she's weighing a buyout bid.
Procaps (PROC US). Illiquid, busted nano-cap Procaps initiated a strategic review. Procaps has a cdmo segment which accounts for 30% of sales and are the are top 5 manufacturers of soft gel tech cdmo globally and top 1 in latam. Their main facility in Colombia is fda approved and they also own CDMO facilities in Florida. Lot of debt and has been working with creditors. If they can sell their cdmo operations they could be very much net cash. Many thanks to @FernandoInvests.
Digital Media Solutions (DMSL US). VERY indebted Digital Media solutions announced securing of $22m new financing and the exploration of strategic options, including a potential sale of the company. Might be interesting as the company's total EV (c. $285m) basically fully reflects the debt, hence everything above 10x FY25 ev/ebitda could be explosive to the equity (but we just screened this of BB!).
Synlogic (SYBX US). Another one for the list of net-cash, busted biotechs, reviewing strategic alternatives.
Sequans (SQNS US). Wireless semi company. Renesas agreed to acquire for ~$3 p/s but pulled out because of (allegedly) adverse tax decision, tanking the stock to ~50c. SQNS just got a 1-month maturity pause from debt holders (including Renesas) to "effectively negotiate and finalize a strategic transaction." Claims termination of MOU with Renesas led to "interest from multiple key industry participants." Might be interesting. H/t @theotheraharon for the idea.
Better Choice (BTTR US). Approved a (up to) $5m stock repurchase plan (on a $5.6m market cap, 19/04).
Royalty Management Hold. (RMCO US). Busted SPAC RMCO announced a $2m stock buyback program, roughly 15% of the current market cap (19/04).
America's Car-Mart (CRMT US). We note the strong and continuous buying in the open market from large shareholder Magnolia Group (now at c. 12%, 19/04). Also CEO recently bought as well.
Applied Optoelectronics (AAOI US). Insiders buying at this interesting company which seems to be inflecting positively on operating earnings. According to BB, the sell-side expects AAOI to be ebitda break-even in FY24 and ramp up strongly thereafter. Applied is trading at ~9x FY25 ev/ebitda for very strong growth going forward. Might be interesting to dive in.
Paragon 28 (FNA US). Another one with insiders buying at a company where earnings seem to be inflecting positively (though this one seems more expensive on forward BB estimates).
Datasea (DTSS US). Announced the CEO's intent to purchase $3m in shares in the open market over the next 12 months. That's roughly 17% of the market cap (19/04). This comes on top of a recent relatively large order win announcement.
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.
UPDATE (April 22, 2024) Very strong share price movements after positive comments from the company regarding future growth potential (i.e. long-term goal of >25% annual revenue growth). IF achieved, RENT has multi-bagger potential given relatively low valuation and quite the levered b/s.
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.
UPDATE (April 22, 2024) Advent sold another stake to PPF. PPF now owns c. 29% of InPost shares.
Taiga Building Products (TBL Canada). Interesting case from @bitmoreleverage. Trading at less than 3x ebitda with strong FCF generation and a good balance sheet. They've >70% owned by Avarga, a Singapore holdco, which seems a good owner. No coverage. Stock has good momentum.
Avation (AVAP UK). Avation slowly grinding down towards 100p. As a reminder, Avation is a sub-scale aircraft lessor with a large maturity wall ahead (in a much higher interest rate environment), hence a low valuation to book value. The company has been selling planes and should continue to do so, or better sell itself. There are signs that the latter could be in the works. In November AVAP disclosed it received a takeover approach over the summer. There have also been new shareholders which have been amassing a pretty large stake in the company. We expect some action in the future.
Entravision Communications (EVC US). EVC crashed after losing Meta (40% of their ebitda). However, they sit on very valuable spectrum rights which they've monetized in the past and should in the future. EVC also owns tv and radio stations in the Hispanic market (good given election year). H/t @FernandoInvests for the idea.
Centrotec (CEV Germany). CEV sold its climate solutions business to Ariston and received both cash and stock. Stock is trading at €50, while net cash is €71 per share and doesn’t include the remaining operating business. Main owner is almost at 90% and could do a squeeze-out soon. Minority shareholders are (somewhat) protected in Germany and squeeze-outs are usually done at BV per share which is €85 per share. H/t @absreturnchase for the idea.
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.
UPDATE: Stock down as market pressured. Broker initiations suggest Smith Douglas is trading at c. 10x FY24e ev/ebitda (19/04) for >30% ebitda growth p.a. over the next few years.
Nexi (NEXI Italy). Bloomberg mentioned CVC Capital Partners is in the early stages of considering a potential bid for European payments firm Nexi. Share price jumped, but got smashed again after the Worldline mess. Hellman & Friedman (PE ) has c.20% stake in Nexi, part of Fund VIII. Fund VIII is an old vintage (2014) and H&F is looking to wind this fund down.
UPDATE (April 22, 2024) Share price now once again at the lows (i.c. when all the speculation started). Might be interesting to keep an eye on.
Sunshine Biopharma (SBFM US). Very interesting and chaotic case. Sunshine performed a reverse stock split and equity raise issuing ao a bunch of warrants. There's much confusion regarding the adjustments of the warrants post-reverse split and there has been massive selling pressure. Overall, SBFM had c. $8m revenue in Q4 23, growing 30% yoy. That's >$30m revenue annualized for FY24 with much more growth to come, potentially reaching positive net income this year. The only question is what is a representative market cap! Keep an eye on the discussion on X.
Blackbaud (BLKB US). It seems that Clearlake is once again getting ready to bid on Blackbaud, according to the usual 'people familiar with knowledge of the matter'. The last offer was (rejected) at $71 p/s (current share price $76 (19/04)).
Azelis (AZE Belgium). Rumors (Bloomberg) that main shareholder EQT (owns ~50%) might actually take Azelis back private, or sell its stake to others (which would then take the company private). Makes sense in our opinion as Azelis is trading at a large discount with IMCD while basically the same quality (though indeed share overhang and less liquid). Spec chem distributors are a perfect match for PE as they are easily levered (Azelis was 7x pre-IPO!). Take-out, lever, do many add-ons and re-IPO.
Thunderbird Entertainment (TBRD Canada). Large shareholder pushing TBRD to review strategic alternatives; buybacks and/or liquidity event.
UPDATE (April 22, 2024) Voss Capital (c. 17% owner at April 4) continues to acquire shares in the open market.
Barnes & Noble Education (BNED US). After the massively dilutive arrangement to equitize the 2L holders and infuse more equity, the company trades at a PF market cap of $160m + $100m of net debt = $260ish EV. Assuming you subscribe all your rights. Probably many old shareholders selling after the painful outcome. If they can make $80 and $100m EBITDA on their FEC biz for fy24 and fy25 as they promise, this is too cheap. Many thanks to @FernandoInvests.
Primerica (PRI US). We highlight The Bear Cave's new short report, this time regarding Primerica.
NCR Voyix (VYX US). Speculation regarding the potential sale of the Digital Banking unit (roughly 25% of pre-corp ebitda). Sale would unlock the strong SOTP dynamics, with >70% upside on our (back of the envelope) estimates. Remainco seems cheap as well.
Charles & Colvard (CTHR US). Trading very much below net cash and inventory, with little debt but some cash burn. Management seems focused on reducing this cash burn, and has been acquiring a lot of shares.
FlatexDeGiro (FTK Germany). CEO Frank Niehage to step down. We generally don't comment on C-suite changes unless it’s a big deal. This is a big deal. Expect either an acceleration towards adjacent new businesses, or perhaps even a (preparation for a potential) sale of the broker.
Vanda Pharma (VNDA US). Rejected (another) offer from Future Pak. The latest offer was ~$7.5 per share, vs current share price of $5.1 (19/04). Vanda is a net cash biotech ($390m net cash on $293m market cap (April 19)), BUT actually has $190m revenues, is profitable (after interest income) and has relatively low cash burn.
James River (JRVR US). Rumored take-over of James River for $15 p/s vs current share price of $9.36 (19/04). More info @InvestSpecial.
Ducommun (DCO US). Rejected an unsolicited offer from Albion River ($60 p/s vs current share price of $52 (19/04)).
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great work, like CEV
One of the best on the internet