ToffCap's Monday Monitor #26

Your regular monitor for interesting event-driven trades and companies

May 21, 2024

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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.

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.

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Inhibrx (INBX US). Will spin-off 92% of its subsidiary Inhibrx Biosciences on May 29 (record date May 17) on a pro-rate basis. Might be interesting to keep an eye out.

BGSF (BGSF US). Initiated a process to evaluate strategic alternatives 'to maximise shareholder value given the continued dislocation of BGSF's market valuation'. Interestingly, BGSF shares are down >20% since the announcement (at earnings). The company is trading at ~6.5x annualised Q1 24 ebitda with decent b/s.
Altantica Sust. Infra. (AY US). Exploring strategic alternatives. Controlling shareholder (AQN, ~40%) likely to push for a sale. AQN is also pressured by an activist to sell its renewable assets business, including the stake in AY, so the likelihood of a sale seems to be high here. Also Bloomberg reporting discussions with Energy Capital. Relatively low valuation. H/t @InvestSpecial for the idea.
OCI (OCI NA). One of the most interesting opportunities on our screens for 2024 in the larger mid-cap space. OCI is trading at 2.5-3x ev/ebitda on a pro-forma basis after the announcement of two large division sales. Peers are trading at 5-7x (on what I would argue are low multiples).
UPDATE (May 21, 2024) This first special divided of EUR 4.5 p/s was announced (~18% yield). Roughly EUR 9 more to come. Improving operations and continued ongoing strategic review. OCI now mentions significant inbound interest in the continuing operations.
Sharecare (SHCR US). Evaluating strategic alternatives. Sharecare is actively engaging with parties interested in acquiring the company. Sharecare has a strong net cash b/s (though relatively high cash burn). Little share price reaction so far. UPDATE (May 6, 2024) We note the recent write-up on VIC (45 day waiting period for non-members).
UPDATE (May 21, 2024) In a recent update (May 9), Sharecare notes that it is in active discussions with multiple bidders and 'expects to bring the process to a conclusion within 30 to 45 days'.
Xperi (XPER US). Rubric Capital (7.6% owner) pushing for strategic alternatives for the company's AI unit. Officially announced to be evaluating strategic alternatives (of Perceive business). Based on Bloomberg ccs, XPER will grow very quickly over the next few years and is trading at <3x 25e ev/ebitda. Co has a solid balance sheet (net cash). UPDATE (March 15, 2024) Activist Rubric Capital nominated two independent Directors. Rubric also taking increasingly strong stance. UPDATE (May 6, 2024) Launched a $100m buyback, c. 21% of s/o (May 6). Also, Rubric Cap sent quite the spicy letter to shareholders.
UPDATE (May 21, 2024) The strategic review (of Perceive) 'is progressing and expected to be completed by the end of summer 2024'.
Reneo (RPHM US). The third on this week's list of net-cash, busted biotechs, reviewing strategic alternatives.
UPDATE (May 21, 2024) Announced an all-stock transaction with Onkure.

Seer (SEER US). Busted (massive) net cash biotech Seer authorized an open-market share repurchase program of up to $25m, roughly 19% of current market cap (May 20).
Akamai Technologies (AKAM US). Authorised a $2bn buyback, ~14% of market cap (May 21).
Tandy Leather Factory (TLF US). Authorised a $5m buyback, ~13% of market cap (May 21).
Seadrill (SDRL US). Seadrill expanded its buyback program by another $500m, roughly 13% of its market cap (May 21). SDRL has a clean b/s. To note, Elliott has been steadily increasing its stake and now owns ~12% (May 21).
Thinkific (THNC US). This Canadian software company announced a substantial issuer bid to purchase up to $35m shares at $3.72 per share. That'll be c. 16% of the current market cap. Ignoring the horrible name, Thinkific screens interesting, with high growth, a net cash position of ~40% of its market cap (May 21) and ebitda inflection in FY24.

Telos (TLS US). Quite some open market purchases from insiders in Telos. Telos has a very strong b/s (roughly 30% of market cap in net cash at Q1 24) and seems on the verge of operating earnings inflection. Ebitda improved sequentially over the past three Qs and is rapidly approaching break-even. Still some cash burn ahead but might be interesting is inflection is indeed reached over the next year or so.
Treace Medical Concepts (TMCI US). We note the very large insider purchases. Treace's share price has been an absolute dog over the past years (was expected looking at the insider sales), but management now seem to think it’s a good opportunity to buy. Strong net cash b/s (though still some cash burn).
Vestis (VSTS US). Strong insider buying here after the large correction.
B&G Foods (BGS US). Strong insider buying here as well after a large correction. B&G is a pretty levered producer of shelf-stable foods. Should be able to generate quite some cash flow going forward. Based on BB ccs for cash flow generation, given B&G's high leverage the equity could rerate ~20% p.a. on the current base (May 20).

Westaim (WED Canada). Very interesting looking trade with a great risk / reward. Pro-forma the full sale of their Skyward (SKWD) position Westaim will have ~90% of their market cap in net cash. Management intends to decrease the discount to NAV (C$ BV 5.44 vs C$ 4.00 stock price (May 17)). Company has a history of paying out excess cash.
Clearvise (ABO Germany). Share price derated on worsening fundamentals. Current share price might trigger an acquisition of EQT which already owns ~30%. Sector has seen consolidation with KKR acquiring Encavis. H/t @absreturnchaser for the idea.
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.
UPDATE (May 21, 2024) Ended strategic review without a sale. Itafos is trading at <2x FY24e ev/ebitda with a solid balance sheet and cash flow generation.
Tripadvisor (TRIP US). Shares fell >30% after the company announced it would not sell itself. Tripadvisor is now trading below the pre-announcement level; shares trading at <7x FY24e ev/ebitda (May 17) for 10-15% annual ebitda growth over the medium-term and a net cash balance sheet.
Enhabit (EHAB US). Ongoing review of strategic alternatives, including full sale of the company. Sector deals have been performed at mid-teens ebitda multiples (50-100% upside).
UPDATE (May 21, 2024) Ended strategic review without a sale. Despite the disappointing result (for some) the LT case remains compelling, with a potential sale still the outcome (imo) in a year or two. Co's performance is steadily improving. Also, activist investor AREX Capital Management (4.8%) brought a proxy fight to replace seven board members. Current trading at ~10x ev/ebitda (May 17) indicates 50-100% upside.
XL Media (XLM UK). We note this very interesting thread by @Symmetry_Invest on XL Media. Pro-forma the sale of certain sports betting & gaming assets, XLM will be trading around net cash. High potential upside if you believe that the proceeds will not be wasted on M&A and that the company will be taken out.
James River (JRVR US). Rumored take-over of James River for $15 p/s vs current share price of $9.36 (19/04).
UPDATE (May 21, 2024) Global Indemnity Group (GBLI) mentioned talks have paused. JRVR shares trading at (almost) ATL (May 17).

Ferrellgas (FGPR US). Publicly traded post-reorg MLP with an unusually complex capital structure. Various scenarios to reduce complexity and/or sale could lead to substantial upside. We highlight the interesting thread on X by our friend @marginofdanger.
Superior Industries (SUP US). Highly levered Superior is restructuring its operational footprint which will increase and stabilise earnings and cash flow generation. Actions to improve the capital structure are ongoing and news is expected soon. Superior guides for an exit rate of $190m adj ebitda by YE. Shares trading at ~4x ev/ebitda on this guidance. Strong rerating of equity possible. H/t @BitMoreLeverage for the idea.
Carecloud (CCLS US). Recently received (and rejected) an unsolicited offer for $5 p/s vs. current share price of $2.51 (May 17).
Equity Commonwealth (EQC US). C. $2.2bn net cash on $2.1bn market cap (May 17). Company committed to either do deal or liquidate. Interesting to keep an eye on. H/t @RealAssetsValue for the idea.
Mytheresa (MYTE US). Rumored to be working with investment bankers on two fronts, pitching investors on a buyout that would take the company private and looking at acquiring Net-a-porter. Mytheresa is trading at ~12.5x FY24e ev/ebitda (May 17) for >40% ebitda growth pa over the next few years + clean b/s.
Ashford (AINC US). Ashford approved plan to terminate stock registration. 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). Plan expected to be executed in 'the summer of 2024'.
UPDATE (May 21, 2024) We note that very large insider purchase (almost $1m).
SmartRent (SMRT US). Shareholder Land & Buildings Investment Management is pushing SMRT to explore a sale of the company. L&B believes that SMRT could fetch up to >1005 premium. Though growth has decelerated, SMRT is still growing quite nicely and appears to have reached earnings and cash flow break-even. SMRT has c. 40% of its market cap in net cash (May 21).
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.
UPDATE (May 21, 2024) Future Pak came back and sweetened the offer with CVRs.
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)).
UPDATE (May 21, 2024) Blackbaud rejected the Clearlake offer, '$80 is too low'.