ToffCap's Monday Monitor #27
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.
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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This week’s additions, highlights and updates of event-driven trades
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.
UPDATE (June 17, 2024) Spin completed. Inhibrx Biosciences trading under ticker INBX.
Lionsgate (LION 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 (Jan 7, 2024) Now intends to spin studio business via SPAC Screaming Eagle (SCRM US).
UPDATE (June 17, 2024) Listing via SPAC completed. Trading under LION. Roughly -21% since listing (June 14); might be interesting to keep on the watchlist as SPAC listings often get (seriously) discounted while LION does have a few good franchises.
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.
UPDATE (June 17, 2024) Magnora will spin (1-1) its legacy business 'Hermana' this week (listing date 18/06).
Illumina (ILMN US). We note the recent spin of Grail GRALV. This spin should conclude a headache case for Illumina which arguably pressured the share price.
TC Energy (TRP Canada). Recently approved the spinoff of the company’s Liquids Pipelines business. Shareholder to receive 0.2 shares in a new public company ('South Bow') per TC share.
Indie Semiconductor (INDI US). Bloomberg reported that Indie is exploring strategic options including a sale.
Neo Performance Mat. (NEO Canada). Launched a strategic review of the business, including a potential sale of the company. Goal is to 'reflect the true value of the business'. While cyclical, we note that this market has significant secular tailwinds. Also, Neo has a decent b/s with c. 20% of the market cap in net cash (June 14).
Yext (YEXT US). Reuters reported that search optimization company Yext is exploring a sale. While the stock performed terribly, Yext has a strong net cash position (roughly 22% of its market cap) and ebitda inflected positively in FY23. Definitely not expensive on street estimates, trading at ~7.5x forward ev/ebitda for >20% ebitda growth projected pa over the next few years. Shares hovering at lows.
Webjet (WEB Australia). Webjet recently announced that it is exploring a separation of its two divisions. This screens very interesting as one of the divisions is WebBeds, a very profitable and solid growing b2b hotel distribution platform - which nobody knows. H/t @sweetstocksblog for the idea; refer to his blog for much more background.
Ikena Oncology (IKNA US). New addition in the busted biotech bucket. Big net cash position, negative EV, reviewing strategic alternatives. Opex strongly down, very much reduced cash burn. Seems like this one might move rapidly at his point.
Avalo Therapeutics (AVTX US). Another busted, net cash, negative ev biotech reviewing strategic alternatives (for a few programs), but this one is not liquidating.
TransAct Technologies (TACT US). Interesting net cash micro-cap with an actual product 'actively assessing strategic alternatives, including a sale.' Stock has been hammered over the past months.
Kansai Paint (4613 Japan). Kansai Paint recently filed to repurchase up to 19% of shares outstanding over the next 12 months (buyback capped at ¥80b and 40m shares).
Xunlei (XNET US). Xunlei announced a $20m share repurchase program. This is another net cash, negative ev Chinese company. Who knows what'll happen but there's often some interesting volatility.
Defi Technologies (DEFI Canada). Defi announced the launch of a NCIB (max 10% of s/o, or roughly 27m). If you like weird stocks few people understand, Defi might be for you.
Live Ventures (LIVE US). Micro-cap Live Ventures (of LL Flooring fame) announced a $10m buyback, roughly 13% of the market cap (June 14).
Quantasing (QSG US). Chinese net cash, negative EV company announced a big buyback, $20m or ~22% of market cap (June 14).
FutureFuel (FF US). After several years of inaction, insiders have been buying quite a bit on the open market on this one. FF has been generating good cash flow in the past and has a pretty solid b/s - roughly $100m net cash (post special div) on a market cap of $200m (June14). If you believe that the dip in RINs is temporary (mgt does), than this is is very interesting to keep an eye on.
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 mgt now seem to think it’s a good opportunity to buy. Strong net cash b/s (though still some cash burn).
UPDATE (June 17, 2024) Insiders continue to buy shares in the open market. Like, a lot.
Altus Power (AMPS US). Notable insider purchases at Altus. The stock has been hovering at ATLs over the past few months.
Beyond (BYON US). Insiders continue to add as well at old flag Beyond (previously Overstock.com). As a reminder, there was quite some action here with several activists pressuring the company to launch strategic review and improve balance sheet (via eg asset sales). To keep an eye on given high volatility.
Mobile Infrastructure (BEEP US). Very large purchases from the CEO at busted Mobile Infrastructure. Also, funny ticker (company invests in parking lots...)
UPDATE (June 17, 2024) The flurry of insider buying continues. We also note the very solid base that the stock has made. Something's brewing…
Titan Machinery (TITN US). Insiders buying at Titan, with the stock breaking down. Looks like more is to come based on the earnings progression and leverage. But should be a nice free cash flow generation so there might be an opportunity here at some point. Keep an eye on the insiders.
Wajax (WJX Canada). Notable insider purchases at Wajax as well. The stock was recently hammered after poor results. Nonetheless, the company is trading at roughly 5x ev/ebitda for what should be good cash flow generation.
Gauzy (GAUZ US). We note the busted IPO of Gauzy, which according to BB 'develops, manufactures and markets visions and light control tech'. We know nothing on this one, but note the -16% since IPO a few days ago.
Southland (SLND US). Busted SPAC but with interesting end market dynamics and valuation. FY24 seems to be ramping up well and end markets are strong. Very cheap compared to peers. No imminent catalyst, but if earnings continue to ramp Southland seems poised to do very well.
Flutter Entertainment (FLUT US). Global leader is sports betting. Stock pressured due to various (technical) reasons as HQ moved from London to the US and overall poor sector sentiment. Underlying performance seems to be strongly improving, which bodes well for future cash flow generation. Screens very cheap given growth potential.
Enzo Biochem (ENZ US). Interesting net-net with quite some action going on while the share price is not moving. Enzo has a substantial net cash position after the sale of a segment. Cash burn slowed significantly, current operations seems to gather momentum and management's compensation package seems very geared towards a sale. @ragingbullcap has done a ton of work on this one.
Pacific Current (PAC Australia). We highlight this very interesting case from @InvestSpecial. PAC seems to be on the verge of launching a tender for 50% of the market cap. PAC received several bids for the company at roughly AUD 11 per share that were rejected. NAV is at roughly AUD 12.2 vs the current share price of AUD 10.28 (June 14), suggesting the tender offer might come at a premium to the current share price. H/t @InvestSpecial for the idea.
DXC Technology (DXC US). Reuters flagging that DXC has been in talks with Kyndryl and Apollo for a joint bid, at $22-25 per share, vs. current share price of $17.85 (June 14).
Ascential (ASCL UK). Ascential to sell two divisions after a strategic review. Remainco valued at ~5x ev/ebitda; peers trading at >10x. 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.
UPDATE (June 17, 2024) Ascential remains an interesting opportunity. Recently divested divisions and returned capital, still trading at a large discount vs peers, HudsonMX review ongoing, buybacks. Seems like either valuation discount will close soon or someone will close it for them.
DMC Global (BOOM US). Small diversified industrial company heavily levered to energy recently announced strategic alternatives for 2 of its 3 business lines, including DynaEnergetics, which many consider its crown jewel. Decent balance sheet, trades under book (though tangible book is negligible) and near 5-year low price. Recently refinanced.
UPDATE (June 17, 2024) Steel Connect (10% owner) offered $16.50 per share. DMC Board considering the offer. Current share price $14.43 (June 17).
Saes Getters (SG Italy). Sold its medtech business for $900m. Tendered for stock (roughly €140m), will pay a €12.5 p/s dividend (on €34 stock price); remaining €350m to be reinvested in business. Roughly €20m net debt position (pre-sale consideration).
UPDATE (June 17, 2024) the action continues at Saes with SGG raising its offer to €28 per share and activists challenging the offer, deeming it too low.
QXO (QXO 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.
UPDATE (June 17, 2024) Jacobs noted to be near $3.5bn equity offering. Lots of volatility here.
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.
UPDATE (June 17, 2024) We note the substantial (to put it mildly) short interest in BNED. This one might be explosive.
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.
UPDATE (June 17, 2024) The Vanda circus continues. Cycle Pharma offered $8.0 per share all cash. Future Pak increased the cash component of its offer to $8.5-9.0; incl. the CVR the total offer is roughly $13 per share. What a crazy management. But at least the share price is moving in the right direction.
Innovative Solutions (ISSC US). We highlight the recent bid from large shareholder Harborne of $7.25 per share in cash compared to the current share price of $6.30 (June 14). This seems like a rather low offer to us for such an interesting (and cheap) company. Interesting to keep assessed.
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.
UPDATE (June 17, 2024) True Wind, one of the largest holder of Cellebrite (CLBT), launched a tender offer for 47% owner Sun Corp at 4,400 yen/share.
Vista Outdoor (VSTO US). Vista to sell its Sporting Products operations for $1.9bn (or about 5x ev/ebitda on the unit's FY24e). Spin off the table. Current public stockholders of Vista Outdoor to receive shares of Outdoor Products (recently rebranded as Revelyst) and approximately $750 million in cash in the aggregate. UPDATE (December 3, 2024) Activists ColtCZ disclosed a stake and launched a bit for $30 p/s and a $900m buyback, which the company rejected. Interesting to keep assessed, could continue to see some fireworks. UPDATE (May 6, 2024) Bloomberg reporting that a deal with MNC Capital could be reached over the next few weeks.
UPDATE (June 17, 2024) MNC Capital increased its offer for Vista to $39.50 per share vs current share price of $35.50 (June 14). Vista rejected the offer and confirmed it received a $2bn offer in cash for its Ammo division.
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Thanks for all the work you do in putting these together.
Outstanding work, as always🙏🏼