ToffCap's Monday Monitor #28
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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This week’s additions, highlights and updates of event-driven trades
AFC Gamma (AFCG US). Intends to spin its commercial real estate loan portfolio into a (to be) REIT, "Sunrise Realty Trust". The separation will create two companies, one focused on the cannabis industry and the other on CRE. Separation expected to be completed 'mid-2024'. Might be interesting given different character of businesses.
UPDATE (July 1, 2024) AFC Gamma will spin-off its CRE portfolio Sunrise Realty Trust (SUNS) on July 8 (trading as of July 9).
Cargotech (CGCBV Finland). Approved the split of Kalmar, "a technology forerunner in container handling and heavy logistics with strong market positions, geared to grow by making the industry electrified and more sustainable". Planned completion date is 30 June 2024.
UPDATE (July 1, 2024) We remind the Kalmar spin (trading July 1). Kalmar to trade on Nasdaq Helsinki.
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 (July 1, 2024) Spinco Hermana (HERMA Norway) is trading. Relatively small and particular spin compared to Magnora. Interesting to keep assessed.
Tecnoglass (TGLS US). Tecnoglas announced that it will be review strategic alternatives. No timetable has been set. Tecnoglas is a solidly profitable and growing company trading at <9x forward ev/ebitda (June 28). Fwiw, the sell-side is projecting quite some cash flow growth over the next few years.
Cara Therapeutics (CARA US). Net cash, negative EV, busted biotech currently exploring strategic alternatives. Recently announced it will be reducing its workforce by 70% (i.e. first sign of liquidation).
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.
UPDATE (July 1, 2024) We note the new short report from The Bear Cave.
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.
UPDATE (July 1, 2024) Announced a $150m buyback, roughly 7% of the market cap (June 28).
Oramed Pharma (ORMP US). Announced a $20m buyback, roughly 19% of the market cap (June 28). Sizeable net cash position and relatively low cash burn. Also, insiders have been adding. Looks like there might be something brewing here.
ADF Group (DRX Canada). ADF recently bought back and terminated 8.4% of s/o. You know we love this stock. The (relatively small) sale from the main shareholders, Canada's new capital gain tax and a healthy breather after +130% ytd (June 28) are creating a nice entry opportunity after a stellar quarter. See here for our most recent update.
GEE Group (JOB US). Very strong insider buying for the first time in quite some years. Management clearly believes that these are interesting price levels. Our friend @Investmentideen has done quite some work on it, should you be interested.
Offerpad Solutions (OPAD US). Insiders woke up a few weeks ago and decided to significantly start buying the stock. Offerpad is a busted SPAC with quite some revenues but low GMs. Fwiw, sell side is projecting Offerpad to reach break-even operating profitability next year. Might be interesting to keep an eye on.
Friedman Industries (FRD US). Quite some purchases from insiders. Interesting little company with a clean balance sheet. No coverage. Cyclical industry, which makes the insider action interesting.
IZEA Worldwide (IZEA US). GP Investments (~20% owner) continues to back up the truck as much as possible in the open market at this net cash, negative EV online marketing company. Also, IZEA recently announced a $5m buyback, roughly 13% of the current market cap (June 28).
Rezolute (RZLT US). Interesting pattern of purchases from insiders in this pre-revenue biotech. The shares bottomed around $1.0 beginning of the year and have been steadily rising since. Interestingly, insiders have been adding all the way up (previously little action). Something's going on.
Global Self Storage (SELF US). Micro-cap Global Self Storage received and rejected an offer for the company at $6.15 p/s (current share price $4.9, June 28). Insiders bought quite some shares after these events. Good sign.
Greenland Resources (MOLY Canada). A ToffCap favorite. Insiders have continued their buying spree over at Greenland Resources. Sooner or later we think something big is going to happen here.
Telephone and Data Systems (TDS US). TDS seems to be liquidating. A large deal has already been announced (USM sale to To-Mobile) and there are plenty of other assets to sell. Could be interesting.
Eiger Biopharma (EIGRQ US). Eiger is liquidating assets while in Ch11 liquidation. Assets are selling at very interesting prices. Stock moved a lot but still plenty of potential. We're no experts, but several knowledgeable people are putting equity recovery values at >$50m vs a current market cap of ~$19m (June 28). H/t @Lord_of_Biotech for the idea.
AtriCure (ATRC US). Interesting med-tech company. After many years of operating losses, ArtiCure seems to be inflecting positively. Given continued DD top-line growth projected and ~75% gross margins, operating leverage should be quite good. Nonetheless, the share price is at multi-year lows. What's more, Edward Lifesciences (EW) is rumored to be interested in the company.
Rapid7 (RPD US). Another interesting company with inflecting operating earnings and takeover interest. There has already been interest in Rapid7 some years ago. Now activists (Java Partners) are reported to be pushing for a sale. Not surprising as the share price is ~30% lower over the past 5 years but cash flow generation seems to be ramping.
Evotec (EVT Germany). Bloomberg reports that Evotec hired defense advisers as various PE firms have been targeting the company. We are not at all surprised. Like many companies in this sector, Evotec's suffering from bad end-market demand. This is a cyclical industry, the market will return at some point but these are the moments when sharks start (or better, should be) circling.
Lindex (LINDEX Finland). Lindex will relist in Sweden, is getting rid of loss making Stockmann and will do a sale and leaseback of their €115m distribution facility. Remainco should look much better (and hence improved valuation). H/t @tacoenthusiast2 for the idea.
Boat Rocker Media (BRMI Canada). Canadian Micro cap Boat Rocker announced that it sold its stake in talent management company Untitled to TPG for proceeds comprised of cash in the amount of approximately C$51.6 million and 8.8% of TPG's new talent management company. Boat Rocker will have a pretty solid b/s after. If it can get profitable anytime soon this one could do very well. Seems very cheap at $1.0 (June 28) IF cash burn stops. H/t @trustfundgen for the idea. Also @InflexioSearch has done quite some work on this one.
Harbour Energy (HBR UK). Harbour will vote on July 5 on the acquisition of Wintershall's non-Russian upstream assets. Will massively change the company's profile. Deal will greatly increase annual production and FCF generation (>100%). Current uncertainty regarding UK taxes etc. seems to be heavily discounting the opportunity. >100% upside even assuming conservative reasonable multiples.
GAN (GAN US). GAN announced the CFIUS clearance for the SEGA deal. Quite a large spread still (>30%). Closing expected late 2024 or early 2025.
Philly Shipyards (PHLY Norway). Norwegian microcap Philly Shipyards received a bid at NOK 87 p/s in cash - compared to NOK 67 today (June 28). Consolidation is a major theme in this tough market. Regulator risk seems low. H/t @homsted for the idea.
Sila Realty Trust (SILA US). We note the ongoing $50m tender offer at $22.6-24.0 p/s. The range is still above the current share price of $21.2 (June 28). TO expires on July 19.
Benson Hill (BHIL US). Micro-cap Benson Hill received a buyout offer from its largest shareholder Argonautic for $0.2236 p/s, roughly +47% above the current share price (June 28). Fwiw, Benson shares have been in a solid base all year. Also, the shares even went down on the announcement.
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. 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.
UPDATE (July 1, 2024) The saga continues. MNC Cap bumped its offer to $42 p/s in cash.
Calumet (CLMT US). Calumet is preparing to spin its MR unit, targeting > CLMT's current EV. Management recently dedicated a slide to what they believe is an intrinsic value range for Calumet’s equity, $31-56 p/s.
UPDATE (July 1, 2024) Transition to C-Corporation in July should provide some boost (increase the investor base) and pave the way for further action (like the long-awaited spin). Is something (finally) going to happen at Calumet?
ZimVie (ZIMV US). Valuation burdened by large debt and declining spine business (though healthy dental business). End of last year ZimVie announced to sell the a transaction entire spine business to HIG Capital ($375m, $315m cash and $60m PIK note). Sale eliminated both issues. Story now much simpler but market and analysts still need to catch up. Large rerating potential.
UPDATE (July 1, 2024) According to Bloomberg, ZimVie is ‘weighing options including a sale after getting fresh takeover approaches. Prices rumored are $25-29 per share, compared to c. $18 currently (June 28).
Covestro (1COV Germany). Rejected a $ 12bn offer from Abu Dhabi National Oil (ADNOC), but ‘open to discuss deal at higher price’. To keep in mind that Covestro is basically 100% free float. Potential fair price high 50s. UPDATE. Covestro confirmed its engaging with Adnoc regarding a potential take-over. Adds to previous reports on informally lifted 'proposals' towards €60/share as trigger for starting official negotiations.
UPDATE (July 1, 2024) Covestro to enter concrete negotiations with ADNOC, sees €62 p/s as 'starting point'. Current share price ~€55 (June 28).
Premier Investments (PMV Australia). PMV will review a few of its brands, potentially spinning these off, with the intention to focus more on the more rapidly growing part of the business; ‘the Review will consider a range of options… including dividend policies and a separation of the Group into two or more distinct entities by way of demerge’.
UPDATE (July 1, 2024) Myer (MYR) has approached Premier to explore a combination with its Apparel Brands business. AB generated $845m in FY23. Transaction would be a share deal. Premier continues to explore demergers of other brands.
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.
UPDATE (July 1, 2024) Vanda Board rejected all proposals. Future Pak withdraws offer. What a crazy mgt. We believe this story is far from over.
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Thanks. This publication seems to get (even) better every time.
Where is news that Lindex is reslisting / selling Stockmann / sale & leaseback on distribution facility?