MiddleBrook Pharmaceuticals, Inc (fka MBRKQ)

[Renee]

MBRKQ revoked:

http://www.sec.gov/litigation/admin/2014/34-73273.pdf

[Renee]

MBRKQ: SEC Admin Proceeding:

http://www.sec.gov/litigation/admin/2014/34-72475.pdf

[Iron Maiden]

Hey ...I had my shares "dispersed"(???) and for 2500 I received $230 CDN on Dec 23rd...

Never seen that before....

23-Dec-2011 -2,500 MIDDLEBROOK PHARMCTLS INC
DISP $0.00 $230.12

[jrallen81]

Sorry to show ignorance, but can someone in the know update me on the status of this security? I thought it was liquidating for $0.07, but etrade told me today it is worthless.... did something change? I don't see anything in the SEC filings but it is long enough now that I'm nervous.

[Iron Maiden]

TD shows this as invalid ticker?

[ne trader]

That's some big paintbrush on FRI.

[PlanMaestro]

That was excellent Madclown!

So from reading your post, the conclusion is that there is not much margin of safety. So the play, if there is one is the NOLs, in a potential shell as Enterprising Investor mentioned?

[Madclown]

http://thediligentinvestor.blogspot.com/2010/11/look-at-middlebrook-pharmaceuticals.html

I would also add the following as a recent update to the situation:

At first blush, Blue Ridge does appear to have just bot 8% of the outstanding shares of MBRKQ based on SEC filings. What is interesting is that Blue Ridge has invested alongside of Sam Zell's Equity Group Investments(EGI) on a number of occasions in the past few years. EGI held over 30% of the O/S of MBRKQ and were seated on the Board but dividended out their entire holdings to their investors on 11/22/2010. This is likely where the selling presure has come from lately. The only reason I say that Blue Ridge "appears" to have bot is that with their close ties, it is possible to deduce that Blue Ridge is one of the groups that had invested in EGI itself and thus only received a distribution of the shares that EGI just dividended out.

[PlanMaestro]

Follow the Oracle from Texas, he knows what he is doing

[Enterprising Investor]

Nothing wrong with liquidation.

The shell may have value at some point, once all the claims have been paid.

I would suggest that anyone interested wait at least five days to buy in based on the Schedule 13G filing by Blue Ridge Capital.

[windansea]

Well, I'm out at 0.070. I'll take my $21 of profit and treat my wife to dinner tonight. Will stay away from anything involving
"liquidation" in the future. Thanks for your kind inputs. I'm a relative newbie to this stuff and appreciate the wisdom of your cautions to me.

[PlanMaestro]

But you have probably noticed that the recent volume does not support a recent 8%+ buy. So,

1. they already had a substantial position below 5% before
2. something else is going on (and I heard some good hypothesis yesterday)

[Enterprising Investor]

I would have changed one sentence.

It should have read, "Their liquidation will be something to watch."

If only the company had filed in the Northern District of Texas (rather than Delaware), I would have had been able to attend hearings.

[windansea]

My knowledge is limited to what I read in the Ibox, posts here, and on the Yahoo board. But I do have confidence that John Griffen and his people are capable of much more thorough DD than I (or most posters on IHub) could ever do. I've had better luck in the past following hedge fund picks than stocks touted by pumpers. Its just a tiny position for now. Like a perpetual option. If the arbitration works in my favor, I make a few bucks.

But you are right about what "fun" is. That was a poor choice of words. GL

[PlanMaestro]

Just for fun? For fun I prefer to invite some friends for some low stakes poker. The stock market is for compounding, do you know anything about this company besides the Market Folly article?

[windansea]

Just for fun, I picked up 2K at 0.057 after reading the below.
How often do you find a Hedge Fund playing pinks??
Explain this: Blue Ridge bought almost 7 million shares (on 11/22??). All the charts I have looked at for back to June,2010 show 2 millions shares highest day volume. Guess they accumulated them in small bunches.

http://www.marketfolly.com/2010/12/john-griffins-blue-ridge-capital.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarketFolly+%28Market+Folly%29
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Friday, December 3, 2010
John Griffin's Blue Ridge Capital Discloses MiddleBrook Pharmaceuticals Stake (MBRKQ)

John Griffin's hedge fund Blue Ridge Capital just filed a 13G with the SEC regarding MiddleBrook Pharmaceuticals (MBRKQ). Per portfolio activity on November 22nd, Blue Ridge has disclosed a 8.05% ownership stake in MBRKQ with 6,969,697 shares. You can see commentary and analysis of Blue Ridge's other investments in the just-released issue of our newsletter.

It's difficult to discern whether or not this is a brand new position for Griffin's hedge fund. Securities traded on the pink sheets (like MiddleBrook is) aren't deemed reportable assets on 13F filings. So in their most recent 13F, Blue Ridge doesn't show a position in MBRKQ. However, if an investment firm were to acquire over 5% of a company's shares outstanding, they would have to file the respective 13G/D with the SEC, even if it's traded on the pink sheets (just as Blue Ridge has done). Readers will recall a similar scenario in the past when Bill Ackman's Pershing Square did not disclose their General Growth Properties stake (GGWPQ back then) on their 13F filing, but did disclose it in a 13D.

So, while it's unclear as to when Blue Ridge originally purchased MBRKQ, they have quite a sizable stake now, with recent enough activity to force the disclosure of the position due to crossing the ownership threshold amount.

This transaction is intriguing for a few reasons. First, Blue Ridge files 13G's or 13D's on a much less frequent basis than many other hedge funds we track as they don't seem to take concentrated positions as frequently. Second, MiddleBrook Pharmaceuticals is a micro-cap company ($5 million market cap) and filed for Chapter 11 bankruptcy protection in April of this year. Their restructuring will be something to watch.

Griffin founded Blue Ridge after leaving Julian Robertson's Tiger Management and is known as one of the successful 'Tiger Cubs.' For more from his fund, check out Blue Ridge's recommended reading list.

Per Google Finance, MiddleBrook Pharmaceuticals is "a pharmaceutical company focused on commercializing anti-infective drug products that fulfill unmet medical needs. The Company has developed a delivery technology called PULSYS, which enables the pulsatile delivery, or delivery in rapid bursts, of certain drugs."


Read more: http://www.marketfolly.com/2010/12/john-griffins-blue-ridge-capital.html#ixzz173sfJsLq

[poloran]

Equity tanked today to 7 cents on huge volume of 507k shares. It appears the investors who set the bid at 8 cents finally realized the equity is worth less than 5 cents. Better late than never!

[Enterprising Investor]

Debtor files Disclosure Statement (11/04/10)

http://www.kccllc.net/documents/1011485/1011485101104000000000005.pdf

[poloran]

MOR - September - Ugly Picture

This company continues to destroy value for equity. According to September's MOR, the company burned $1.3 mm in cash during the month versus a forecast of $760k. That's $540k more than anticipated, or a 71% negative variance. MBRK lacks leadership capable of winding up this mess without squandering the company's extremely limited cash resources. Even with a Management Incentive Plan providing a $750k bonus if equity gets $7.5 mm in distributions, the company is unable to execute on the simplest of tasks, which is to minimize spending cash at a company with $0 revenues and a single digit employee count!

The current share price of $0.08 implies an equity distribution of approx. $7 mm. Good luck buying there when the Par claim won't be settled by arbitration until February 2011 at the earliest. At the current rate of monthly cash burn of $1.3 from October until February, or 5 months, the estate would be left with $6.5 mm before paying post-petition and pre-petition obligations. At the end of September, those liabilities stood at $1.2 mm and $5.8 mm, respectively, not including Par's $3.5 mm claim. Even without a payout to Par, payments to claimholders would total $7.0 mm ($1.2 mm + $5.8mm), leaving equity with $0.

This is not a pretty picture for equity.

[poloran]

Over the weekend, I spent time trying to figure out whether I should keep my investment in Middlebrook or not. I’ve never invested in a liquidation before, so much of this is new to me. Here’s how I understand the situation as reflected by the most recent filings:

cash $18.3 mm

post petition
post petition payables 0.440 mm
other post petition liabilities 1.344

pre petition claims
unsecured priority claims 3.001 mm
unsecured non-priority claims 2.200
Par claim (max.) 3.500
Gleacher payment 0.600
Est. of operating expenses (Sept to Feb) 1.000
Seneca Parkway claim 0.400
Remaining cash for equity 5.819 mm

MIP payment 0.000
# of shares 86 mm
Value per share $0.68

If Par claim is disallowed, add $3.500 mm
Cash, net disallowed Par claim 9.319
MIP 0.750
Remaining cash for equity 8.569
Value per share $0.990

Share price on October 9th $0.880

If this is correct, the upside is 13.2%
and downside is 34.1%

I am interested to hear what other investors who know this name better than I think. If, however, this analysis is correct, I'm not sure I want to let my investment ride on an arbitration ruling in January 2011.

[Enterprising Investor]

Thank you for the insight.

Exactly has I thought. There is a difference between liqudating the assets for the purpose of paying off creditors and true liquidation.

It is highly likely for an investor (or a group of investors) to try to save the corporate shell.

[Madclown]

That’s a good question. This is supposed to be a straight cash liquidation. That’s basically all that’s left. I believe we have a few employees, a building lease, some receivables, some deposits, a pile of cash in the $18 million range and some pre and post-petition liabilities. However, it is interesting to note that the company has Federal and State NOL carry forwards of approximately $236.2 million and $186.3 million respectively. It would be a shame to see those wither on the vine.

There were some insiders that made an 11th hour play for a whole company buyout, literally hours before the gavel went down approving the sale of the assets. I am assuming that the would-be purchasers had assigned some value to $236 million in NOLs but I can’t be for sure. They are, without a doubt, one of the most complicated assets to accurately value.

I don’t know for certain whether there is anything to do in this case as far as NOL preservation. I am just not sure if “liquidation” and “shell company reverse merger” are compatible situations. It is my understanding that there are some folks on IHUB that do specialize in these things. If you (or anyone else reading this) are in contact with any of them, feel free to mention our situation and see if they can provide some guidance. It might even spark some renewed interest in the stock. If we had enough interest in the stock I might be convinced to update the MBRKQ case summary as events unfold.

[Enterprising Investor]

Staying up to speed on these situations so you don't get blown out just becomes a full-time job at some point and I already have one of those.

No joke! I have been averaging about five hours of sleep for months.

You could save me some time on MBRKQ. I apologize for not knowing the answer. I am confused if the reorg goal is a shell or liquidation?

[Madclown]

I'll respond on the BAD board later tonight so as not to hijack the discussion on MBRKQ.

[PlanMaestro]

Mad, many of us are following your write-ups. It would be a privilege and a pleasure to reciprocate whenever you ask.

The most recent MMPIQ POR offers to buy shares at $0.35 (current price $0.3) to the ones choose to sell and only double the number of shares for the ones that choose to stay. With a written down equity close to $2 per share, it looks like an interesting upside with the downside protected.

Talking about "buy when the world is selling and sell when the world is buying", am I blind or TRXAQ looks very cheap despite the lagging effort of the OEC?

PD: should I take this discussion to BAD?

[Madclown]

Maestro, I also subscribe to the "buy when the world is selling and sell when the world is buying" theory.

Congrats on the MMPIQ trade. I had a number of folks, yourself included if I remember, propping that trade down in the 5 to 7 cent range and I just didn't have the energy to take on another complex Chapter 11 case. I needed someone to write up a case summary like the one's I put out there. I saw that first POR that they filed and let them scare me away. Staying up to speed on these situations so you don't get blown out just becomes a full-time job at some point and I already have one of those.

GLTU

[PlanMaestro]

I have seen another doomsday POR open a window of opportunity (MMPIQ) and that is precisely the type of event I am personally looking for.

[Madclown]

I'll just put another thought out there for feedback.

We should see the POR by November 23, 2010 and since the Par claim will not likely have been arbitrated by that time then we should expect that the full claim of $3.5 million will be included, even if it turns out to be less or even a zero a few months later. It has always been included in full on the MORs so there is no reason to suspect it will be otherwise on the POR. Since the full amount of the claim will be listed on the POR it will not paint the rosiest scenario for equity. In fact, it will likely present the worst-case scenario. But the beauty of the doomsday POR is that it basically establishes and reveals the downside risk.

I am assuming that those who know this all too well are not willing to ride that roller coaster for the next 2 months only to have to wait another 3 to 4 additional months to get the actual distribution. So the trade looks like it is shaping up to be one where you exit ahead of the POR and reenter after the dust settles. That is of course, unless the risk adjusted rate of expected return gets so low in the interim due to selling pressure that the bull case can once again be made.

[PlanMaestro]

There are others following your posts madclown despite being quite. Just waiting for some reduction of the uncertainty: Qs tend to give many opportunities for the patient

[vpagano]

Makes perfect sense that the PAR claim being extended causes that .08 to break down because with a longer discount period to any cash payout the current price is going to fall. MM's don't want to wait around for peanuts, their opportunity costs are too high.

[Madclown]

One things for sure is that the 8 cent bid finally broke down. That had been solid support for many months. I think the extended timetable due to the Par claim arbitration pushes this out several months. The volume uptick coincides with this development and the market reception has not been positive. I am just glad there is someone else alive that I can converse with regarding this stock. This board has been a ghost town. I thought I might be the last to leave and was about to turn out the lights.

[poloran]

Crazy trading going on in Middlebrook. Today, volume reached over 600k shares on a stock that had been trading in the 20k to 30k volume range just a week earlier. I think the smart money realizes there's no upside as they've headed for the exits over the past few trading sessions.

[Madclown]

If you assume that the "other assets" are not collectable or are otherwise not available for distribution and if you assume all of the "other liabilities" are in fact going to survive (which is the most conservative approach) then you have it pegged about right.