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EGI finally makes an appearance.
http://www.kccllc.net/documents/1011485/1011485100727000000000006.pdf
Values them at 20 cents - is this for calculating total value or a cash payout?
Impressive analysis. An 18 cent payout would provide a significant return and you still get greater upside if a buyer comes along and makes a bid for everything higher than the current $17.1M on the table.
Yeah - maybe write a few sentences about each and sort them so the most interesting is at the top and either contact them yourself or shoot me an email and I'll pass it on. My email is on my blog - selectedfinancials.com
Thanks guys - I really appreciate the kind comments :)
I have to thank Seth Hamot for the interview though - he was very open right from the start and that made it all possible.
Interview with distressed asset investor
http://www.selectedfinancials.com/2010/07/interview-with-seth-hamot-of-roark.html
It's also up on http://www.distressed-debt-investing.com/
Next court date? July 8th?
Are other iHub folks going to be at the next court date? I want to take a day off and sit in on it - I'm about 2-3 hours away driving distance.
Did financials turn around or something? Where is the value coming from?
I remember looking over it and I think the value hinges on either profitability or what their properties are worth in the market.
Wow... that's quite a move - thanks for the updates. I might have to grab some tomorrow.
How long does getting an equity committee approval normally take? I haven't seen any filing regarding it since the ad hoc committee mentioned it in a note in one of their filings.
They halted Pulsys development a while ago though, right?
If there was value there, I'm inclined to believe that we would have seen an offer sooner, sometime in the past year that this project has been sitting idle.
I want to be wrong here, because I believe Moxatag has some value and people will want to own that, but if Pulsys has value, we might see some even larger offers come in.
MBRKQ - Lease Question
Reference this: http://www.kccllc.net/Docket/SearchResults.asp?T=2180
Docket #127 is this: Order Approving the Debtor's Omnibus Motion to Reject Certain Leases and Executory Contracts of Enterprise Leasing Company, Ikon Financial Services, Mailroom Finance, Inc., Neopost, Inc., Seneca Meadows Corporate Center II LLC, Seneca Meadows Corporate Center III LLLP, and Spectrum Water Coolers Nunc Pro Tunc to April 30, 2010
Is there anything here (PACER) of importance that can't be found in the kccllc.net/MiddleBrook directory? Maybe just quicker postings?
Regarding Sam Zell, Phil Tinkler, and EGI
If anyone has spare time and is following this case, it might be helpful to get an idea of their track record with investments going into bankruptcy. Are they getting involved in the BK process or just taking whatever they're given?
These guys know what they're doing - Tinkler and Zell are very experienced investors and so I have to believe that they bought those shares in December with an idea of something that could be a catalyst for an outcome where the shares are retired above 40 cents each. They can't buy/sell shares now that the significant holders are restricted.
The question is why did they buy those? They have 45% of the company now: http://www.sec.gov/Archives/edgar/data/1161924/000095012309072308/c93913sc13dza.htm
They had 43% in the previous month.
Did that 45% mark achieve something for them (control? wouldn't that need > 50%?) or was this a "value play" because they believe the price will end up higher? If so, why weren't they buying more in March in the low 30's? I don't think they would be throwing good money after bad by buying $840,000 of stock in December, but we haven't seen anything to prove them right so far.
Not sure if anyone else faces this, but it constantly does take some effort to make sure the decisions we make are ethical. Unethically, I think I could have made more progress and sooner. Won't go into any details, but I'm convinced that being ethical is actually a skill and something we have to practice.
Maybe they're going to help find a buyer for the assets and that is going to take some time because they don't want to make an offer to early and have to deal with others? It'll be sold in an auction eventually anyway though, right?
Great article, here's something I disagree with though:
They are, but you should wonder that if these guys are willing to fight it, why haven't the 2 other major holders done anything?
I still have to believe that Sam Zell's group sees something because of their 40 cent purchase in December, but I haven't seen a filing from them yet.
MBRKQ Update
(1) 7 members formed an ad hoc equity committee paying legal bills and working together
(2) Filed for an equity committee
It seems like things are starting to heat up and so if anyone wants to follow it, keep an eye on the situation. I would recommend reading through the EDGAR filings and kccllc.net/MiddleBrook.
I'll probably spend some time on it this weekend, no guarantees though.
Been looking that over myself - 7 people are in it, footnotes 1 & 2 are of importance:
1. The members of the Ad Hoc Committee are:
Menachem Maiman
Douglas Abramson
Kule Wang
Joe Huang
Chrus Czeexat
Lichu Liu
Randy Kaven
2. The Ad Hoc Committee has requested appointment of an official committee of equity security holders from the UST. Upon information and belief, the Ad Hoc Committee's request is currently under advisement with the UST.
I have to say that it's nice to see these investors working together on this case. Their effort is commendable and I'm a little curious how each of them is related or was brought into this. I'm also curious if the names were spelled correctly - Czeexat doesn't show up in even 1 Google/LinkedIn search result.
I'm going to be digging around in this case for a while... will probably go through a ream or two paper this weekend.
FWIW, the bonds are trading lower too.
http://www.kccllc.net/documents/1011485/1011485100518000000000001.pdf - filing
What actually goes on at an Omnibus meeting?
I think it was Warren Buffett that said "All intelligent investing is value investing" while he was in a discussion over growth vs value.
They have a market cap around $700,000, what do you think the company is worth?
Remember, one of the most basic concepts of finance is that of Net Present Value. The price you pay today, in an efficient market, is close to the present value of future cash flows.
Because you're buying this stock, you believe the present value will be greater than what it sells for, $700,000. If you can explain what you think this stock is worth, I'm all ears and do have dry powder for good investments.
Thanks! Took a look at it and the CEO stepped down not too long ago - for such a small company, do you think they can survive a change?
Small companies need great leaders just to get off the ground, would anyone else have the motivation and drive besides the ex-CEO (possibly founder?).
Holy moly! I looked at it a week or two ago - How did they do the valuation there?!
I looked over the CF statement and FCF (op-capex) nor income statement pop out to justify that value with 700M of LTD.
I could really learn something from this if you have any insight.
Haha, amazing! I thought the markets were bipolar for a while - been keeping an eye on it with my phone and I saw it dropping down significantly one day, then right back up the next.
I think something I've learned is that at least with bankruptcies, you only really have time to follow maybe 1 or 2 at a time unless you do this full time. I follow 1 company very very closely (CFO/CEO will take out half a day to spend time with me) and follow 1 bankruptcy right now, on a part time basis. I'm sure I'll get more efficient at it over time, but I have to say that posters like madclown are simply doing a great job and it makes it easier to see research that others have posted while sharing your own.
Wow, I had not seen that and it looks beyond amazing. Honestly, I could probably sit through the whole thing 10 times.
I start a new position for the summer on Monday and so unfortunately, there's no way I can really get out of that :P
I'm hoping to go to at least 1 or 2 conferences on bankruptcy investing this summer because NY, NJ, etc. are all within driving distance for me.
Distressed Debt Summit
June 16th in New York - http://www.iglobalforum.com/conference_live.php?r=27&p=home
It's on a Wednesday and the agenda is here: http://www.iglobalforum.com/conference_live.php?r=27&p=agenda
I'm planning on going to it and if anyone else is as well, just let me know.
Why are you focused on the equity and not the debt? If there is a lot of value, wouldn't you rather fight for the debt, because it's a lot closer to being in the money?
Do a writeup, send it to some distressed debt investment funds, and let them fight a legal battle for you.
You might be right on short term, but let's be honest... an equity committee is not going to happen. If there was a chance or the judge wasn't sure, they would have asked for more information.
The blog objecting this seems to have been much more focused on how the stock has traded and a statistical analysis proving manipulation rather than the valuation and so I fail to see why there's a shot of getting an equity committee.
Madclown wrote a very good piece on this: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=48843348
In essence, you should not trust the MOR for the balance sheet. Use the 10K/10Q's for this data. His post has more detail, but there are clearly discrepancies and I bet an auditor wouldn't have let this pass if MOR's had to be audited. Unless you're running Enron, Lehman, or something similar, you don't see stockholder's equity change by 14B this quickly... unless you're not being audited.
They may have a valid reason for it, but if the auditor's didn't let if pass, I'm going to pass too.
I think the "shock" of seeing how Q's trade has gone away, but it's still mind boggling... 15M shares of ABWTQ.PK traded right around 10 cents per share. That's $1,500,000 worth of equity plus transaction costs!
I guess even a sunken ship at the bottom of the ocean can still point up, hehe ;)
MBRK Update
There was a hearing yesterday, attendance sheet here: http://www.kccllc.net/documents/1011485/1011485100504000000000006.pdf
The only one that caught my eye was Par Pharmaceuticals. First, it's misspelled - listed as Parr, but it should be Par.
They had an agreement with Par a while ago regarding some development work. page 47 of their annual report has more information: http://www.sec.gov/Archives/edgar/data/1161924/000095012310025277/c97767e10vk.htm
jaxstraw - thank you very much for pointing this out, you've made my life a lot easier actually.
I was normally going to wait till my research was finished, but if I see a possibility of something happening, tossing $10-20 on some pre-Q shares is a great idea.
Price Increase
When they increased prices on Titanium Dioxide, what were the original prices? I want to gauge how much of an increase these last 2 changes were in terms of a percentage of original prices.
MBRK - My beginning analysis is here: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=49675701
My conclusion (thus far): The current drugs require too much marketing and promotion for them to be profitable, so no economic gain by selling them. The drugs in the pipeline had R&D halted a while ago and so if there was value in them, we would have seen a buyer come along and try to buy them, because having research halted for a year is a lot of lost money if there is serious potential.
A large buyer bought a chunk of shares in December and so I originally thought there might be something here, but I haven't found it yet. If someone else finds something, I'd be happy to take a look at it.
If their pipeline had value, we would have seen any number of things happen a long time ago when research and development got cut:
1. Outside buyers make offers (they needed cash badly, they would have taken it)
2. Management raise money to continue R&D while marketing moxatag
They put a ton of money into Moxatag and it didn't go anywhere worthwhile. If there was value in any of their other assets, I believe we would have already seen someone step in. There is a lot of value lost in letting a product in the pipeline sit around unresearched. We vote with our time and money in life, management has shown their votes (with the money investing in marketing Moxatag) and subsequently, how much value they believe each part of the business has to offer.
I posted some work here:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=49675701
A large owner bought more shares in December in the 42 cent range and so I believe there might be something I'm not seeing here, but I haven't found it yet.
FWIW, MBRK board: http://investorshub.advfn.com/boards/board.aspx?board_id=9330
I didn't find anything interesting at all, just people responding to press releases and comments about the way it's trading.
Came to a halt on this - let me know if you guys can help.
http://img46.imageshack.us/img46/5282/mbrkfinancials.png
From Page 78 of their annual report in PDF format, you can see how they spent $70M and were only able to increase revenue to about $15M. Their goal was to increase Moxatag sales, which got FDA approval, which is the medicine I used and it worked for me last year. There is some R&D that was lumped into SG&A, but it was less than $5M if I remember correctly.
From this alone, it seems they spent $45M over the prior year and revenues did not rise significantly enough to justify this expenditure. It would seem to me that it's not worth very much at all because the marketing needed to push this is way too much.
In addition, they don't have any way to make very large margins on the Moxatag product. Moxatag is sold with a "$20 maximum copayment" where you can buy it for $20 or less without insurance or anything. Moxatag is basically amoxicillin except it has less active ingredients and you only need to take 1 pill every day rather than multiple doses of amoxicillin daily. (This is how I understand it so far anyway) I bought it with this $20 maximum copay and I didn't use my insurance, so all generated in revenue from me was $20. This was at the retail level too, so what they saw would be even less. Basically, in order to actually sell the product, they're already required to sell it for a low price because of competition from generics that are IP-free.
Here's the question - how much is a buyer willing to pay for their FDA-approved drugs? Are they worth *anything*? Maybe the large marketing push last year has created a market that will generate $5-10M in revenue and $3-8M in gross profit by simply distributing it and not furthering marketing or anything related?
They owe money to many people, contractual obligations alone are $14M, and we don't have financials yet after December 2009.
I know I haven't quantified just how far away commons are from being in the money, but I think the first goal is to find a value for the things they have left. If someone can buy their portfolio and create a business that can capture the $3-8M in margins annually and be profitable, there might be value here. On the high side, let's say they make $8M in gross margin, $2M down to net income (insurance, taxes, accounting, legal fees, administrative, list goes on) and an 8x P/E ratio because of the risk involved with pharmaceuticals, etc., that's only $16M of potential for the sale of some assets (intangibles). I could see value from an established marketer selling this along with other products (if a salesman is already out selling, he might be able to present a portfolio of drugs rather than just 1) or value in the other unapproved drugs that I haven't researched and they halted R&D for. If there was value in a drug they halted development for, we would have seen interseted buyers already emerge though.
I've come to a halt on this and so if someone else sees why this is worth more, do post back. They have 2 other drugs in development, but at least 1 of them had research halted and the company took an impairment loss against it, so I'd say if they were willing to kill their income statement with that, there won't realistically be any value left.
I want to think there is value because in December, a major holder bought about 2 million shares at 42 cents each. It came from a sophisticated buyer and they had to have seen this coming...
Middlebrook Pharma.
Jaxstraw - thank you for posting this.
Filings: http://www.kccllc.net/MiddleBrook
Website: http://www.middlebrookpharma.com/
SEC Filings: http://www.sec.gov/cgi-bin/browse-edgar?company=&match=&CIK=MBRK&filenum=&State=&Country=&SIC=&owner=exclude&Find=Find+Companies&action=getcompany
12 cents/share after hours on Friday
86M shares outstanding
Implied 10.32M market cap based on 12 cents/share
At first glance, these guys are burning 10-20M every quarter: http://finance.yahoo.com/q/bs?s=MBRK
Value for commons? (Expect some speculation here, this is preliminary research!)
Maybe... profit margins have fluctuated between 54% and 91%, with the better margins coming from quarters with higher revenue. Maybe they have manufacturing contracted out and they have to meet certain minimums? Moxatag and Keflex are produced and in use. I personally used Moxatag last fall when I was sick and so I believe this is a real company. Going back to the financials (I/S primarily) - they're spending tons of money on SG&A for some reason. R&D is separate and so I'm assuming (for now) that SG&A really is SG&A, in which case you have to wonder why they're spending so much on selling efforts, and if employees weren't meeting quota, why didn't management stop this bleeding sooner or remove staff that was underperforming?
I believe there will be a value for their intellectual property and I think establishing that is going to be helpful in understanding the valuation here.
It seems like I'm going to have to start learning about valuing pharmaceutical intellectual property now.
I'm not happy with the outcome, but I understand the court's decision against Resilient because of their very late filing.
I'm more easily found in this board: http://investorshub.advfn.com/boards/board.aspx?board_id=17555