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I'm simply stumped why this company went public in the first place.
Don't disagree with that story but we see a slowly improving default picture, we see improved new sales numbers.
To me your statement tells me one of a few things.
1. RDN under-reserved more than its competitors who have fallen by the wayside and this will eventually catch them. I find this hard to believe as I doubt the states insurance boards would not be on this. If it was true the improving market may hide this as the recovery will dampen it. The only way to check for this will be underperformance vs their peers going forward. Something to watch for sure.
2. The entire housing market takes another correction. If so I have bigger issues to worry about. Banks are more levered than these guys and were the canary before the insurance guys.
3. General economic slowdown. - Again I have other worries.
Simply I think the market is ovestating the downside risk here.
Chevy - Nobody on Ihub likes this company.
Its above $1.00 share, hell its above $.10 share.
It has a real business with real, REAL sticky clients.
It is one of the few surviving players in the industry that you or I can buy equity in.
I own it at higher price than your post in May but I think you did well for yourself.
Was any of this due to the supposed demand by MPG to sell their assets? If true this may prove to be a repricing of some of EVOQs properties or maybe a bidding war by some losers.
BTW, that was a nice find. It took me a few minutes to figure out how you knew that but it was something I completely glossed over.
I am surprised by the complete lack of volume in the past few months. Was hopeing it would drift down and I'd rebuy in the 12-13 range, which looks very unlikely.
I've owned a few shares (but not enough) for 18 months.
Personally, I didn't like the 8k for two reasons.
1. Mgmt has been funding the legal fees for this and the complete costs need to be subtracted from the award value.
2. Is the amount referenced for distribution lower than the cash value of the award due to the cost of legal fees + any taxes or is mgmt going to keep some of the award for themselves to enrich themselves or are they going to use part of it to start a new business.
I sold half my position this morning.
Thanks for this. I had run accross this once and had it bookmarked then lost it. Appreciate it.
I just send the Q2 Statement to Chevy. Maybe he can post it publicly. I don't have a dropbox account. I get it via work and it comes from NAIC data.
I don't think you'd want to take it activist quite yet. The problem is the only person that is really in control here is Michael FitzGibbons, the administrator. Remember he is paid by the State of Nebraska Insurance commision to make sure everything is cleaned up smoothly. Nothing about equity or growing the business.
This company has two forms of value to be realized.
1. Positive book value, value will be unlocked after Granite Re is cleared.
2. NOLs - I believe these would be lost in a change of control (buyout). So I don't see a buyout making sense.
Recap, yes. That said, lots of insurance companies are selling for less than book today. Lots of life companies are realizing that its a commodity game and are in runoff mode (rolling over premiums but not managing a sales force writing business), add in the crappy yields on bonds and the whole sector is cheap in some regards.
I need to rephrase what I meant about burning cash. The Book is flat to down a few hundred thousand since I've been watching it, not real material. When I first invested I was actually hoping that interest rates would rise and the interest earned would more than cover the minimal expenses, or a free kicker.
It wasn't revenue it was that admitted assets increased and were almost offset by an increase in liabilities.
To be honest I am not sure what would cause that much of a movement in both the Assets and Liabilities lines. The two are related, no doubt but I'm not sure what changed.
The only thing I can think of it they moved some assets that had been classified as non-admitted as moved them to admitted. At the same time they would have moved the corresponding liability. However a comparison of non-admitted assets looks flat as compared to the last quarter.
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Agreed that this isn't revenue. They haven't written new policy in a long time. Their only source of income is from their investments, unfortuately as the bonds roll-off each replacement bond is generally a lower return. Previously, I was hoping that the interest from the bonds could cover the overhead and add a little kicker, instead it just slows down the burn.
What business would you want to do?
The business that caused them to fail was two fold.
1. A poor reinsurance contract with Granite Re was only 1 part of their problem in their Crop Insurance Business. The only had bought this business a few years prior.
Overall a decent business. However you have to get to scale and quick. There are two players in this market that have their own sales reps and are doing well. The next 4-6 have a few dedicated sales reps but generally sell via a broker business. These guys shift spots every few years as #1 and #2 pull away as they can get any premium pricing as the brokers just churn clients and sales.
2. The business in runoff mode was primarily in Workers Comp. Their major losses were in CA like many other insurers in the 90s. Many other insurers closed down due to legislative issues that crippled them, only large insurers stayed offsetting their losses. Only in the past 18 months has the CA workers comp market started looking good from an insurers standpoint.
The life and P&C auto markets are basically commodity markets now. And to compete in home and others you need scale.
If I was starting recapitalizing these guys I'd be looking at Mortgage Insurance or Crop. I have a few ideas on the crop side especially since you can give away 20% of what you write to the Feds to reduce your risk. Good tech in this sector could give you an underwriting advantage, along with dedicated reps in a few states allowing you to grow and then slowly broker out would be my plan.
This post reminded me to look at Q2 filings. Same old story, no material changes.
Admitted Assets were up $4.2 to 33.8M but liabilities (ex Granite Re) were up $4.0M to $21.8M. Unfortunately we still have the Granite Re claim out there for $17.5M.
What we need to happen.
1. Settle claim with Granite Re for something. Ugh.
2. Settle/sell the books of business that make up the non-admitted assets. For the past two quarters they have used language that they are not holding liability reserves as non-admitted assets will easily cover any liabilities owed on their part.
3. Once the settle with Granite Re they should be able to sell of the business to other insurance companies who buy these dying books. All reasearch that I've found on these show that sell for 70%-80% of book value.
Edit: My guess is that Granite Re will not settle until they do #2 as they probably assume that any sale/release of liability will be good for AICPQ (which I agree with) and will allow them to have more leverage in a settlement. My guess is FitzGibbons wants to get the lowest settlment price with Granite Re as he knows they are in administration or BK (Chevy do I have that right?) and he can probably outwait them.
We need Mr. FitzGibbons to settle at a good price. I haven't spoken to him for a year but he's a very bright fellow who gets the big picture. His CV also shows he was successful in getting a return for equity in situation that looked much, much worse when he stepped in. Granted, the stories are different (timing, P&C vs crop, etc) but he somehow did it.
Nothing. Sentencing Hearing for Brooks on the criminal proceedings is scheduled for early October. There is a status update on that in early September of no real significance. The sentencing hearing was delayed as Brooks lawyer was the lead on another case during July which would not allow him to give full effort on this case. The judge doesn't seem to care as Brooks is in jail and will count against whatever sentencing is imposed.
The civil suits against Brooks and his family are stayed until the criminal case has been completed. This could be a long while. Hell, even the monthly billings for the debtors is less than $7,500/month which is nothing.
The best news for us would be to wake up one day and get news that there was a) settlement between all parties for X and what everyone gets (Lawyers, gov't, IRS, shareholders pre, current company (us) and whistleblowers). I'm optomistic that something gets done by Christmas but I said that last year on DIMEQ and I woke up to getting robbed by the Grinch right after the new year.
However, its not a given that the $2.8M will be returned to shareholders, correct? They could stay in business.
On page 22.
Thanks frank. I'll have to go find that and read that.
Frank-
Not sure if you are still following this story but I have a question for you or anyone else for that matter on the recurring nature of the revenue.
We have seen the revenues grow 15% while advertising is flat to declining which to me means that they are becoming more efficient on the marketing which ties to the their shift to direct mail vs TV. (A company that does this well will do very, very well).
However, I struggle with the idea that they can throttle back the ad spending considerably. My understanding if the lifecycle or user base of this product (catheder) is much shorter than diabetes in that the average user is less than 90 days. If that is true I don't think we get that multiple.
Anybody else have any thoughts out there.
I like that they are seeing a shift in increased sales and that the direct by mail advertising plan seems to be working.
Question for anyone that may know. Why the comparison for Quarter ending June 30, 2012 to the one ending Sep 30, 2011. They state both are Q3 but I see no notice of them changing their YE data. I must have missed it. Anyone else know?
I very much like the increase in sales on Year over Year basis but we still haven't had sales really ramp on current vs prior quarter which will get investors attention.
My biggest concern is the growth in receivables at a much higher rate than sales and profits. Its been going for a few quarters now but it hasn't led to higher charge offs. Need to contact the company to figure out the story.
Somebody could take out the 40k shares for $450 dollars with commission right now.
A total of $55 has traded today.
Great story.
In my attempt to be a better investor I've started looking in the grey markets. Many times these are real companies who have discontinued publishing financials except if you own shares. So I bought 1 share of this company wrote the owner and asked for financials. Got an call back a week later wondering how I found out about the company, etc and if I was related to a certain advisor who was from the same state as me (Wisconsin).
He proceeded to berate me up and down and tell me that whatever I was planning with the other advisor was not going to work as the trust held more than 50% of the company and his job was not to maximize shareholder returns but instead do the best for the trust as he was on that board as well.
Sad situation. I sold at the bid the next day and haven't looked back but has kept me focused on the top rule. Figure out what mgmt's incentive is and make it aligns with you otherwise you are toast.
I've listened to Chapman as she is the judge during the 4Kids BK and handled the dispute between them and Tv Toyko which caused the BK filing in the first place.
Thre really has been no fireworks so its hard to say how she thinks. Last time I looked through her schedule she also had the Lightsquared BK and she only became a judge in the fall of 2010 so she's pretty new.
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I've been starting to think about bottom fishing in some of the coal names for a while but I still don't think we've hit the bottom. As long as Nat Gas is below $3.50 it makes sense for power plants to convert (I assume that if a plant was to convert it would have done so by now).
I'm not a fan of Central App coal as I don't think its a cyclical thing but a permanant shift. I like Powder River basin more as its low price and low sulfer content made it the least likely to experience a shift to nat gas and I think China is in for a hard landing so exports are not going to save anybody in the short term.
I'm thinking that shareholders are going to get hosed but maybe the bonds are the way to play based on the value of the assets.
Agreed on the value of courtcall. Unfortunately, I will be on a flight otherwise I would listen in.
I enjoyed listening to a recent call where 5 minutes into the hearing the judge stopped the call to remind participants that there were 2 people on the call and read off their names. The debtors council asked for clarification of who I was and what my role was. I found it humourous as you know someone was then googling my name to find out more about me.
Thank you for adding additional color as I hadn't and wasn't planning to look up some of the case law cited. Are you planning to listen in on Friday?
These docket items are basically immaterial.
The stock is moving becuae in the criminal case there is a hearing that is scheduled Friday to discuss what assets David Brooks will use to satisfy the $61M judgement. Brooks council has been busy on another case and with sick family and was unable to file anything so the Gov filed what they thought were appropriate assets to equal the $61M. This set of a few responses from Brooks and council arguing that only Brooks assets should be able to be claimed to equal the $61M not assets that are frozen in the name of his wife, children etc.
From there there has been some squabbling back and forth over validity of the two arguments.
The bigger news however is that they again referenced the global agreement which would settle the criminal, future civil cases against DHB and family. In one of the documents it refeneces that parties agreeing to it include the gov, Point Blank (company) and Brooks and family. At this point different parts of the government appear to reviewing it and they are hoping for a sign-off. However there is nothing noting how much each party gets, timing, etc. The judge has requested a copy of the settlement agreement prior to Friday's hearing.
My guess is people (Hedge funds) are going to be at Friday's meeting in hope that any amounts are released or that the agreement is approved.
Absolutely.
He was right.
I first bought at the initial and then didn't chase beyond $.04. It was worth the risk/reward for myself at that point.
Then I got excited by the Loopnet post that it sold for $1.2M. Logged into loopnet myself saw the sale. Put together my own spreadsheet and started tracking stuff. Bought more in the $.17 and $.19 range. Saw where the building in Indiana sold for stalking horse bid and not the $1.2M. Called the realtor who did the sale and she confirmed the price, etc. That was a big negative hit and I decided to hold and not add anymore.
Then started to see other locations sell for inventory.
Called the CEO spoke to him for 10 minutes. Thought about it overnight and then proceeded to sell where and when I could.
My screwup in early May ommitting legal fees was the big mistake. Luckily I got out for my cost less PACER which will not be cheap.
See my post after yours.
Add in the fact in the criminal proceedings that they were looking for $200M in ill gotten gains and the judge ruled that they were able to only prove and therefore are eligible for $61M of it and its disappointing.
In the criminal filings in the Spring before the judges ruling above there was a docket filed by a former Brooks lawyer who wanted to get paid and referenced a potential $200M settlement for everything that was being contemplated by the Gov. I have no if the Brooks win in the criminal case will throw a wrench in the settlement or if there is even one being contemplated still.
I would like to derisk a little as this is taking longer that I hoped for but I'll wait for some news first. I've been here long enough. The B/A spread is too wide to let me as well.
Other recent-ish news (last month)
Sentencing for Brooks moved to August 8th from the 22nd for the criminal portion.
Civil portion of lawsuits, etc against him, his family etc are on hold until 30 days after sentencing.
I know. I do thank you. Thanks.I had pulled PACER on Friday evening and the two important ones were not there at that time. My thoughts per my post at the time were signalling much of what I thought.
I spend some more time going over my numbers that I had posted from early May (http://investorshub.advfn.com/boards/read_msg.aspx?message_id=75079260)
I was long the stock at the time of my post but as I looked at the numbers in greater detail I ended up calling the company as my math had only $1M of wiggle room and I had not included any legal fees which was a big ommission.
I called the CEO, who is the only employee left at DI and asked what the plan was. He told me straight up that the original plan was to file BK and sell the Mobile Business as they had lost the contract for that drapery business in mobile homes and the plan was to reorganize and consolidate plants around the hospitality business. I asked about why the OCC objected to the sale of the mobile division in December and he couldn't say. His last statement was that delay and expense caused a shift from a reorg to a liquidation. Once he said that I assumed equity was toast and sold out.
Yep.
July 2011 - A $44M / L ($76M) - Total ($32M)
August 2011 - A $45M / L ($76M) - Total ($31M)
Sep 2011 - A $42M / L ($75M) - Total ($33M)
Oct 2011 - A $42M / L ($75M) - Total ($33M)
Nov 2011 - A $13M / L ($38M) - Total ($25M)
Dec 2011 - A $11.5M / L ($37M) - Total ($25.5M)
Jan 2011 - A $11M / L ($37M) - Total ($26M)
Feb 2011 - A $11M / L ($37M) - Total ($26M)
Mar 2011 - A $6M / L ($33M) - Total ($27M)
Apr 2011 - A $6M / L ($34M) - Total ($28M)
I was excited when the sale price was announced but it seems in reality that it didn't help the balance sheet much.
This is going to be $0 or homerun stock and we need two hit two or three consecutive home runs to get anything.
1. Deal with Brooks for $200M.
2. Agree with Gov that shareholders get the equity and not the DOJ, IRS or anybody else.
3. Then an agreement that somehow splits the money between current equity holders and equity holders when fraud occurred.
Why do you tease? I just cannot figure out who is sitting on the bid @ $.12 right now. Its only $600 but still.
Not a fan of todays filings by the OCC.
I cannot figure this out. The OCC is basically claiming mgmt fraud and wants to go after D&O claims. If they were getting paid in full there would be no need for this and really they should be silent. If the debtors aren't getting 100% then equity is a zero.
Second, this looks like a fight between DI Mgmt (1 person) and the OCC. For equity this looks like a fight that will get expensive quick and for such a small float that is bad news.
Disappointing.
So which one is closer to the truth?
The CFO - his statement is definitive. If he is wrong, I can't see how he keeps his job as his credibility is shot.
or the 10Q - Is this the real story or just covering their ass by the legal department. Quite often the 10Q on a solid company can make an investor sick by reading the disclosures.
The follow up question is what is the market giving odds to IDIX/GILD? Then we can determine if we want to play in the gamble.
My thesis on CAT to DE is similar to your's. I
Sorry if my previous comment came off as snarky or rude as I didn't mean it. I wrote that after getting off a long and unpleasant phone call.
Even if 3% of CATs sales are in China, 1/3 of their book in the resource segment is driven by demand from them and Brazil for resources. The volatility is too much for little ol' me.
Additionally, I don't see the US operations slowing down anytime soon.
While I understand your point and I think that 90% of the time its a good rule of thumb I've watched what I perceive to be poor decisions in many startups where companies take on debt, instead of reasonable diltuion and that in a few years the debt becomes too much and they fail.
When companies exchange common liabilities in exchange for equity that is a red flag for me as normal operating expenses should be able to be paid by the company. If not there is an expense/profitability problem.
I'm a long term investor who is looking for some 10x returns so this is where I am coming from. Here are my three examples.
1. Back in the early 80s there was a microbrew startup here in my hometown, one of the first. Shares were issued for $1.00 share and have basically been illiquid as there is no public market. Up in LaCrosse, Wi there was an old Pabst/Old Style brewery that closed in the early 90s and was restarted with a local startup by equity. Both breweries were doing well, growing at 10-20% annually. The brewery in LaCrosse, needed to replace some old equipment and borrowed via a bank loan taking on debt. Capital Brewery in my hometown issed more equity. Both had operational issues with the growth, slowdown in economy. City Brewery in LaCrosse was taken over by the bank who saw an opportunity to get an asset on the cheap where my shares of Capital may have been worth less in year one but my BV/share has never been higher.
2. Axion Power (AXPW)- Battery startup with a battery designed be in the price range of the AGM but with faster recharging characteristics. Its really a hybrid of a capacitor and a lead battery. They have been in business for 8 years and basically dilute shareholders every year as they wait for sales. They are supposedly in year 4 of testing with BMW and 23-30 months with Norfolk southern for batteries loco's in their switching yard. My investment in this company was in the locomotive space as there was a company called green goat which promised locomotive hybrid tech and had $150M in sales and a huge backlog when it turned out in 3 years that their batteries sucked. If you go back and listen to old Conference calls with these guys you can hear that they expect an order from Norfolk for atleast 12 months. If these guys would have taken on debt 12 months ago they would be belly up and my stock would be worth zero.
Sure you can question these guys forecasting ability and I have but insiders owned 50+% of the company prior to the last dilution, which was horrible don't get me wrong, but at least they are still around. Mgmt owns a bunch of the company at a much higher share price.
3. Beacon Tech - Made flywheels, about to commercialize after starting test plant last spring. New Frequency regulation coming should help them but instead their $40M debt for facility they built with the government was called in after the Solyndra debacle and these guys were forced to shut down.
Both Axion and Beacon were/are almost to commercialization and one is now gone because it took on debt that it couldn't extend as Fed. regulations relating to demand pricing have been delayed by a year vs Axion is still around as Norfolk is taking their time after prior public failures with the GreenGoat and the NS999 retrofit with a different battery mfgr a few years back.
email if you want more details on Axion.
Dew-
I'm not sure if you really believe this or are willfully ignoring the reason behind this.
Even if sales in China is only 3% of CAT's sales. Sales in Asia were $4B/$16M or 25%.
A different way to look at CAT is this. They have three segments:
Construction - we are all used to this.
Power Systems - Locomotives and other industrial uses
Resources - This includes things like forestry equipment and mining especially since their purchase of Bucyrus last year.
All three groups are about the same size and make up 95% of revenue. The rest is basically from their financing arm. Their most profitabale portion of their business is in the resource sector, driven by mining. Mining is a highly levered business driven by commodity pricing at the margin. Just because a slowdown in growth in China doesn't mean that commodity prices take a hit and that affects sales growth.
(I was an owner of Bucyrus before the merger. I have sold my CAT as my industrials are held in Deere, Johnson Controls, and I have a small speculative position in Xide in the hopes of a turnaround in the battery mfgr based on stop/start in cars in the next few years.)
Westport/Shell is driving much of this CNG stuff. I can't find it today but last year Westport had a report on their Website of where Shell was going to put 30 CNG stations on major East-West interstates. Primarily the run from LA to PHX to St. Louis. Then there were plans to run the West Interstates North South and certain runs in Western Canada. Shell was even going to finance truckers purchases of CNG engines to utilize the equipment.
Its not always that simple.
Lets look at a battery company, called Axion Power (AXPW). They issued more shares instead of taking on debt. At this point they are an R&D company hoping to commericalize something. Adding debt at probably onerous terms and without a direct pathway to being cash flow positive would probalby cripple this company. Therefore I can understand this sort of financing.
(Full Disclosure - I'm long the stock and while I didn't like the amount of dilution I can accept it vs a BK filing.)
Isn't BK quite often a formal or rigid entry of the potential to convert debt to equity. In most BKs equity will be wiped but sometimes a coversion from debt to equity gives the company needed time. I'm not saying this is always and in penny stock land it quite often is a sign of crap but I'd rather of seen what Axion pulled off diluting shareholders vs the death financing that A123 got.
When was this. Point Blank (PBSOQ) initial POR from the fall of 2010 had something like what you mentioned and I know that equity holders and others referenced section 1123(a)(4) which states:
Hey Jax-
Can you find any history of them diluting the original shareholders when they bought I-Web. per the filing they bought 90% of the common so did the other 10% holders get a free ride up to $3 for a while? Now trading @ $1.01ish.
One of the biggest issues in California was insurance especially the Worker's comp area. I can tell you that it looks like we may be a trough pricing and losses in this area. That may be a good precursor for business investment in California if pricing has stabalized. Banks follow business growth.
Are you restricted shares available for trading? Mine have a CUSIP # but according to Fido have not been received. I thought the restricted shares were for 12 months so I was expecting to see them open up this Spring.
Here is Rodney McFadden's latest on this case:
http://thediligentinvestor.blogspot.com/2012/05/trident-microsystems-completes-sale-of.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+TheDiligentInvestor+%28The+Diligent+Investor%29
Trident Microsystems Completes Sale of TV Business; Seeks Permission to Expedite Sale of Audio Unit
Readers should note that the closing of the STB and TV Units may well mark the point in the case where halcyon times may give way to discord and divisiveness, at least for a while; not so much between the Debtors and any of their Committees but rather between the Equity Committee and NXP. Given that the Equity Committee has filed a Motion for a Rule 2004 Exam of NXP as well as certain of its affiliates and directors and given that NXP has been non-responsive to any related requests for production of documents or tendering of witnesses for deposition, to say the least, it is going to get very interesting. While it is early in the process to know anything for a certainty, suffice it to say the Rule 2004 Exam Motion filed by the Equity Committee provides a broad outline of a set of transactions the contours of which would appear to suggest that the purported business relationship between NXP and the Debtors may instead be tantamount to the archetypal Parasite/Host relationship. The Rule 2004 Exam motion will be heard before the Honorable Judge Sontchi on May 15, 2012.