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Congrats for those of you who stuck in this to the end. Hope you all made a lot of money.
I'm not sure what I think about Syncora right now. It's true the NOLs go to 2029, I believe. But cash burn rate seems to be a little over $1MM per quarter. I'm just getting that by looking at the Liquidation Balance Sheets since last FYE. With $17.6MM in cash left, seems like the runway is through end of next year (assuming no other cost reductions in the mean time).
Or maybe they can monetize some remaining asset to buy some additional time.
But I do think they are running out of time.
Disclosure: No position in Syncora.
I just want to take a moment to reflect on buying my first three suits at Syms, which I wore daily on my slog in an out of Manhattan... hahaha. I don't really miss those days.
NOL valuations are a crap shoot. Syncora threw how many billions in NOLs in the garbage can with the sale of their business to Star? You can't even put these NOLs on the balance sheet unless you are generating sufficient income to be able to reasonably use them over a period of time.
But if I was to assign a value off the top of my head, I guess I would start at the $300MM figure and apply a tax rate, then apply a factor for the merger dilution, then deeply discount it.
Yes, it would likely have to be a private company given the size of the NOLs and the requirements around the reverse merger. They could PIPE into a Syncora shell. Although ultimately I would expect the surviving entity to go private. A company of that that combined size likely has no business staying a publicly traded entity.
Just my opinion. EI probably has a good perspective on this, if he chimes in.
Disclosure: I'm out of Syncora, but if the value proposition improves may get back in at some point.
Well, the distribution was not a liquidation, for starters. You might mention that to the bank. They essentially sold a business line, and distributed proceeds to their investors. They still have a number of assets and still are "in business".
That said, they have announced plans to liquidate at a future point in time, so there would in theory be a second distribution after they have monetized the remaining assets. That would be the liquidating distribution.
The news is not really the distribution. We’ve known about that within +/- 10-20 cents/ share for quite a while. But they apparently are going to liquidate the remaining assets and make a ‘final’ distribution at some future time. Now that is something we didn’t previously know. Whelp, guess those NOLs were worth nil after all.
I cannot imagine a scenario where there would not be a date of record for the distribution. There would be too much litigation without it, from parties who believe they were entitled to it.
There is still 47 days remaining in Q4, and I wouldn't rule it out. Although with Syncora, everything seems to take 3x longer than it really should. I'm not sure why.
American Road took 70 days to close, from the date the sale was announced. The Assured transaction took 115 days from announcement to close.
The SGI sale transaction was originally announced on 8/15/19, 91 days ago. Renegotiated deal announced 9/5/19, or 70 days ago. If you peg the close at 115 days like the Assured transaction, we have between 24-45 days to go. That would indicate a December closing timeline, but it could be very close to the end of the year.
My expectations would be that a distribution would follow the transaction, by two weeks to 45 days, depending. So that looks like a Q1 event almost certainly.
Of course, all this is just my opinion, I hope to be pleasantly surprised with a quicker closing and distribution. Also, would love an announcement for plans pertaining to the stub business.
Living the Miller High Life, I like it.
The story is 95% written with Syncora. Not a lot left to discuss, at least for the time being. Many have waited out 10 years of 'turnaround' and now the remaining book is sold, pending close. Not too much to banter about.
I can't say if anyone on your list still holds the stock or not. But I certainly don't blame anyone who has sold and moved on, as it's been a long road for most.
Snow is just jawboning his book. Probably looking to add if there is a drop in the price. That's been his shtick all this time. At a certain price, you get repaid in full by the distribution and the stub company for free. Maybe he sees value in that. But no one invested in Syncora is running for the exits because of what he posts, so it's wasted effort in my opinion.
Of course, no one needs to buy anything. Ever.
And yes, I'm just starting to look into this. I like the idea of environmentally friendly solutions, but won't invest in anything just because of that. Good companies with real solutions and great ideas fail all the time. Whether I, or anyone else, buys into what they are doing is irrelevant. Its a question of if the process is real and scalable, can they do it at a profit, are there real barriers to entry, and do they have the right team to execute. Everything else is just noise.
Conversing with people who are already invested is part of the due diligence process. Even the best market analysts do this as a part of their initial deep dive. I like to see what people are thinking.
So apparently not the friendliest board on ihub, which is fine. Not my first rodeo nor my first startup. I've spent time as the CFO of a startup. But I do primarily invest in turnarounds, distressed situations, and BK's. Those situations are easier to read. Startups tend to rely upon a lot of hope and luck.
Regardless, you can look at the cash burn here and it's not difficult to assess that they have ramped up overheard too quickly. Just the back of the envelope shows they raised $4.7MM from warrants this year, and have already burned $3MM. At this rate, if they aren't cash flowing for Q4, they need another equity raise in Q4/Q1. But maybe they will cash flow in Q4, I'm not sure what I think about the odds of that yet.
Although even if they do cash flow in Q4, I would still recommend that they access the market, because a blip in the process can throw an entire quarter out the window, and the should operate with plenty of backup liquidity.
Again, documents still posting to KCCLLC as of April 2019. Nothing material, but gives the illusion that there's still activity. Also my brokerage account still shows my position, so the securities have not been officially cancelled as of yet (although they appear at basically a zero value).
So just curious if any other bagholders are still hanging around, waiting for the miracle? lol. meh, win some, lose some.
Not recently, no. Just crickets from investment relations.
First couple of questions are really better suited for an email to investor relations. I'll give you my thoughts, which are really just my guesses though:
Date of Record. Almost certainly there will be one. I've never seen a publicly traded company make a distribution without that. The actual date... who knows. We will find that out closer to the transaction close date.
Amount. This is what the PR states:
Anyone care to share their investment thesis (beyond the obvious that is on the company website and presentation)?
Views on the potential margins? With 'high grade' circuit board scrap trading at $4/lb (US), I don't see how they can generate 30%+ gross margin. Not unless metals prices really jump, but then I'd expect the scrap PCB costs to increase too.
How do they compete with refiners who will process 5,000lbs of circuit boards for $1.35/lbs plus a $350 processing fee, and either hand over the metals or cut you a check for the value at the end? https://www.specialtymetals.com/smelting-refining/electronics-circuit-boards
Why are overhead costs so out of hand? Presumably they are hiring to gear up for growth, but why burn all the cash before you even generate revenue.
What is the agreement with Jabil? What is EVLLF getting out of this?
Thoughts on the two patents pending? In process since 2016...
What is the capacity of the facilities? How many tons through put can it handle each year? What do they intend to operate at?
What is going on in Memphis? Is that a second facility?
What kind of breakdown are they expecting for revenue from e-waste vs mining?
Buying and selling the same stock is the poor man's pair trade.
Thanks Rick. That was a lot to unpack. Let me investigate diet and exercise and get back to you with an action plan.
Just want to say that I bought my first suits at Syms. Suits were the attire back in the days that I was slogging daily in Manhattan. Glad I don't have to do that anymore. I still have them, although wouldn't fit into them anymore.
Does this impact us now that the deal with GoldenTree is cut? I suppose they could have factored in some kind of upside if the PR deal was finalized before the close of the sale.
Wowman last pumped on 8/22. It does seem that he ran for the door. Which is fine. Although he certainly was cranky when I suggested he was selling on 7/9.
Yep, I saw that. I'm kind of wondering what test is used to determine whether the distribution is a return of capital or whether it is a dividend. Syncora will report it one way or the other, and I can only presume at this time that it's going to be tagged as a return of capital. I just can't say it with certainty.
Any thoughts on whether the distribution of SCI sale proceeds would be considered Ordinary/Qualified dividends, or Non-Dividend Distributions?
I'm thinking non-dividend distribution/return of capital is the most likely outcome, although I'm not sure. I suspect most of us who have been invested for quite a while would have such a low cost basis, that this basically just results in capital gains (as I don't think you can have a negative cost basis). I'm not a tax expert however, and mileage may vary.
I think the PR addressed a couple of your questions:
Timing-
Personally, I think this just trades at the expected distribution (or more likely a slight discount to that), until the distribution is made. The market is unlikely to give any real value to a shell company with less than a $1/share in assets that is generating virtually no cash flow. It's just not. It certainly won't give full value for it, anyways.
After the distribution is made, unless there other announcements on the direction of the company, or monetization of the remaining assets, we will then likely trade at a discount to the cash per share. I understand that expected cash is around $32MM, so I'd expect we trade at .20-.30/share post distribution (again, unless there are other announcements).
The risk here is that they just chew through their liquidity while trying to monetize/liquidate the remaining assets. And that's a legitimate risk.
Best case for shareholders is that Syncora announces a plan over the over the next 60-90 days that gives the market a reason to give value to their remaining assets. That announcement probably needs to include both intention/probability of monetizing the Detroit properties over the near term, and also the marketing/solicitation of offers on SHL & the NOLs. If they aren't already working on these, then they have already failed shareholders. Only time will tell.
Terminating the solicitation period prematurely, when they already received at least one 'unsolicited proposal', is a real JV move. They have no idea if anyone else was preparing a bid, as a potential bidder theoretically had 9 more days to submit. The didn't even announce the unsolicited proposal to the market, and give fair warning to other bidders that they may close the solicitation period early. And now we are locked in with GoldenTree. Really a pathetic effort by management and the board.
Well, we will know within 9 days, right? I think Rich has the correct approach, you assume you have what is in hand for now. If a better offer comes in, as we all hope, then great for us. But depending upon what that hypothetical offer is, it may not change the question... what does the Syncora board plan to do with the sale proceeds? Will they distribute it? Or do they plan to hold it for some cockamamie scheme to buy another business? Remains to be seen.
I hope Denny is right, that there is possibly something brewing in the background that results in tossing this GoldenTree offer. That costs us ~$20 million, but its nothing compared to what the board already cost us in the botched American Roads auction. But I'd probably put the odds at 50/50 this comes to fruition.
Better off Dead: I want my two dollars!
I was curious to see what they could achieve with a sale of the book, but given the offer, I tend to agree. They should reinsure the remainder of the book, monetized the remaining assets (primarily the Detroit stuff), and liquidate over a period of time. I've been holding for 10 years, I can wait a bit longer. There is no reason to sell the book for 60c at this stage. None.
Standard language. It's a working capital adjustment, positive or negative.
I've seen this happen a couple of other times, but have never witnessed a better bid come in --- not with this kind of company. This is sort of like a stocking-horse essentially, which is sort of an interesting outcome (I don't think they did this for American Roads sale, which they completely hosed).
The break-up fee is about 5% of the offer, including the expenses. It's not a crazy amount, but its meaningful enough. Considering the underwhelming history of this management team and board, I don't expect to see anyone come in and blow the doors off this offer.
I am curious, however, if they need shareholder approval for this transaction. I haven't seen anything in the PR about that, but clearly we are no longer in the monoline business after this sale, and I would think this equates to a change in business. Normally I think that would trigger a vote. Or maybe I am stretching here.
Well someone's got some 'esplain to do.
Wowman with the stick save.
Unfortunately I was here before 5 cents, haha. Well, "here" being invested in syncora, but on the yahoo board at that time. Always early to the party.
At this point I think everyone is best served just holding. All indications are that this is a Q3 announcement. Hopefully earlier than later, but wouldn't shock me if there is an announcement the last week of September. The American Road transaction took a full quarter longer than expected, so there is that too.
Joking about Wowman aside, not sure why anyone would sell this close to the expected announcement, unless you need the liquidity. Or unless you expect less than 70% ABV, which I think would be a pretty terrible outcome but can't be ruled out. My expectations are higher than that, however.
I know. Cautiously optimistic that they won't hose this one as bad as the American Roads divestiture. However, I would prefer that they get this done before the market corrects. Not sure when that may happen, but getting this in the bag sooner than later should be a goal here.