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I remember reading, recently, that a bankruptcy court judge had ruled the net loss carryforwards from Lordstown motors would be preserved for a potential buyer of Lordstown Motors assets.
Here's my understanding of how it works. The vast majority of American corporations are profitable. With time, a line item in their balance sheets (one of several financial statements which is reported quarterly, to the SEC) called 'retained earnings', shows the cumulative earnings of the corporation. Since Lordstown Motors isn't (and hasn't been) profitable, they have a large balance in an account called 'Accumulated Deficit'. This account houses cumulative losses, and had a balance of more than $1.1 billion as of the balance sheet dated June 30, 2023. Tax loss carryforwards act as an asset, which serves to reduce future income tax liabilities. This $1.1 billion in cumulative losses could serve to reduce the tax liabilities of an acquirer of Lordstown Motors assets, to the tune of several hundred million dollars. For example, a corporation with an effective tax rate of 25% could save more than $250 million dollars in future income tax liabilities if they were to acquire $1 billion in tax loss carryforwards. I'm not well versed in the limitations, and qualifications, but it does serve as a valuable asset for any qualifying acquirer of such an asset.
That is my understanding, and I've seen companies benefit from acquiring such an asset (and have seen them pay dearly for them). This could affect the perceived value of the assets of Lordstown Motors, and therefore the share price.
As always, simply my opinion.
RIDEQ
Law firm KCC LLC is the law firm administering (housing and managing) the documents associated with the Chapter 11 filing of Lordstown Motors. The link to these documents is https://www.kccllc.net/lordstown. The second paragraph on this site states the following:
"The Company enters Chapter 11 with significant cash on hand and a debt-free position."
I suspected this was true, but was pleasantly surprised to see it so plainly stated. Although the general rule is that common shareholders are wiped out during a chapter 11 restructuring, there are exceptions. A few years back, I was invested in the stock in a company undergoing restructuring (in the printing industry - LSC Communications), where I ultimately made several hundred percent trading/accumulating the common stock during the structuring process. The money was made because the asset value (of the organization) exceeded the debt obligations. It would appear that this same situation exists here, at Lordstown Motors.
This would appear to be a bullish sign for the stock.
As always, simply my opinion.
RIDEQ
Do you anticipate that the 'light revenue' condition will continue for an extended period of time for Lordstown Motors?. Have you studied the weak performance of Tesla in their early days, and their slow ramp up at their beginning stages?
I'm fairly certain it was just reported that Lordstown Motors is sitting on $221 million in cash. Are you saying that this amount is insufficient to execute production in the short run. If so, when do you anticipate they will run out of this cash?
A similar thing happened to Rivian (RIVN), back in October of 2022 (about 5 months ago)
There's an article published a few days after the recall was announced entitled 'Rivian Recalls Basically Every Vehicle It Has Ever Made'.
Here's the link:
Article link
Even though they (Rivian - RIVN) recalled more than 12,000 cars, Rivian stock is currently trading at about $14.50 per share, for a total market cap of more than $13 billion dollars. If Lordstown Motors (RIDE) was trading at a similar market cap, the common shares would be valued at about $62 per share. Obviously Lordstown Motors is at a much earlier stage of their development, and therefore worth far less than Rivian's $13 billion valuation. But i do believe that RIDE is worth far more than .the current .84 per share.
I believe that once Lordstown Motors irons out the serious kinks, the share price will be significantly higher. As always, simply my opinion.
RIDE
----------------------------------------------------------------------------------------------------------------
"On Friday evening (10/07/22), Rivian Automotive announced a
recall on nearly every single vehicle it has produced so far.
According to documentation filed with the Nation Transportation and Highway Safety Administration, “The fastener connecting the front upper control arm and steering knuckle may have been improperly tightened … A loose steering knuckle fastener could separate, causing a loss of vehicle control and increasing the risk of a crash.”
The recall affects 12,212 total vehicles spanning the R1S, R1T and delivery van platforms. In layman's terms, the car’s suspension system has a loose bolt that can make the ride harsher or even result in a loss of steering control for the driver."
Let us not forget that Lordstown Motors was in serious contention for Car and Driver's 2023 North American New Truck of the Year.
I read similar statements (to yours below) from other folks, while Sirius satellite radio continued its share price downward spiral back in late 2008/early 2009. Ignoring the pessimistic sentiment at that time, I took a chance and invested (gambled) $10k at under 10 cents per share. Ultimately, my investment/gamble paid off to the tune of 50x to 100x when John Malone of Liberty media took a large state in Sirius, and single handedly provided all of the credit they would need to right the ship.
The potential gains more than compensated for the large risk. I believe that the same is true here. As always, simply my opinion.
Phenomenal piece of press coverage. Thanks for sharing, OPKOHEALTH2022!
Agreed. With the market cap as low as it currently is, any announcement of real vehicle deliveries would make this company dirt cheap in the electric vehicle production arena. And my experience has taught me that 'dirt cheap' don't last for long...
As always, simply my opinion.
Thanks, WeTheMarket, for reviewing and highlighting what you felt were the most important parts.
I like the timing of this PR. Indicates to me the strong intent to move forward, in the near term, with truck production. I currently hold common shares as well as bullish options (call contracts).
As always, simply my opinion.
RIDE
Bengals QB Burrow Visits Lordstown Motors
"LORDSTOWN, Ohio – Cincinnati Bengals quarterback Joe Burrow visited Lordstown Motors Tuesday, met with workers and posed for a group photo, toured the Foxconn manufacturing line and took a ride in the Endurance electric pickup."
“I really wanted to partner with Lordstown,” Burrow stated in the email. “I was extremely impressed with the Endurance today. It means a lot to get this plant back open. It means a lot to Ohio.”
link:
https://businessjournaldaily.com/bengals-qb-burrow-visits-lordstown-motors/
RIDE
Very well said. Looking forward to the RIDE trading session on Thursday, May 12th.
RIDE
Bought 70 call contracts ( expiration May 20) for RIDE this morning (strike $2), during the dip...
What matters most to me is that they just reiterated that they'll begin manufacturing trucks for customers in the third quarter '22.
I expect a rebound in the next week.
As always, simply my opinion.
RIDE
Lordstown Motors Shows Off Endurance at Work Truck Week
LORDSTOWN, Ohio – Lordstown Motors Corp. showed off its inaugural vehicle, the all-electric Endurance pickup, at the NTEA Work Truck Week expo in Indianapolis, the company reports.
Work Truck Week, held this year from March 9-11, is North America’s largest work truck event. Produced annually by NTEA, the trade association for the work truck industry, the event includes work truck show exhibits, education and training, a green truck summit, and networking.
“The Lordstown Endurance is a unique vehicle offering a superior combination of handling, traction control, torque and turning radius that we are confident will be appreciated by our fleet customers,” Lordstown Motors President Edward T. Hightower said in a statement last week. “With fewer moving parts than more conventional propulsion systems, we also believe the Endurance will have advantages in total cost of ownership.”
https://businessjournaldaily.com/lordstown-motors-shows-of-endurance-at-work-truck-week/
In my opinion, this stock will be money in the bank. But as always, simply my opinion.
RIDE
No one should underestimate the power of a new heartbeat on a company website, where the stock had previously been stuck in the range of 0000/0001 for several years. I've seen multiple examples like this where the stock began the ascent into multi-pennies within a few short months.
As always, simply my opinion.
MTVX
The SEC filing dated October 1 includes the following statement:
"The transaction remains subject to customary closing conditions, including regulatory approvals. The transaction is expected to close during the fourth quarter of 2020."
Since it is clearly not a done deal yet, the common stock will continue to trade (for now). With more than $1 billion in annual revenue, and the stock having hit .01 today, I expect there is still some opportunity for profit here before the story ends.
As always, simply my opinion.
LKSDQ
Was skimming through the Harbin Pharmaceutical Group sale document approved by the court a few days ago. I found item Y, on page 14, particularly interesting:
"Y. The Sale does not constitute a de facto plan of reorganization or liquidation or an element of such a plan for the Debtors, as it does not and does not propose to: (i) impair or restructure existing debt of, or equity interests in, the Debtors; (ii) impair or circumvent voting rights with respect to any future plan proposed by the Debtors; (iii) circumvent chapter 11 plan safeguards, such as those set forth in sections 1125 and 1129 of the Bankruptcy Code; or (iv) classify claims or equity interests, compromise controversies, or extend debt maturities."
If the sale to Harbin Pharmaceutical Group does not impair or restructure the equity interests in GNC, does that imply that GNC equity interests (i.e. common stock) survive the sale?
GNCIQ
Found this today on the Prime Clerk website re: LSC Communications chap 11 case...
"UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
____________________________________________
In re
LSC COMMUNICATIONS, INC., et al.,1
Debtors.
____________________________________________
x
Chapter 11
Case No. 20-10950 (SHL)
Jointly Administered
FINAL ORDER (I) AUTHORIZING THE DEBTORS TO OBTAIN SENIOR SECURED
SUPERPRIORITY POSTPETITION FINANCING, (II) GRANTING LIENS AND
SUPERPRIORITY ADMINISTRATIVE EXPENSE CLAIMS, (III) AUTHORIZING THE
USE OF CASH COLLATERAL, (IV) GRANTING ADEQUATE PROTECTION,
(V) MODIFYING THE AUTOMATIC STAY AND (VI) GRANTING RELATED RELIEF..."
"(ii) authorizing the Debtors to obtain from the lenders under the DIP Credit Agreement (the “DIP Lenders”) upon satisfaction of certain conditions set forth in the DIP Credit Agreement total advances in an amount not to exceed a maximum outstanding principal amount of $100,000,000 in accordance with the DIP Credit
Agreement, the DIP Documents and this Final Order, with up to $55,000,000 for new borrowings and up to $45,000,000 for issuance of new letters of credit or renewals or replacements of existing letters of credit, with no more than $5,000,000 of such amount available for use for new issuances of letters of credit;"
"IT IS HEREBY ORDERED THAT:
1. Motion Approved. The DIP Motion is granted as set forth herein, the DIP Facility is authorized and approved and the use of Cash Collateral is authorized, in each case subject to the
terms and conditions set forth in the DIP Documents and this Final Order. All objections to this Final Order to the extent not withdrawn, waived, settled or resolved are hereby denied and
overruled."
link:
https://cases.primeclerk.com/LSC/
LKSDQ
LSC Communications filed their 10-Q this evening. Although they continue to lose money, the net loss for Q1 '20 was about half* of what they lost in Q1 of '19. A year ago, when they reported that much larger loss for the quarter, the stock was trading at more than $6 per share (at that time, they had not yet filed chap 11). The common shares outstanding is about 33.5 million for both periods.
Additionally, their balance sheet still shows the land and buildings, originally valued at $696 million (pre-depreciation), so it appears they are still in posession of 100% of these hard assets.
Just a couple of things to consider when estimating the chances of a pop in the stock price. As always, simply my opinion.
LKSDQ
*(1.56) vs (3.77) per share
While reviewing LSC Communications (lksdq) financial statements for calander year ended Dec 2019, I noticed something very interesting on their consolidated balance sheet. It states that their total liabilities of $1.721 billion exceed their total assets of $1.649 billion, resulting in a total negative equity of about $72 million.
But here’s what I found when I looked into the balance sheet details a bit. The line item Property, plant and equipment-net was $440 million. That seemed a little low to me for a company doing more than $3 billion in sales annually, so here’s what I found in Note 8. There was actually a total of about $3.704 billion for those items, but was carried on the books at $440 million due to accumulated depreciation of $3.264 billion. Of the $3.7 billion, $698 million represented the pre-depreciated land and buildings (with the remaining $3.006 billion being the equipment/machinery).
So the total category of Property, plant and equipment has a total depreciation of about 88% (3.264/3.702). While this may fairly represent the current value of the equipment/machinery, it does not likely fairly represent the current value of the land and buildings (my experience is that these things generally go up in value over time, not down). So although the $698 million of land and buildings seems to be carried on the books at a net value somewhere in the neighborhood of $80 million (due to the accounting mechanism of depreciation), there may be another $600 million in current value for this asset class. Even if there was only $300 million of additional asset value (half of the difference between the original cost and the depreciated value, that would flip the balance sheet’s negative equity of $72 million on its head, converting it to a positive equity of more than $200 million.
With the stock currently trading a total market cap of around $1 million, the fact that the net equity of the firm may be closer to a positive several hundred milllion rather than a negative $72 million might affect the trading upside here.
As always, simply my opinion.
*Please note that since I was unable to determine the breakdown of acummulated depreciation between the individual components of property, plant and equipment, I made the assumption that the aggregate 88% accum depreciaition applied equally to each of the category components.
You are correct that there will very likely be nothing left for common shareholders, when all is said and done. But for now, the stock will continue to trade for many months to come, just as Dean Foods (dfod*) has, also in chap 11. That stock was down to .05, and then within a matter of weeks bounced to over .35 ((in Jan 2020) for a potential gain of 600%. A similar thing also has happened to Pier One imports (also in chap 11), recently down to .06, and at this moment popping back to about .30. From my eperience, this happens to nearly all stocks while trading after filing for chap 11. I believe there is similar upside here.
As always, simply my opinion.
LKSD, at under 10 cents per share, is currently trading at less than one one-thousandth of annual sales. What brought is down to this level is clearly the serious threat of a bankruptcy filing. They are a struggling company operating in a struggling industry.
Even if they end up filing for BK, it is very common for stocks in bankruptcy to continue trading for many months, and sometimes more than a year. So although there is a significant risk of LKSD filing for bankruptcy protection, that does not translate to the stock immediately (or even quickly) being worthless.
Bare in mind that retailer Sears Holding Corp, while trading in bankruptcy after a chap 11 filing, at one point, spiked more than 900 percent (from under .25 to over $2.50). And there were several smaller percentage spikes as well. Another interesting point is that the very next day after filing for bk, they had an intra-day spike of more than 100 percent.
If LSC Communications is able to avoid bk entirely (although unlikely, but still possible) as was the case with Sirius XM back in early 2009, when rescued by Liberty Media, the stock could easily return back to several dollars per share.
As always, simply my opinion.
LKSD
lvl 2 issue - missing OTC ticker
I am posting this message in regard to a missing OTC pink sheet ticker symbol on the iHub OTC level 2 service. Dean Foods was a NYSE stock that recently filed for chap 11 protection. When it did so, it became an OTC pink sheet company, with a new stock ticker of DFODQ (it was previously trading under NYSE ticker DF).
It has been trading under ticker DFODQ for about a week, and although there is a message board under the new ticker, iHub OTC level 2 quotes are not yet available for this stock. When can level 2 subscribers expect to be able to view level 2 quotes for this ticker?
Regards,
The bids and asks are routed to and executed by individual market makers, not one long line containing all of the orders. Your buy order may have routed to a market maker with a small number of shares in their queue, and that market maker was the one who got to process the order first (before other market makers). With a level 2 view of the bids and asks, it is more transparent where the buy and sell orders are grouped.
The Seeking Alpha article dated May 14 that I referenced (see link below) takes short term liabilities, as well as long term debt, into consideration. A large part of the computed value in the analysis is derived from several off balance sheet items, as well as undervalued assets on the balance sheet. If you read the complete article, you will find a relatively thorough analysis, inclusive of debt.
Since the author was long Rite Aid as of the release of the article, a case can definitely be made that the author's bias could have lead to an overly generous valuation. But beyond the article, it should be noted that with about 54 million common shares outstanding, and revenue per share of nearly $400 ($21.5 billion divided by 54 million), Rite Aid at under $8 per share leaves alot of room for an upside move, in my opinion.
article link:
https://seekingalpha.com/article/4263822-rite-aid-r-e-l-x
Interesting article on Seeking Alpha, dated May 14th. The article includes a detailed financial analysis of some assets on Rite Aid's balance sheet and their future prospects, and the author concludes that Rite Aid is conservatively worth at least $2.6 billion ( or about $48 per share). That is a premium of more than 500% above today's closing price. It should be noted that the article's author was long RAD at the time the article was released.
article link:
https://seekingalpha.com/article/4263822-rite-aid-r-e-l-x
RAD
The chart looks attractive from a TA (technical analysis) perspective, with an apparent double bottom at around $9 (.45 pre-reverse split). But I also think that RAD is attractive from a fundamental perspective, as follows:
There are approx 54 million common shares outstanding on Rite Aid (about 1 billion pre-reverse split). That puts the total market cap currently at around $500 million. Gross sales for the most recently completed fiscal year was more than $21 billion. And even with the fairly recent reduction in total store locations, the current forecast for next fiscal year is that sales will be at least $21 billion.
On that sales level, Rite Aid Sr. Mgmt have just forecasted a loss for the upcoming fiscal year of between $170 million and $220 million. Since the average healthy large cap public company trades at about 1.5 times sales, the avg healthy large cap company would be valued at about $30 billion (if they had an annual sales level of $21 billion).
Rite Aid's current market cap of about $500 million is less than 2% of $30 billion. Accordingly, I think that the coming weeks/months will demonstrate that Rite Aid common stock was very cheap at around $9 per share (45 cents per share pre 20:1 reverse split). As always, simply my opinion.
RAD
Correct. There are approx 1 billion common shares outstanding on Rite Aid. That puts the total market cap currently at just over $500 million. Gross sales for the most recently completed fiscal year was more than $21 billion. And even with the reduction in total store locations, the current forecast for next fiscal year is that sales will be at least $21 billion.
On that sales level, Rite Aid Sr. Mgmt have just forecasted a loss for the upcoming fiscal year of between $170 million and $220 million. Since the average healthy large cap public company trades at about 1.5 times sales, the avg healthy large cap company would be valued at about $30 billion (if they had an annual sales level of $21 billion).
Rite Aid's current market cap of about $500 million is less than 2% of $30 billion. Accordingly, I think that the coming weeks will demonstrate that Rite Aid common stock was very cheap at around 50 cents per share ($10 after 1:20 reverse split). As always, simply my opinion.
"An options contract undergoes an adjustment called "being made whole" when the underlying stock splits.
"Being made whole" means the options contact is modified so that the holder is neither negatively nor positively affected by the corporate action. While a stock split adjusts the price of an option's underlying security, the contract is adjusted so that any changes in price due to the split do not affect the value of the option. If your option is purchased post-split (i.e. after the split is announced), it will not be adjusted because it already reflects the post-split price of the underlying security. The Options Clearing Corporation will automatically make these adjustments, for the sake of orderly and smoothly functioning markets.
The "being made whole" calculation is relatively straightforward. Each option contract typically controls 100 shares of an underlying security at a predetermined strike price. The new share ownership is generated by taking the split ratio and multiplying by 100. while the new strike price is generated by taking the old strike price and dividing by the split ratio."
link: https://www.investopedia.com/ask/answers/what-happens-to-options-when-stock-splits/
Nice. Not only is RAD due for a short term bounce, but I think people will look back at this week's price action and regret the buying opportunity. The current market cap for Rite Aid is about $600 million, less than 3% of annual sales. For a recognizable brand/company that is not in bk, that is quite low. I say they based upon the avg public company trading at around 1.5 times annual sales. Rite Aid is trading at about .02 of that avg. WHile it is far from best of breed (they face serious challenges in coming months), they are worth far more than the current share price would suggest.
As always, simply my opinion.
Just added 6000 shs of RAD...
I have shared your experience in OTC companies that filed for bk, but that it not the type of company to which I am referring. I am specifically referring to big brand name, large scale companies such as Sears Holdings, Trump Entertainment, Six Flaggs, etc. When these companies were in decline over a multi-year time frame (such as Rite Aid), and then finally filed for Chap 11 bk, there was almost always at least one significant price pop after that filing. Simply check the historical data if you think that has not ocurred. The reason I know it is common, is because I was in each of them during/shorlty after the bk filing.
The day after the evening that Sears Holdings voluntarily filed for Chap 11 restructuring, the stock was up big intraday (it peaked at about 140%, before pulling back but still ended the day in the green). I know that the move was counter-intuitive, but it is also quite common. I don't expect Rite Aid (RAD) to file for bk any time soon (especially with the massive cost cutting that they recently announced), but even if they did I would not be surprised if the stock moved up (albeit briefly) after such an announcement.
As always, simply my opinion.
While I am not adding more call options at this time (I already own several thousand contracts with a strike price of $1, mostly expiring in late July), I added more RAD shares today. Keep in mind that Sears Holding just recently bounced from under .25 per share to more than $2 per share, while in bankruptcy. Although in distress, Rite Aid is not in bk, and expects to be profitable again (after the recently announced cost cutting) within about the next year. I think many will look back at the RAD common stock, and wonder how they missed such an extraordinary buying opportunity.
As always, simply my opinion.
RAD
Excellent example, farooq. As AMD demonstrated (and as I expect Rite Aid will demonstrate in the coming days) is that stocks that have gone down for a long time continue to go down, until they don't. In other words, after a long period of selling, most observers (if not all) are convinced that it will never again go up. But then, one day, they do go up. And when they do, they don't go up just a little bit. They often surprise all with a mega-move of at least several hundred percent.
The one point that I differ in opinion is t=the one regarding a possible Rite Aid bankruptcy. If you check how Sears reacted immediately followibng the voluntary petition for chap 11 restructuring, the stock entered a nice run. This often occurs after the selling exhaustion, where there is sort of a relief rally upon bk filing.
As always, simply my opinion.
RAD
Just added another 600 call contracts, strike price $1, expiring in July 2019.
Rite Aid was profitable during two quarters in 2018. They have just articlated a staff cutting plan which will bring them back into profitability after one ugly quarter of one-time charges. As a profitable company, they would likely be worth at least .25 times annual sales (since the avg profitable large cap company is worth more than 1x annual sales). That would make them worth at least $5 billion on $21 billion in sales, which is more than $5 per share).
As always, simply my opinion.