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Well shoot, if the unsecured creditors are unhappy about the "economics of the deal" then I have questions for us.
(1) Would they be happier with no deal? Isn't that a realistic option that we might face, or are they having that much certainty that another bidder will come along by tomorrow.
(2) We might wonder where is the value for the shareholders if these creditors don't think they will get sufficiently paid?
With Destination declaring that the bid "has been increased", but not specifying that price, leaving us to speculate. If 3% was the target to get judge's approval of the break-up fees, then the new bid should be as high as $58,333,333, by my math, an increase of 16.7% (just my speculation at this stage, not confirmed). And by the same token the competitive bids instead of coming in at 52M are going to now require 60M plus, to be considered! (A difference of 10M could mean a value of 0.68 per share but that is only once the debts have been satisfied.)
Also, what a fascinating day in court this must have been. Now I wish I had gone to the hearings. Any way to get the transcripts?
Welcome to the board! Indeed, the next few days are going to be interesting as we find out exactly how much of the proposed 50M sale price is committed to the secured creditors. (Reported 34M, but I believe there may be overstatements due to some duplication of several claims in the process.) After that, I do not know exactly what other obligations the company may incur, but the courts should spell that out. Sometimes in bankruptcies I have experienced a cancellation of common shares clause, that could still occur if they don't have any funds left after the debts have been made whole. Otherwise, the hope is here that we will have between 0.30 and 1.10 left, per share, if the restructuring occurs most favorably.
I visited my hometown Destination Maternity tonight, getting a general sense of the mood and prospects. There were 90 minutes to close. Aside from me, only two customers browsed the shelves. I asked about the Black Friday traffic and was told it was "just like any other day which is dead." The one employee working was happy to answer my questions, but I did not press on about the imminent store closings. She speculated the Black Friday deals might have been "better online" or at least that was her explanation for the lack of store traffic. Many people, she said were at the neighboring Verizon store.
Inside Destination Maternity, I liked the small selection of books & small gifts for $10, $15 and $30 retail, the majority of which was on 30% off that. I liked the bright signage and it was easy to find a few things I thought women would like to buy for themselves or receive as gifts from the husbands / parents / sibs / coworkers, etc. However, I had the sense that amazon, Target.com, and other websites were cannibalizing this market gradually over time, and that stores like Buy Buy Baby and of course Target have a broader selection of books and gifts in that price point.
Was surprised to see gift cards for sale but sometimes they wait til the last minute to pull the plug on those in terms of return policies getting stricter and becoming a cash only business.
Your assumptions are correct. However, I believe the vultures operate at deflated price points, scouring the lists of securities out there to diversify their positions, framing themselves in a position with less risk. They aren't all in this to .60, this could go bust and if so they don't get paid. Instead of that all buy scenario, I think the volume indicates there has been some churning and gradual accumulation of shares. They're happy to sell shares for 0.08 knowing they can buy back in next day for 0.06, and increase their margins each time. Before you know it, they have doubled their worth even though the stock was only up 40% during a similar span. This is just one theory, but it explains the 1M in volume today and basically a flat close and small runs that leave only enough space to leverage the repeat buys/sells needed to increase the firm's total position.
When/if can we assume ALL the liabilities have all been accounted for in the chapter 11 hearings? AFAIK that 32M number that has been documented in the total claims represents only the secured creditors claims. Employee severance pay, pension obligations, and bonuses? Costs to close this final deal? Costs to close all the stores? Inventory fluctuation? Common stock comes last in these deals by their nature.
Absolutely... There are people waiting on the sidelines and there are people betting against this sale from completing profitably. There is a lot of negative experience in bankruptcies that would potentially put at risk,at least in these conservative funds' minds, our final value distributed to shareholders. 1 distinct possibility that we have discussed a lot is that there could be a sell all order in place buy a large institution or two, and the M&M's are scooping up the supply cheaply until that runs out!
So I'm very motivated by today's overall course of events, in particular the news getting picked up of the $50 Million impending sale, and what it did for our trading volume.
It's of course still worth consideration at these low prices (0.0645) because even though we are playing long odds, the possibility, the practical likelihood of a bidding war unfolding is enough reason to stay in the hunt just 7 to 10 more days. Just don't need to chase it up, but on the flip side of that, don't sell a penny stock for being down a penny. I feel bad for those who paid 0.08 or 0.09 today when 0.06 or 0.07 would have been available for the patient onlooker. And I feel doubly bad for tight stops getting pulled under 0.07 multiple times today (see the chart for at least three such quick dips) only to have these gaps fill within minutes and they come racing in to steal your shares! And those pennies up and down are so critical for percentages when you're trying to accumulate shares. I for one do not like playing the flip game but I have no doubt that some of the more experienced holders flipped their shares twice today to go from 100k shares to 140k shares and didn't even have to invest a cent more of their own money because of the easy flipping action going on. But at the end of the bidding process hopefully all longs are made whole by the new offers that this company is all but sure to attract, now that we know there are several legitimate competing offers that could be in the process of forming. We learned a lot today about the motivations of some. Don't let yourself fall for the easy traps that are laid out there!
Here is the link to Peter Johns of Greenhill Bank's ringing endorsement of the $50M stalking horse bid. There are some very, very bullish indicators in here, such as when he says the sale can achieve maximum value for stakeholders per his opinion, but also that he thinks there will be other serious contenders by December 5th, for which the assets of DEST may need to go to auction on December 9th for perhaps even greater returns. He goes on to explain how the bid protections came about, such as the $5M deposit showing the seriousness of intent to purchase on a short timeline, as well as the almost $3M protection clause in force for the bidder which means they can't be outbid unless someone only bids $53M or in excess of that, for the total purchase. Enjoy the read, and let me know what you think of the prospects!
https://cases.primeclerk.com/DestinationMaternity/Home-DownloadPDF?id1=MTI4MzExMA==&id2=0
New price target 0.60+ on December the 12th!
Set your limit high and let it be true.
Remember there is practically no float. Just look how the penny manipulators were able to walk this quickly down to 0.06 today and up to 0.08 twice and back in the day.
Remember, don't sell before December the 12th.
How curious, another mod was added who just made their first post about the company.
It was I who on a weekend saw the alert of the buyout news dropping into WSJ, and posted it here. It was I, who among others, prior to that, speculated correctly about the short term targets moving from 0.05 to 0.06 to 0.08 to 0.10. But I guess, I will never be the moderator. I guess I'm not "mod material."
Good luck, longs.
Very solid target there, hopefully attainable. Thursday 12/5 is last day for bids to submit, and then in a matter of days they will announce the winner if it goes to auction on 12/9.
There is some reassuring language in the docs filed by the bank representing Destination Maternity.
"11. I believe entry into the Stalking Horse APA is in the best interests of the estates and best positions the Debtors under the present circumstances to achieve the highest or otherwise best outcome of the sale process. Greenhill expects to continue to market the Assets pursuant to the Bid Procedures and, if necessary, conduct an Auction for the Assets as well as other Assets of the Debtors.
12. The Stalking Horse APA provides a floor above which other bidders can bid. I believe other bidders, potentially including bidders contemplating acquiring certain retail store
operations and leases, currently intend to participate in the auction."
May I ask if you know of any peers which successfully closed a sale such as our proposed one and actually paid commons? This seems to be the most uncomplicated chapter 11 I've ever been witness to. DESTQ was originally seen as a boom or bust for me when I entered, but as the 50M is now a good starting point, we now have nothing to lose other than a few more days so I am not selling until we get the full picture of what's to come.
16.2M cash assumes that 33.8 in claims have been filed. However I only see 32M in registered claims on primeclerk, because I did not count up to 2M in what appears to be duplicate claims. Meaning the company filed a claim, and then made a revision, but the primeclerk doesn't overwrite the dupe claim. This is my assumption. I do not know what the official process is for assessing these claims, but I have to hope/assume that the company is acting in its best interest to eliminate bogus claims and won't just pay them.
I am just not sure, from my limited experience in BK's, whether there will be further, as of yet unannounced, distributions to employees, CEO's, lawyers, etc. that eat up some of this remaining cash distribution. You know that these deals are made for the insiders. The high volume was a good sign (30% of the float today, my goodness!) but the trades at or near yesterday's close seem to indicate the market's ongoing skepticism about the ability of DEST to close this sale out and still have funds left over for the commons. Remember that DEST originally was looking to cancel shares unless they found a buyer and could operate as a going concern? Well they did take care of the first part sufficiently, but I am not sure about the going concern part since the caveat is that the stores are closing.
It seems the $1.38 "book" value is slightly overstated or possibly a bit outdated, however if you look at similar scenarios, it's not uncommon for these particular auditors to resign if it's evident their services won't be needed next year anyway due to the majority or all of stores closing, and buyers will perform their own audit and it's likely they'll want to have a prior history with that outside auditor rather than accept a conflict of interest from an internal auditor that has been around awhile and isn't necessarily motivated the same. Furthermore it is really not at all uncommon for bankrupt stocks to trade below cash value. This is because the assets are impaired, and will be sold for less than their book value. There is the possibility that the secured creditors debts will be the responsibility of the company regardless of the Chapter 11 outcome. Therefore, I don't see anything out of place with the way this stock has been valued as of late. Last but not least, the 0.11 pre BK valuation is a ceiling on today's trading which we were not able to break through, and that's not surprising because if traders wanted to buy for more than 0.11 they could have paid that price pre bankruptcy. The bankruptcy comes with it some diminished brand reputation and that's definitely being factored into the lower price.
Did you see my earlier example post which explained how volume can be higher than the float in some rare cases where the daytraders get involved?
Today's trading was evidently textbook MM's trying to reset the price to load levels and then getting back in at 6 cents and exiting at 8 cents "rinse and repeat" as they like to say. By doing this the MM's can trade with house money and they hold little risk because they got into the shares for free basically. Unlike my experience with two other BK plays where I was able to leverage this volatility for my good, I am not doing the in and out crap because I can't time this one's moves and PR's. Our timeline is really too small for a lot of trades to make enough sense for me. I'm just in it hoping to get my eventual $1 which I paid a fraction of that for.
We could be told sorry we had an unexpected lawsuit and severance of officers and 3,000,000 stock options plus a legal fee and we're left splitting 1 million 20 million ways but that seems to be priced in to the 6 cents per share which I consider a lot of upside and a lot of risk. The more days go by the more I'm certain we're at least going to survive the auction with some value, even if it ends up being diminished by the courts and settlements, at least it helped pay for my premium on entering this thing. It's called a lottery ticket. It's not going to go to the moon but maybe it's 0.06 or 0.60 and that's a good enough return for what I paid.
PiSky called it perfectly. I saw a lot of news bytes circulating today about the impending sale. And flippers were out in full force to reap their rewards. I wish there was more transparency into the BK process. Sure I know it's open to the public but you have to know lawyer speak to understand some of these filings.
The chart is pretty, It looks like a bull flag.
To my point from all along however, the market has seemed to price in some uncertainty as to whether shareholders will even be left with anything of value after the claims are settled. 50M at least means there is a floor for bidding which is better news than the total speculative play back when this was just hoping for a sale to occur.
For example purposes only see this article. It basically reinforces that not every holder has sold.
https://www.investopedia.com/ask/answers/05/sharestradedoutstanding.asp
To be clear I think there are only 32M in sustained claims. Can you tell me where you saw 34M? Some duplicate claims were filed.
My understanding the situation is different than yours. The 50 million dollars does not just vanish. it is applied against the bankruptcy claims and what's left may go to shareholders if there's enough left that is
Thank you for your insight as always. I do think the total negotiated sale was for less than $1.38 per share so perhaps the ceiling is not quite as high as you think. Unless you are aware of something that I am not...
What are the trading ranges for Monday expected to be like? Will the publicized bid do anything to the opening share price? Will we crack 1M in volume and produce a new post BK high? What are the obstacles that remain in our way now towards $1.00 share price that we've had a serious bidder come to the table? And there is news that the company is closing all its stores which means elimination of some liabilities? Do we have to be concerned that the total assets are only fetching about 1/4 of their value and are we left with anything when it's all said and done?
It is incorrect assumption about book value. The chapter 11 secured creditors' claims have basically created a $32 MILLION impairment. There is no $1.38 valuation when all is said and done. We are trying to get some value out of what's left after they sell the assets. So final valuation still remains to be seen but I don't think it will be the number you keep repeating.
This feels like it's going to be the longest wait ever til this impending sale approval in the courts.
So far we have more questions than answers. We have a bidder, that's half the battle. It is all good now because total loss has been taken out of the equation.
But what will be the toll from unsecured creditors and severance pay? Will we be getting the huge returns from this or will there be a line around the block to collect?
I expect the known tally for the creditors may come in around 32M despite what primeclerk says (34M). I have already taken 2M of their listed 34M claims in writing to be obvious duplicates. however I'm not really sure what the 26.7M owed to the Fed is all about, and I didn't see employee severances listed in the court documents. I hope some of those claims are overstated or can get rejected in court. I also hope that the final sale is not watered down by fees or inventory impairments or other unforeseen events.
You're asking questions that were answered by The Wall Street Journal bankruptcy news article on Saturday, but I am happy to oblige you in case you don't know where to read it.
The article states that at least 20 companies did due diligence on the bidding process, but only three were possibly preparing an offer now... and so far only one bid made it through negotiation. Obviously if there are competing bids it will drive up our final share value. I like that there is some sort of a 2.7 million payout to Marquee's negotiated in the first bid, which means the step up to the next bid would have to be at least 53 million dollars, or more to be worthwhile enough to consider. What I don't know is if part of the terms of the sale will be canceling the common shares and if that is even legal. I don't know because I admittedly don't have a lot of experience in these short term sales but my experience has included some big wins and some near total losses.
I have eliminated $2 million of claims which appear to be double filed, meaning the company could fork over ~$34 M to pay out claims and leave shareholders with up to $16M or $1.11 per share approx. in proceeds from the asset sale.
Did I miss any caveats? will there be lawyers fees or some type of "bonus" paid to the CEO/internal ownership that leaves us with empty hands? I sure hope we have this one because we've been loyal and patient longs.
weird to see this place so quiet with even all the permabulls taking a weekend off. It is well deserved little longs. We believed in this company's value and we have been redeemed by a 50 million dollar buyout bid. by my estimation that should leave 16 million dollars in value after all the bankruptcy claims are paid off. so we will get to the promised Dollarland as long as a sale gets properly finalized which we should know by the next 10 days or so. I hadn't written this off completely but I did understand that this buyout was not guaranteed. It's going to be a long 10 days for us to realize whether this plays out correctly in the courts. One clause that gives me pause is that there is a plus/minus adjustment built in for the inventory so I certainly hope everything is accounted for correctly and we don't take a loss.
Buyout news is out but remaining stores will close. I wonder what this will mean for shares on Monday.
Markets closed at 1:00
Nice going. We agree on the prospects, as of now. I'm eager to see this go into the double digits, soon. Now as long as shares are not suddenly cancelled which tends to be a 90%+ risk of the bankruptcy plays (in general), we could see that decent return we have been waiting patiently for.
OK can you update the supermoderator's error then? (I see 20M OS and 14M float is an error that MUST be corrected or else the "source" provided to us.)
BTW, where is my welcome to the board? I've been wondering if you forgot.
Happy Thanksgiving and good luck to longs. 5 days til news.
No, it's not going 100 to 1 as no one would release it like that. There are constantly sellers keeping it down at historic low levels, as evidenced today by one dump of 150k shares just to keep it under 0.05.
One thing I could glean from today's selloff is that this won't be an easy runner. Regardless of volume however, it was only one trade. Might as well hold, we are down to just three trading days before the auction bids are due.
I noticed numerous bot-written pump articles came out yesterday and today, all of which used the pre-delist pricing of 0.11. So far this has been a lot closer to my predicted trading range of 0.05 to 0.06. We need to see more volume than we had today. I wonder if they're still keeping it down because they know news is going to come out next Tuesday. Even permabull is quiet. Something be cooking. What is it?
TRUE but my gut feel is that they're hesitant to post something positive until the ink has dried. As DEST goes, they've been through no fewer than two failed mergers before, though different management at that time. There are potential complications of the final creditors meeting which hasn't yet occurred (although the claims were all submitted and documented, some even duplicated).
Perhaps there are conditions of the pending sale and they don't want to jeopardize it. We'll know in under two weeks, I'm sure, whether there was a big return of value on this investment or if we're shit outta luck.
One of the quarterly filings also indicated that DEST had a huge asset in the form of tax credits which could have a remarkable value to a future owner if they were to acquire its headquarters and move all of its own employees there, and maybe even acquire the DEST name. It could potentially pay off in a big way for the buyer's bottom line depending on the synergy of products.
New HOD of 0.052 was struck at 1:53 on 750 shares traded. Not a lot of volume is going to be needed in order to push it to 0.06 (and beyond). That can't keep it down for very long! Let's see it.
Thin Ask is showing 0.06 again, it'd be great if it completes some trades there. Could have some momentum effect on the existing bids.
Good theory as always, p.s.e.s.
Yes, see post #116 as I first "predicted" this news release :)
We should be flying high soon. I am hoping between now and around next week at this time (Dec 3), we could have the names and amounts of at least two bidders.
There are barely four trading weeks left in this decade. So we have only needing so little time to find out that your prediction will pan out.
Love the price action and volume today, could have a multiday runner unfolding. Huge support at the 0.043 line, paper thin resistance at 0.05. This could really be flying in seconds.