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Thank you for posting that. Any reduction of debt and relief from interest payments will be good news and at this point the tax consequences are the least of their problem.
However, even if their is a change of control such as buyout or recapitalization to a different shareholder base, NOLS may still apply if the underlying business is of the same type. In other words an R&D biotech with millions in NOLS can transfer the NOLS upon buyout by another similar R&D biotech but not if the buyer is an oil and gas company. Correct me if I am wrong in understanding what you are referring to.
All in all I couldn't be more pleased with the developments. I have declared that my iterest is to buy as low as possible...so the detractors can post away but let it be knows that I think it a gift to investtors like me.
Yes the cash payments have been put under the BK process. I do believe that in their PL statement they will still account for those payments.
Dew, Thanks, my friends are not in the US but I will certainly follow up on the link you provided.
I am wondering in you have read the book on what happened with DNDN:
https://www.amazon.com/Dendreon-Effect-men-Manipulate-High-tech/dp/1563431416
Not sure what I think though I do remember that at the time thinling that the system had been somewhat compromised to the detriment of cancer patients.
Indeed All stockholders should be participating in this. However, right now I think that the status of the UNITI lease has to be resolved. It is possible that the company can eliminate most of that payment by backloading the lease on the argument that by 2030 the lease should be worth much less at market rates (they claim 80% less or so).In fact until we see the financial results of the next few quarters in light of the resolution of the UNITI lease it will not be clear to the court as to what is needed for financial reorganization.
If I am right, then positive developments on both fronts (UNITI lease reworking and Ers) would require little or no additional actions by the court and would require little or no draw down on the DIP financing. The court could just order for the company to work out a payment plan to Aurelius (say 12 quarterly payment) subject to the agreement of the secured creditors). The unsecured creditors would likely be made whole give the better financial performance and the stockholders holding stock at greater than $5/share.
A less rosy scenario would be the company drawing some from the DIP financing and issuing some shares to convert that new debt resulting in some deterioration in the perceived value of the stock, but as my prior post pointed out, a plausible price recovery scenario for the stock. Either way long term stockholders do very well (certainly from these very depressed levels)
A debt for equity exchange if done fairly would not lower the price of the stock since any dilution caused by the new share issuance is directly made up by the increase in net asset value and the increase in enterprise value, the latter being the basis eupon WIN stock price was trading prior to Aurelius.
I am assuming that they are now in better shape and that without the Aurelius case going against them they would have been well under way to being able to meet their debt obligations. That is becoming clearer and clearer in every quarterly report. Should the situation reverse then one would want to know why and decisions as to what part of the business would be sold would have to be made. Then indeed shareholders would have lees of the big pie to share.
The big unknown is how the UNITI lease will be reworked. I think it will affect how much shareholders get. I think they get something even if this is not reworked significantly.
I an doing some research into Dendrion for two reasons
1. Cloee friends have Prostate Cancer
2 Dendreon effect has been brought up
I remember you were involved in posting on the Advisory meeting and other DNDN events. We both posted on GENR board.
Wonder if you are still around and have any comments in hindsight.
Yes the preservation of the NOLs would be a deciding factor in not cancelling the old share structure for a new one even if current shareholder value was not affected.
the last line should read the value of the "old" shares prior to the BK sgould be equal to the value of their newly issued shares (assuming the cancellation of the old shares).
LG exactly !
You even put it more succinctly which is better. I was a bit long winded in an effort to be thorough on account that given the uniqueness of the situation there are many misconceptions out there.
I am also suggesting (though this should not be counted on by investors) that not only will common shares survive but they should if all goes well go back to the value they traded at prior to loss of the Aurelius case. Again because we are speculating on the actions of a dicretionary body (Ch 11 court) we can't be sure what will happen regardless of the merits of our arguments.
One last comment. Ultimately fundamentals rule and what has happened so far to Windstream has not altered the fundamentals. Here the fundamentals are good and continue to improve and this is what CH 11 is intended to address.
The creditors can only propose a POR (plan of reorganization)...the court decides. If no other stakeholder can provide a viable plan (for example if the company is burning cash for the foreseeable future) then the court will just rubber stamp the creditots' plan.
Again this is different than a KMART case and here the shareholders can make a very strong case that everyone is better off if no assets are sold (other than those that would have been sold in the normal course of business had these events not unfolded as they have).
[While most of the Institutions have sold out,
there is a Group of Investors that could
influence Management to protect the
Common’s value - WIN employees and 401Ks.]
Now in the real world your comment above probably is appropriate but in an ideal world (though one that so many purport is close enough to the actual state of affairs) then:
Management's full fiduciary duty is to shareholders and no one else. However, this is (and perhaps should be moreso) constrained by management's obligations under law (including contracts and debt agreements) and that which is demanded by ethical and social responsibility.
So management has a duty to shareholders but an obligation to creditors...what is the difference? In practive it means that management should seek to maximize shareholder value but only satisfice creditors (somewhat but not exactly in the sense of Herbert Simon) in light of the Chapter 11 proceedings.
So there is no reason why investors/stockholders should have to influence management in this regard.
However, as you point out, in the real world management is often content to collect their paychecks as long as they can while only responding to things desperately requiring attention...so it really is a must for shareholders to push to hold management to its proper fiduciary duty.
Here you are using Sears Kmart type examples as models. See my last post for why this is not relevant in this case. Assuming WIN prior to bankruptcy or lawsuit threat was trading at reasonable valuation there is no need or justification to convert debt to equity so that shareholders only get 1%. The math wont work out that way.
It will indeed work out that way if a company (say KMART) is forced to sell assets to pay creditors up front. Becaue in that case what is left is a small fraction of the original and much of that goes to creditors with unsecured debt.
Sometimes all the shareholder gets are warrants meaning that only if the price of the stock went up drastically would it be fair to compromise the interests (now in equity) of those not already made whole through the selling of assets. The cap on the value received by these creditors is justified by the fact that they had already agreed to capped appreciation in exchahge for a reduction of risk, unlike a common share holder.
Ok let's take this one step at a time and let's reason this out ..no guarantee the BK court will agree with us whether they should or not. The court in the Aurelius case perhaps didn't do what it "should have" (interpret any way you like)
Let's go
1. In Bankruptcy the rules change
I think I know what you mean here and surely things can change when a company is no longer able to generate or raise cash in order to meet its debt obligations. However, this is not so much a "change" of the rules but an enforcement of them, that the creditors get first dibs on the assets but beyond that which the company owes them and the implied interest that is as far as it goes. In fact these creditors don't want to bet their money on unguaranteed future cash flows and that is why they invested in debt secured by hard assets instead of equity in the first place. The objective of the BK court is to make as many parties whole as it can possibly and reasobly hope to achieve. In so far as the company is current with its interest and debt repayment schedule to creditors there should be under normal circumstances be no reason for the company to transfer or sell any assets in order to satisfy creditors. This has been true for years even as Windstream's business prospects were less rosy than they are today and going forward. What changed this is the Aurelius case and 300+M dollars being immediately due. Without BK protection Aurelius could file a claim for assets percipitating similar claims by senior debt owners and immediately draining the company of all its assets. So the BK court can stay these actions and restructre the timing (and tems if need be) of the debt obligations so that the company can have time and an opportunity to raise cash in order to meet them. If they can do so and preserve the interests of unsecured debt owners and stock holders then by all means it is the duty of the court to pursue such options. So I think this long explanation is a better rendering of "the rules" and in fact provide if anything a "bending" of the normal rules in favor of the stakeholders further down in line.
2. Creditors...in essence own the Assets and
get paid first.
As stated earlier this is only if the company is unable to meet their obligation and amounts to pledging company assets as collateral. So if any sense they "own the assets" it is in the same sense as the bank holding your mortgage "owns your house". They have no legal right to tell you what color to paint the unstairs bathroom as long as you are current on your payments even and especially were you to declare BK.
3. harder for the Creditors/Debtors to justify
a cancellation of current common shares.
There we fully agree. However I would go even further and say that even if the next few Qs are so so it would be senseless to cancel the current common shares.
First we have to realize that this not like a Sears Kmart or BonTon Chapter 11 where the problem is due to so many underperforming assets that are better off sold to meet obligations. Here the opposite is true and not only is it pointless to have a fire sale of the company's assets but since the value of the assets is multiplied by synergies it would grossly reduce the ability of the company to actually meet all those obligations. All but the most cynical vulture capitalists would even consider such a scenario and it is precisely from such entities that the BK court is designed to protect the company.
Second, let's say they did cancel the common shares. Since it is clear form above that no assets would be sold (as in the case with the other examples of BK cited above) then the enterprise value of the company woud remain intact (Market Cap reflecting fair value + debt) if not rise assuming continued positive business developments. So to the degree that they cancel debt and issue new equity it would simply be matter of shifting one of the two components of that formula i.e. reduce debt but increase market cap). Note that this would keep the current shareholder stake exactly the same (higher assuming growth of company) as before the bankruptcy. So what I am saying is that OK cancel the shares and issue new shares to creditors but to the degree you do that there is the same amount if not more left over in enterprise value for the original common shareholders. Therefore a shareholder's holdings of new shares after the bankruptcy would be equal to the value of their newly issued shares (assuming the cancellation of the old shares).
So by financial restructuring rather than reorganization (selling non performing assets and recapitalizing what remains) shareholders will have the same ownership stake that they had prior to the BK.
In fact since Windstream's quarterly results continue to improve at an impressive rate there should be MORE for shareholder's after they emerge from Chapter 11. Remember common shareholders have essentially the only equity stake in the company. They own it, not the creditors, not AUrelius.
With the DIP financing they can satisfy those entities that demand payment now (insofar as the BK even grants them that privelege) and use the remaining cash flow to pay off the remaining debt over time, all the while keeping all the assets and the underlying business (i.e. shareholders get it all). As an added bonus they get a chance to rework the UNITY lease under the CH 11 process to negotiate a cancellation or a new lease under much better terms thereby turbocharging their profitability!
Am I missing something here?
Hi Otterman
Have you followed CPAH lately. Noticed you posted way back about them. Any thoughts. They have secured favorable financing that eliminates the need to do equity raise. Only 12M market cap and into the collaboration market which experienced 300% yoy growth last year. Any thoughts?
The market may be wrong here because they amended the agreement with Hologic (formerly Gen-Probe) which reduces the $10M they were obligated to pay down to $2.5M. So that takes a lot of liability off the books which should allow them to use the whole $15M more or less left after the $2.5M is gone to distribute to shareholders.
This is not a buyout but an asset sale. It sells off the vast majority of assets but there may be some still left for liquidation. There is also the Nasdaq shell and the NOLS if they find the right company to reverse merger so could be more than the $17.5 M from this sale.
Heidmar Rev wont show up in DRYS financials since they only own about hald its stock. This is not a takeover. So if they can clear some net income then DRYS can get a dividend. If not it wont contribute to the P&L but will stay on its books and DRYS could always try to sell its shares.
Perhaps the tanker market will pick up and this will be a great money making acquisition for DRYS....we will see
Question on valuation and the VLGC segment of DRYS business. The ships give
about 29 to 30K per day according to the contract. What are the total costs per day (voyage and ship maintenance) and hence how much of the daily amount contributes to free cash flow? If it's 50% then that segment alone would pay for the SG&A expenses and the rest of the fleet would be in a position to contribute directly to earnings.
Or at the very least that he has no more interest in the stock (supposedly) and we can move on.
Why this goes up this week:
1.The volume of Friday died down soon after the first hour so the momentum factor that is so critical to a cult stock like DRYS was working against us because it was in profit taking mode off a gap up on news.
2. With an upward bias which has to come at some point we will see the sustained heavy volume that this stock is capable of which will attract momentum players and traders who always have DRYS on their watch list
3. The downside is very limited because of a sound valuation argument and more favorable outlook for shipping as well as a surging BDI.
4. Those holding the stock over the weekend are not desperate to cash out and know that they will have an opportunity to sell on big momentum days and that if the stock falls a bit the positive momentum days will more than make up for the drop.
5. The fear of millions of shares being added to the float as well as the fear of an announcement of such an event is gone and so traders' fear of holding the stock after a morning spike, overnight, or into the weekend is now gone. As more and more figure out that this is a viable trading op the float will dry up.
6. Now that all the bad news is behind us and people know that management has a huge stakein this there will be anticipation of positive news and catalysts to further drive the stock price.
Well we are now in the same league as AMZN AAPL FB GOOG TSLA
We replace MSFT at number 10 of most watched stocks booting them to 11.
https://most-watched-stocks.wixsite.com/webjam
Yeah I totally agree. It would be nice to have a final update on all this like the ones we see after the reverse splits. Earnings release should be soon so that would be a good time to give guidance on the cash flow status for the next few quarters.
"The Company will have the right to cancel the Rights Offering or amend
the terms thereof."
Hopefully we can get the co to improve the terms here which will bring even more upside. Letting the exercise price be negotiated based on market conditions might be very bullish.
although 20 dollars may be very optimistic there is much upside to the 77M in that the half stake in Heidmar is not figured in and your 110M is high and until they do the deal and get the assets (which will be used to generate more income which should go mostly to the bottom line given that expenses paid are already counted in the 77M figure) we should not figure that in.
So assuming that Heidmar adds say 10M (perhaps in dividends per year) we can optimistically get 87/70= 12+ per share (using your 10 EBIDTA estimate) so on very bullish momentum we could see 20+ but I would not count on it yet....
Thanks for posting that and I think you are in the ballpark but a few points.
1. It appears that Kalani did not sell many shares into market last week. No 6K was filed and it appears that the negotiation might have been to end Kalani in exchange for the current deal.
2. Heidmar doesnt own any ships it just operates them. So it is unclear how to count the stake in terms of book value. How much will be goodwill and how much will be booked as hard assets? Perhaps GE understated the total value.
So the first item may actually help our book value and the second one is unclear.
The terms of the rights agreement have not been finalized so there is some possibility there for more.
I imagine that Heidmar has been providing dividends for its owners for at least a part of its existence. They probably had a difficult time in the past few years with the whole industry. It will be interesting to see how they do with the BDI going up recently. I also wonder when we will get further info on the closing of the deal and when Dryships will be able to show this acquisition on its books.
" Don't you think the more likely pattern is that after the year once the shares are up, it will once again be crushed the same way it has been?"
Yes there is a chance that it will go up beyond what is sustainable and shorts will gladly pile on but I was talking about the stock at the current price. I am sure many longs here would welcome DRYS going up so that it becomes an attractive short candidate.
Yeah that is a common patter to follow a day like today. It happened to AUPH also after they announced results. If it starts from oversold position in the morning and if there are fundamental reasons for the stock to trade where it is (not necessarily for it trade much higher) the natural dynamic is for longs to hold their positions as they stock rises and shorts (and week hands) to scramble resulting in the very opposite of what we saw today.
A catalyst PR would also help.
"This is still a short! "
Wow excellent DD. The reason this stock was selling low was the anticipation of dilution but now with no more stock sales for the rest of the year the avg selling price of all the shares is well above the current price instead of anticipated to be well below the current price.
That's the huge difference...what made it a great short before has reversed
and it has become a value...this is why the stock traded around $4. People just took profits and the aborted long plays in the morning had to sell to shorts who provided some of the shares they had bought prematurely. This is a classic pattern. The value here is definitely above 2.75 and at least the weighted avg of that price and the rest of the shares sold at much higher prices so depending on how the company can communicate with shareholders and execute it's business plan this has great potential. It's not going to $100 but a double or more from here with the right catalysts is doable.
Some possible catalysts are increase in the dividend
Continued rise in BDI
More institutions taking positions
More accretive acquisitions
execution by management to unluck the value of the fleet without wasteful corporate expenses.
Time will tell but at this price and with BDI setting up to make GE's $77M in EBITDA doable this is certainly not a short.
I was wondering the same thing...part of the consideration for the 100M dollars worth of shares is about 27M reduction of debt which is about what was left of the Kalani.
Anyway we both called this saying the GE was going to buy in. The best part is not so much the deal itself but the fact that GE has now relinquished his role as puppetmaster and is now a common shareholder and will not compromise the value of the shares for pittances as before.
Let's see how he manages this going forward.
The RS probably assumes Kalani will sell the stock down to a dollar or less...but they could do a RS even over a dollar in order to make the stock more attractive to investors (who would consider a 1.70 stock as still a "penny") and to make it marginable.
If they can finish the offering and dont sell stock after RS then the RS will probably help the appreciation of the stock.
OK assume they do an RS the question is will they essentially have concluded the Kalani deal by then...if so and if the market believes they wont do an offering on the heels of this one then this RS will be a boost to the price in reducing the float.
I have done ok with DRYS as you say by flipping it often making trades in premarket before Kalani could do his thing...the one bad trade I made was when I decided to hold it for a while...
However, I have a feeling that this will change ..trouble is if you get in at the wrong time you lose all your investment. For example if you had 975 shares at the announcement of the previous offering you would have lost it all and paid reorg fees for the 4 reverse splits
we will see what happens to this rally and what they annnounce at the end of the week.
Yeah I mentioned that in previous post and commented why one should be a bit careful.
If I was sure that they were not going to announce another offering right after this I would be all in at these price and agreeing with your 10 plus target.....there are upside scenarios to this as you say but the downside like what happened in March when this offering was announced looms large here.
At this time a price of 40 dollars assuming they complete the offering at these prices or so is approximately 2B dollars for the company. I hope it gets there for you but dont be afraid to get back what you can on a spike which hopefully will follow this completed offering.
". ..We will now concentrate our efforts on arranging financing for these vessels. This will allow us to focus on further accretive vessel acquisitions without the need to raise further equity.”
Trouble is that since this statement was made before trading on May 30 they proceeded to increase the share count (completely unnecessarily) by a factor of at least 50 and counting and we are not even done. And since that statement the stock price has gone more than 99% (recovering now from lows).
It is like a child abuser pledging to change and then proceeding to gouge out an eye and remove two limbs...is it now safe to leave your children with this person?
This looks like such a great opportunity now though now and I guess if you hold the stock and trust GE and Kalani you deserve to be rewarded for it.
yes but that is not uncommon with Drys during rallies...GE could be accumulating though I would think he would want to catch a bottom...will they allow trading to take its course or engineer a another drop so insiders can buy (perhaps with the announcement of a RS which will depress price and reduce the float) and then allow the news of the buying and the end of the offering(s) to shoot the price many fold.
So far though none of these shippers have shown any inkling of concern for unlocking any shareholder value and/or using the value to drive the company's growth.
For example if after the last reverse split when the co was sitting there with a 10 to 15M market cap imagine what would have happened if they announced that they were suspending issuing shares through the kalani deal for 6 months and instead announced a sale of 10M shares at the market prices with conventional underwriting. The price may have gone to 10 to 30 and they would have raised 100 to 200 million dollars instead of the 20 to 40 and would have had 16 or so million shares OS instead of around 50M.
If they had announced a special dividend to boot of 25M (ten times the usual one) paid in part by the extra funds raised that would probably have driven the price even higher allowing even more money to be raised
which would have paid off the dividend and then some.
In 6 months then they could probably have dusted off the rest of the Kalani deal in a few trading sessions raising even more cash and driving the price even higher on that news.
Even assuming not much growth in the BDI index I could easily see a price per share of 40 to 80 dollars (more with favorable market and sector environments).
The fact that they didnt do this and this exists only in our fantasies makes me suspicious that they will act reasonably here.