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Time will tell…a short time too. There are multiple bidders. Way crazier things have happened than a $700M revenue business being bid up by competitors wanting to be bigger in the space. In this case a business with a lot of upside. Still a big risk. There is Potential though.
That’s in the restructuring plan, to cancel the stock, yes. But not in the sale plan. Read the q&a for common stock shareholders. It says so clearly.
Cyxtera auction pushed to 8/30. Per filing, company has received ‘multiple bids’ and they need more time to evaluate them.
$CYXTQ still very high risk. But potentially huge reward here.
https://www.kccllc.net/cyxtera/document/2314853230822000000000011
So if they have a stalking horse bidder. Will we see the name of the company and the $$ figure?
The cfo said they have financial flexibility to find a buyer. With 90% recurring revenue. Real ebitda and real growth. Companies are coming to buy this. What that price is, we don’t know. If the sale fails or sale price is lower than total debt, then common shares lose all. That is what’s written. Everything comes down to a sale or recap for retail. That’s the bet. And shares aren’t canceled in that situation.
The company set to do $240M in ebitda this year. 90% recurring revenue. And 9% growth from q2, year over year. In an industry that trades at 25x ebitda. If a company in the industry buys the whole company and wipes away debt, they could buy it at 8x ebitda and triple the value of that investment…overnight. 8x = $1.9B sale price. Still a risk to buy a bk stock. And it could go to zero. But it’s a gamble I am taking.
It is weird to not include that. Just be fair on both sides. This has a chance to go to zero. That’s fair. This also has a chance to be a big sale and win. Either scenario, especially given the numbers $CYXTQ posted for q2, AND the fact that there are multiple qualified bidders,is certainly possible.
For those who don’t like this stock. What am I missing in these numbers? Growth in revenue and recurring revenue is huge. Transaction adjusted EBITDA sounds like something I shouldn’t believe until I look under the hood. What is that? What else?
From the release:
Total revenue increased by $14.9 million, or 8.1% year over year, to $199.0 million in the second quarter.
On a constant currency basis, total revenue increased by $15.1 million, or 8.2% year over year.
Recurring revenue increased by $15.8 million, or 9.1% year over year, to $190.0 million in the second quarter.
Core revenue increased by $17.4 million, or 10.3% year over year, to $186.2 million in the second quarter.
Transaction Adjusted EBITDA increased by $6.4 million, or 10.7%, to $66.4 million and increased by $6.5 million, or 10.9% year over year, on a constant currency basis, in the second quarter.
This is a strong and growing business. Cyxtera isn’t going to be bought and sold for their tangible assets imo. Someone will buy a growing company with real revenue and EBITDA numbers and real growth in those areas. In a business set to explode.
This stock can definitely still go to zero. I have a high risk tolerance. But today’s filing/article boosted my confidence a lot.
https://www.benzinga.com/amp/content/33600043
My own numbers are off. Sorry. But this company’s revenues and EBITDA are significant and growing.
Sorry. Should have specified. Operating Cash Flow positive. See below link. Also EBITDA GREW BY 14% in those numbers you sent, year over year. What would a company pay for $200M in EBITDA? 6x gets us to $1.2B. https://finance.yahoo.com/quote/CYXTQ/cash-flow/
Totally understand this.
I always wonder how much they were trying to sell for before filing. Like how greedy did they get when they were first trying to sell? It definitely wasn’t for just the debt.
Look most bankrupt companies go to zero. But I I know how people LOVE cash flow positive businesses. And the premium put on those. If not for that I would have bet less.
I truly know nothing. I’ll start there. So this isn’t financial advice at all.
But. What I’m seeing is this. This is an industry that is exploding and set to really explode with AI. I believe that wholeheartedly. From everything I read (and just see) Cyxtera has great products. Has top quality data centers. Has real market share. And has positive Free Cash Flows. They had overwhelming debt. But capital solves that problem.
If companies want to get into this business or capture more market share, buying CYXTQ is a short cut to getting there. Can you spend the next 5 years building/staffing/equipping 60 data centers around the globe? Yes. Will there be missteps and wrong hires set backs, and bad business deals baled into those 5 years? 100% yes.
So do I believe there will be more than one company interested here? I do. Do I know there will be money left over? I honestly have no idea. But that’s the bet.
Then we are saying the same thing. It felt like you kept saying that bidders could choose not to pay shareholders. That bidding companies could choose to leave them out. All that matters is final sales price of all the assets versus total debt + cost. If there is money leftover, commons will get something. If there isn’t anything leftover, we won’t. If a mere $20m is leftover from sale price of all assets minus debt and costs, we 2x.
I willl guarantee you that no company will bid on the debt lol. But the money they will get from the sale of the assets will go towards debt and eventually common shareholders if there is money leftover.
I willl guarantee you that no company will bid on the debt lol. But the money they will get from the sale of the assets will go towards debt and eventually common shareholders if there is money leftover.
Some observations, studies and thoughts on some turnaround stocks, incl. Hertz ($HTZ), Luckin Coffee ($LKNCY) and New Oriental ($EDU). Starting with $HTZ. Here's the chronicle of Hertz's turnaround from Ch.11 filing to emerging from bankruptcy. (15x RoR for 13 months) 1/n pic.twitter.com/dBo1z8VsRc
— NextTrillionAssets (@next1TUSDassets) August 3, 2023
It all comes down to money in. How much money are they getting for these assets? That money in is applied to the debt. What is in excess of debt, if anything, goes to common stock shareholders. It doesn’t matter if they only want the assets. Yes. Of course. That’s what they are buying. But the money in is distributed. Common stock is last to eat. If bids are $10m over total debt/costs, we break even. If not, we don’t. Tell me I’m wrong on this if I am.
Great thoughts here. Ty. That helps. I do also like healthy debate on stuff and not the normal ALL CAPS INSULTS.
This makes sense if the company is going to be bought and the assets broken off and sold in pieces. If you’re valuing the assets that way then what you are saying makes complete sense.
But from what I can tell, Cyxtera has great, top of the line products. And a real growing business. In a growing industry with a lot of promise and hope for the AI boom stuff.
Their debt was too big, like most SPAC set ups. And they couldn’t make it when interest rates went up. (Maybe they wouldn’t have made it anyway with debt that high.)
So, if two companies believed and wanted to get into this business. Or a current company wanted to block another new well capitalized company from getting a strong foothold and global footprint in this business. They might. And I stress might. Be willing to bid over asset value for this company. That’s why, in my opinion, it has a shot.
As gamblers do, they put money down to take a shot. With a market cap of $10M. Not needing much over here to at least break even. Maybe make a return.
What I’m saying is that if there are multiple bidders. The sale price could go higher than the debt. No guarantees of course. But do you agree that that’s possible? It is possible in my mind. And if that’s the case, where would the extra money go to? So if debt is $1B and the sale price is $1.3B. Who would get the extra $300M, if not the shareholders? And I’m asking here. Maybe you know more than I do. I only know what I read and what the company put out.
If the bidding company pays more than the total debts, the remainder goes to common shareholders. If the price is driven up past the debt, common shareholders have a shot here. Are you saying otherwise?
Real degenerates just keep it all in. I know I should be riding for free. I just don’t want to sell any of it.