I haven't changed my opinion on the potential value of the company over the long-term. As far as I'm concerned the panic on this board is just a bunch of noise from folks who are rubbed raw from seeing the stock and their account balances take a nosedive, and I understand that completely because my account has taken a beating as well. I don't think the stock is driven by message board fodder though, at least not over the long-term. It may slide some more in the coming days or weeks but it will ultimately be worth what it is worth and the market will reflect the true value and there is nothing that message board content can do to change that over the long term.
Chemtura is a very solid company with a really bright future. Despite what some say about Rogerson, I believe he has done a great job of turning this company around. Just go look at the profitability of this company for the 3 to 4 years leading up to bankruptcy. Now Rogerson comes in and they are profitable while operating in bankruptcy while saddled with all of the legal costs. He has managed to streamline the operating divisions and restructure them for success. The notion that he sits up in some ivory tower pontificating on how to screw the investor is simply unfounded. Rogerson is not the one that is necessarily driving what is happening in the courtroom, he is busy running the business. Those are two completely separate full-time jobs. If you don’t like the direction of things in the courtroom, your beef might be with the Debtor’s general counsel or the Debtor’s financial advisors, not the CEO.
They have struck the EV at just over $2 Billion right now and that is fair (not ideal), but I can see a scenario develop to where on the high end, within 6 to 9 months after reorganization, the market could price in a valuation of $2.8 to $3.2 Billion based on 2011 estimated EBITDA of $400 million and a multiple of 7 to 8 times. This assumes the world doesn't fall off a cliff. Right now it is reasonable to assume that the $2.05 Billion value is derived from a multiple of 6.5 times the 2010 estimated EBITDA of $315 million. Given that the stock trades at a level above the value it would seem to have in the hands of someone who does not participate in the rights offering, it appears that current purchasers in the market see:
(1) greater post-reorg value that gets unlocked due to the market assigning a higher EBITDA multiple based on greater future EBITDA levels;
(2) additional value that is unlocked by participating in the rights offering;
(3) a more consensual plan negotiated by the EC between all other parties based on the current framework put forth by the Debtors that provides additional recovery; and/or
(4) an alternative plan that may or may not eventually be put forth by the EC
For now I am just waiting like everyone else to see what the equity committee comes up with. I do believe they will be able to argue for a better recovery if they have actually raised the kind of cash they claim to have raised.
The market always prices in extremes on the high and low side and I think we could be nearing the low end. When you see people writhing in pain, it is usually a sign that we have hit the max pain tolerance threshold. When this occurs we see indiscriminate selling which causes a "capitulation" point and this leads to very attractive entry points for the investors who are sitting in cash waiting for the stock price to reach a margin of safety. This goes on in the markets all the time and it causes a transfer of wealth to occur between the fearful and the opportunistic.
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