RENN Global: A Cheap, Interesting And Speculative CEF

Mar.15.13 | About: RENN Global (RCG)

RENN Global Entrepeneurs Fund, Inc. has a long, sad history of losses and disappointments. It trades on the New York Stock Exchange under the symbol RCG. It sells for less than $2.00 and trades at a discount that can exceed 40% of its reported assets. Most of its assets have no reported market but as of December 31, 2012, it reported a net asset value of $2.53/share which far exceeds it market price, which as of March 14, 2013 was $1.69.

Although the letter to shareholders writes favorably about its holdings, I sought to look solely to its cash and securities which it valued above cost. I discovered the following:

U.S. Treasury Notes 17.74%
AnchorFree 13.63%
Bovie Medical (NYSEMKT:BVX) 9.66%
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This is 41.03% of assets and only slightly less than the price you pay, taking into account the discount. I might not rely on their favorable portfolio comments but if they are prepared to value any security above cost, and risk liability exposure, I will trust them.

The implied tax benefits could be truly astounding and far exceed the value of the holdings. The securities which they assign a market value to of $11,611,030, have a cost basis of $27,781,222. In addition, they have tax loss carry forwards of almost $14,000,000. Someone out there should be looking into this. Consider these figures in light of the fact that RCG has only 4,463,967 shares outstanding.

Total assets as of December 31, 2012 were all of $11,273,208, which even with relatively low turnover, destroys operating and income ratios, which are as follows:

Operating Expenses Investment Income Portfolio Turnover
2012 6.51% (5.34)% 32.29%
2011 5.25% (7.30)% 14.46%
2010 5.47% (3.66)% 7.36%
2009 6.30% (3.46)% 8.99%
2008 4.85% (2.78)% 8.26%
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It is impossible to tell if this sad story will continue or turn around. Buying RCG is equivalent to buying a lottery ticket. It is not expensive and their may be hope. Why not take a shot with a small position?

Disclosure: I am long RCG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.