NTS Realty Holdings: Merger Termination Leads to Significant Downside Risks
Recommendation: Reduce long position / sell short NTS Realty Holdings Limited Partnership (NYSE MKT: NLP)
New Target Price: $2.50
On October 18, 2013, after market close, NTS Realty Holdings (NLP) announced the termination of the go-private agreement after failing to extend the financing commitment. Using straightforward valuation methodologies such as unaffected price, dividend discount model (DDM), trading comparables, and discounted cash flow (DCF), I conclude that the fair value of NLP as a stand-alone company ranges from $2.14 to $3.15. In addition, it appears that NLP's financial advisor (Centerboard Securities) used inappropriate assumptions in the valuation process, which led to a gross exaggeration of NLP's fundamental value....