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  • Special Diversified Opportunities: Buying Upside For Free [View article]
    They've performed pretty well. Made some sizable changes in companies they've taken activist positions on.

    I don't have any recent performance numbers, but here's a dated article to give you a bit of background on them:

    I believe they were up 90% since inception at the time of the article, and they had only been around for a few years prior.
    Mar 31, 2015. 03:35 PM | Likes Like |Link to Comment
  • Special Diversified Opportunities: Buying Upside For Free [View article]
    Thanks Robin!
    Mar 31, 2015. 12:02 PM | Likes Like |Link to Comment
  • Essex Rental: Technical Default Masks Massive Value; Triple-Digit Returns Possible [View article]
    I'll have to read through the VIC write-up when its available. Still working on getting accepted. Hopefully second times a charm?

    I still need to read through the credit agreement as well (also a credit guy).

    My only other question I have for now is on the capex. I noticed they break it out by maintenance and replacement. Wouldn't replacement capex be pretty much the same as maintenance (as in Buffett's definition of maintenance capex)? If so, then pretty much all of their capex is just for maintenance purposes, which effectively eats up all their cash flow. I'm not as familiar with these guys are you are obviously (still need to read a lot more), but just wanted to see if I'm thinking about it right.

    Thanks for the answers!
    Mar 20, 2015. 02:20 PM | Likes Like |Link to Comment
  • Essex Rental: Technical Default Masks Massive Value; Triple-Digit Returns Possible [View article]
    Excellent article.

    Don't see too many of these well written, special situations on SA.

    I just had a few questions: any idea on when/if Essex is expected to get the waiver from the banks?

    Secondly, with the possibilities that the Fed may raise rates at some point this year, do you still feel comfortable that the company will be able to refi? I'd imagine market liquidity would begin dry up a bit, and it looks like a lot of companies are active in the market in the first part of the year hoping to beat the increase. I'm not sure if this is something they're working on along with waiver. I'd figure it'd be quite hard to sell cranes if the market took a turn for the worst as well.

    Lastly, could you elaborate on what the company's equity would look like in a liquidation scenario? I was just interested in seeing how you came to your conclusion that shareholder's equity wouldn't be wiped out.

    Again, great article!
    Mar 20, 2015. 11:07 AM | 2 Likes Like |Link to Comment
  • SIGA Technologies: Uncovering Hidden Value In Bankruptcy [View article]
    I talked about this in my comment above. I see it more as a temporary issue, than an impediment to the articles thesis.
    Mar 14, 2015. 06:20 PM | Likes Like |Link to Comment
  • SIGA Technologies: Uncovering Hidden Value In Bankruptcy [View article]
    For those curious, I posted an update at the top of this article.
    Mar 12, 2015. 10:42 AM | Likes Like |Link to Comment
  • SIGA Technologies: Uncovering Hidden Value In Bankruptcy [View article]
    I have yet to see anything.

    I've been following the bankruptcy docs and the comments above, and plan on writing in update in the next week or two as it gets closer to the next court date, and following PIP's release of Q4 earnings.
    Mar 5, 2015. 12:46 PM | Likes Like |Link to Comment
  • Spin-Off NOW, Inc: Market Leadership, Experienced Management, And Pristine Balance Sheet Point To Compounding Value [View article]
    I'd be curious to hear your thoughts on the above comment as well. Allan Mecham's Arlington Value took a big stake in DNOW in Q4 probably following the stock drop. He has a very concentrated portfolio so it's interesting to see him take a stake in this.
    Feb 25, 2015. 12:02 PM | Likes Like |Link to Comment
  • SIGA Technologies: Uncovering Hidden Value In Bankruptcy [View article]
    On the revenue side, as of Q3 the company has delivered 1.3mm courses for a total of $136.8mm. The contract has as total face value of $463mm. So if you back out the $136.8mm they received for deliveries so far, the $61.5mm in milestone payments, and the $102.5mm saved for FDA approval, you have $162.2mm left over which they should receive from the FDA application and the remaining deliveries.

    On the costs side, this seems to be something we disagree on. Regarding the deferred costs, you have to dig a little deeper. First off, why would a company use such a complex, yet legal way to account for revenues received from the BARDA contract? They're obviously getting paid for the deliveries, so it's not like there's a serious chance that they won't receive these revenues. My initial thought was they were intentionally making themselves look bad. If you've followed the PharmAthene case since it started, you'll have seen that at one point in time, the court ruled that SIGA would pay PharmAthene an "equitable payment stream", before this lump sum amount ever came into play. Essentially the court said SIGA would have to pay PharmAthene 50% of the profits from ST-246, after it received its first $40mm in profits. So what does SIGA do? They come up with this ridiculous accounting scheme to make themselves look like they consistently lose money. If they're constantly losing money, they don't have to pay PharmAthene! They didn't put this deferred revenue/cost thing in place because they don't believe they'll be reimbursed in the future, they did it to make themselves look like a big-time money loser on purpose. Ah the wonders of GAAP accounting. Remember Ron Perelman essentially controls this company. I'm sure he and his M&F buddies sat down and figured out this scheme to avoid paying anything. Just look at the stuff he did with Revlon. This may be slimy, but its legal. I'm still going to stick to my guns here and say that they'll still be reimbursed going forward.
    Feb 11, 2015. 12:21 PM | Likes Like |Link to Comment
  • SIGA Technologies: Uncovering Hidden Value In Bankruptcy [View article]
    Hey Oliver,

    Thanks for the great questions. I'll go through each one at a time.

    1) I did not. Here's why. There's a lot of options in the BARDA contract which, in the public eye, are redacted and we are not able to see. Gazing at the contract at first, I just assumed they'd have a solid base contract of $435mm. Simple, easy enough to get, right? But, in the company's 2012 10-K, you'll notice at the end there's an amendment to the contract which increases the value of the contract by $28mm for "Cost Reimbursement". So I decided to take another look at what changed. Now I could be totally wrong here, but I believe there’s a good chance the contract will again be amended to compensate SIGA for the additional manufacturing and distribution costs that you correctly pointed out they have coming in the future. Again, I could be wrong here, but that's the impression I got because of the "mission critical" drug ST-246 is.

    Additionally, the contract contains a variety of other options that I didn’t mention (because individual payment prices are redacted), which potentially boost the value of the contract by another $178mm. My impression is that more of these options will begin to trigger as the company finishes its delivery of the 2 million courses of ST-246.

    Although I didn’t include this in the bear case, I believe it’s almost entirely certain ST-246 will be FDA approved, at latest by 2019. Here’s a quote from one of the company’s 10-Ks. “The Secretary of HHS concluded that, prior to award of the BARDA Contract in May 2011, ST-246, now also known as Arestvyr, will qualify within eight years for approval by FDA for therapeutic use against smallpox.” If the government is already buying the drug, it would look pretty bad for the FDA to reject it after the government spent close to $500mm.

    While it’s difficult to pinpoint an exact minimum EV for SIGA, I don’t see the EV being worth less than $75mm, and through its remaining options and potential FDA approval, believe there’s a strong enough margin of safety in this investment either way.

    2) They only replace the drug at no cost if, “Product that does not meet any specified label claims, fails release testing or does not meet at least 38 month expiry period shall be replaced at no-cost to the government”

    3) If the appeal is swiftly rejected, which again I believe is highly unlikely, they would not have to pay given that they are in Chapter 11. They basically filed for Chapter 11 in the first place to prevent PharmAthene from taking any enforcement action. So unless they come out of Chapter 11, and THEN the appeal is all of a sudden rejected, then they’ll be stuck paying. But I doubt they’d put themselves in that circumstance.

    Thanks again for the great questions!
    Feb 10, 2015. 04:40 PM | Likes Like |Link to Comment
  • Ascent Capital: Industry Consolidation, Low Valuation, And Potential Acquisition Candidate Warrant 65%+ Upside [View article]
    You can certainly go about valuing the company that way too. I just chose to compare it to ADT because I figured if I went the DCF route, I'd get more questions surrounding Ascent's value vs ADT's. But yes, they are totally different business models. In my opinion, I believe Ascent's asset-light, higher margin business model should warrant a higher multiple than ADT, and that's why I tried to tackle valuation on a multiple basis by comparing the two companies.
    Feb 2, 2015. 09:43 AM | 1 Like Like |Link to Comment
  • Knight Therapeutics: Minimal Downside For This Misunderstood Company [View article]
    Thanks for the comments! Definitely think Goodman can ramp the company up rather quickly. Investors obviously are eager to jump on board to with all of the over subscribed share offerings recently. Once the financials become easier to understand it should increase awareness of the company also.
    Jan 29, 2015. 09:12 PM | Likes Like |Link to Comment
  • Ascent Capital: Industry Consolidation, Low Valuation, And Potential Acquisition Candidate Warrant 65%+ Upside [View article]
    Thanks for the question. You have to look at the way ADT calculates SSFCF vs ASCMA.

    Ascent's is essentially annualized reported EBITDA less subscriber acquisition costs which you calculated correctly above.

    What ADT does is different. They add back subscriber acquisition costs back to EBITDA. If you look at their earnings slides (I used the Q3 ones when this was published), they use annualized EBITDA before special items and pre subscriber acquisition costs. I back out the subscriber acquisition costs, because one I think it's just a repetitive way to boost their SSFCF, and because it then makes their SSFCF comparable to ASCMA's calculation. I'm sure if Ascent added back subscriber acquisition costs to EBITDA their SSFCF would be much higher too. I believe much SSFCF for ADT was about $600 million
    Jan 19, 2015. 07:19 PM | Likes Like |Link to Comment
  • Why ModusLink Global Could Be A Double [View article]
    What's your take on D&A being substantially higher than CapEx? D&A has averaged about $13-$14mm over the past 3 years, with CapEx floating between $4 - $11mm. I've been trying to get a solid grip on the FCF the company generates on a steady-state basis, and thought D&A would be a better proxy for steady-state capital expenditures, and a normalized FCF calculation. I just want to make sure they don't have to burn through their nice cash balance just to maintain the business.
    Dec 24, 2014. 11:43 AM | 2 Likes Like |Link to Comment
  • PDF Solutions: Potential For A Quick Double Following Market Overreaction [View article]
    The company hasn't formally announced a time yet. I'd assume it would be in the first two weeks of February.
    Dec 17, 2014. 04:16 PM | 1 Like Like |Link to Comment