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Value investor that seeks intrinsic value and the principles of Warren Buffett. Seeking Alpha placing special emphasis to identify risk and lay it off to the capital markets at profit. Use options to hedge and to deliver a risk adjusted return on investment. Trading Strategy: Sell puts on stocks... More
  • Value Play NOVC Aka Ready To Shine All Tax Free DTA & With CRM 2 comments
    Jul 26, 2014 1:13 PM | about stocks: NOVCQ

    Value play NOVC aka ready to shine all tax free DTA Never underestimate the power of CPA Audited Opinion see Grant Thornton for NOVC clean opinion.

    Investment Thesis on NOVC aka NOVC raises $53m tax free cash, thanks to deferred tax asset mostly written down off FAS 109. NOVC current liquidity has grown to $60M, see 8K defining $30M is ear marked for a killer for Five9, Inc. FIVN ($330m market cap). No mention of extra $30M cash or the estimated $5m cash coming from Portfolio of Securities.
    Babson Capital and parent Mass Mutual are shareholders. NOVC only long term debt matures 2033 owned by Fortress, FBR and RAS (Betsy Cohen CEO of TBBK and RAS). This Senior Debt carries a nominal 1% interest rate till 1.2.2016 then still ultra-attractive (libor + 350 bpts).
    NOVC owns 5 assets; $60M cash, CorvisaCloud, Adventtax, Portfolio Cash Flow and Deferred Tax Asset that shields both taxable income and capital gains. Sale of Streetlinks confirmed this part of their conceal strategy. CEO in recent investor call 4.30th reconfirmed this and reconfirmed it at early June annual meeting NOVC is all in on + 60M cash + cash from portfolio of investments.
    1. 100% owned by NOVC operates in a mission critical market and is expanding head count and office space by 100 heads and to 35k SF respectively. Heartland Payment Systems, Direct Buy are two large customers that have installed CorvisaCloud solution. They partner with and have co invested with them in ManyWho.
    3. Legacy portfolio of subprime mortgages est. $5 Billion is kicked off $5m + cash and increased year over year per 2013 10k.
    4 Deferred Tax Asset of $290M (+ at least $216M of unrealized tax losses hidden by APB Opinion 11). GAAP classification of two tax benefits (NOL of 511m per 2013 10k and unrealized and realized capital losses residing in NOVC portfolio) in the future that will shield NOVC taxable income from taxes. Lance Anderson CEO says this on NOVC web site under Q&A when he states NOVC will be able to efficiently deploy capital free of any tax effect and states NOVC will not pay taxes for years to come.
    5. NOVC stated at June annual meeting they plan to exit this business. I feel confident they will sell it at a reasonable tax free profit.
    6. SOLD for $72m almost 10 x 2013 earnings of 7.4m. I believe the buyer Assurant Insurance 15k employees may have agreed to buy CorvisaCloud solution which will be priced at much higher multiple. All of these proceeds $53m up front were tax free.
    THE MOAT is substantial and patented technology is hard to duplicate. Five9 trades FIVN and has attracted two substantial investors and carries a market cap of $330m but must pay taxes on Taxable Income where CorvisaCloud does not. I believe this will provide CorvisaCloud a tremendous competitive advantage in pricing and the ability to absorb market share.
    CorvisaCloud ability to exit in a success event is also very competitive since NOVC shareholders could sell at an attractive price and pocket the capital gain tax free. Further in 4.30.14 investor call CEO stated CorvisaCloud technology is best of breed and CFO stated they had 60M in cash, 8k ear marked $30m for CorvisaCloud but they could deploy the extra $30m to buyback common shares while their price is manipulated at 29 cts. This represents 9M share buyback or est 10% of common shares outstanding. They could retire debt but this debt does not mature until 2033 and carries an attractive rate. Based on past behavior they could invest in another business. (AFS - HR Block peer) AFS services the unique financial service requirements for the 70M non or under banked in Americans in the USA, see Meredith Whitney comments as well as Goldman Sachs prospectus NTSP 2010. Currently AFS offers three solutions for this large market; a RAL replacement via Settlement Products and GDOT like prepaid debit card solution and Check Cashing Services - 100% owned by NOVC. Payday Lenders have more locations (22k) or more branches then Burger King and McD combined. AFS offers financial solutions to the unique 70M NON or Under Bank US Citizens. Most of the bank regulators (FDIC and Comptroller of the Currency) are forcing the lenders out of RAL market. State regulators will continue to pressure PAYDAY lenders, (400% APR percentage rate). AFS solution to the 70M non/under banked (per Goldman Sachs NTSP prospectus 2010) is far more efficient then RAL or PAYDAY Lenders. Aspen Institute recently awarded AFS President John Thompson an award for his work with NON Banked market. AFS founders, Mark Ernst and John Thompson still own 13.5% and 6.5% of AFS and were CEO of HRBlock/#2 at IRS/now COO of FISV and SVP at HRBlock, respectively.
    Deferred Tax Asset DTA NOVC has DTA which acts as tax shield on future taxable income and capital gains. Streetlinks sale early this year confirms this fact. This asset will allow NOVC to deploy capital more efficiently and avoid taxes on future earnings. It is comprised of two tax benefits NOL (est. $511M per 2013 10K) and estimated $216M plus unrealized tax losses in their portfolio shield by GAAP APB Opinion # 11. The latter components is hard to calc since APB Opinion 11 allows NOVC to hide or not disclose all the unrealized tax losses. The Deferred Tax Asset (DTA) has been almost completely written off or reserved against under FAS 109, however shielded 100% of sale of Streetlinks proceeds from taxation, (this fact was hidden in all SEC docs yet confirmed by CEO on 4.30th investor call). 2013 NOVC auditors Grant Thornton provided a clean opinion to SEC. Prior year Deloitte & Touche did so as well.
    Today you and I can buy NOVC at .29 however I believe NOVC true price should carry a range of $5-6 with upside of 20 per share. This price dislocation is attributable to NOVC board stealth mode and failure to be transparent. NOVC has no relationship with the investment community. It is enhanced by a misleading GAAP representation and management's incentive to remain quite while they pocket compensation well in access of fair market value. CEO is paid $655k per year in non-incentive base salary. In addition he was awarded 4.4 m shares of stock options (capped only by NOVC poison pill to protect DTA under Sec 382 of IRS code) which he has vested on half 2.1m shares at 51 cts. He also is provided 5% x annual cash earnings. The board is controlled by CEO and his close friend Gregory Barmore Founding Board Member, lead director and Chairman of the Compensation Committee. Two of the six board members Edward Mehrer and Art Burtscher are paper dolls to allow CEO and Lead Director to control the board. This fact breaches Sarbanes Oxley independence requirement. None have bought a material % of stock. The remaining two of six board members Barry Igdaloff/Howard Amster I believe own and control 20% of NOVC and I know are sick and tired of this condition.

    Disclosure: The author is long NOVC.

    Stocks: NOVCQ
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  • reddog3
    , contributor
    Comments (2) | Send Message
    Author’s reply » RE Value Investor Trade Setup. NOv 2015 Update on NOVC


    Jeff Eberwein Lone Star Value Mgt has quietly bought 3.1m shares or 3% of NOVC aka Corvisa ON NO NEWS. Yesterday someone bought 217k shares again on NO NEWS. Eberwein is x PM at George Soros shop.


    He is ousted CEO and CoB who was IMO milking the company which owns 100% of, Summit Platform PAAS software, 10% of ManyWho also owned by Marc Benioff of CRM. Portfolio worth far more than Grant Thornton clean audit opinion and finally they hold 30m est cash + 10m accounts receivable from Assurant Insurance and DTA hidden by GAAP (tax shield comprised of NOL 650M + unrealized tax losses in the portfolio.


    NOVC been shorted see while Jeff Eberwein bought 25k shares every day for over 5 months see form 4s.


    All in my opinion do your own due diligence and share.
    3 Nov 2015, 08:16 AM Reply Like
  • reddog3
    , contributor
    Comments (2) | Send Message
    Author’s reply » Update on NOVC now that Barry Igdaloff, his pal Howard Amster have used Jeff Eberwein & his pal Chuck Gillman (x George Soros PM) to retake NOVC board. Amster & Igdaloff played very successfully with Tom Akin x Salomon Brothers + Merrill Lynch to play Dynex DX. I believe they do it again at NOVC.
    There is plenty of value in NOVC Balance Sheet to cut a deal with Senior Debt (hidden by GAAP Deferred Tax Asset DTA or 2 tax benefits to shield future taxable income from taxation of $1 B ($682m NOL per 10k + UTL est $225m). NOVC can not use the DTA until a deal is cut & restrictive Covenants are eliminated. It will be done with one swipe of financial engineering and a new or old business model can start ALL shielded from taxation.
    Sr Debt holders are highly motivated to cut a deal IMO by:
    1. Hidden value in the portfolio + DTA shielding future biz model from taxes. NOVC could also become a Special Purpose Acquisition Corp or SPAC like Eberwein's past boss George Soros, Wilbur Ross and others that are leading a rebirth in SPAC market see WSJ)
    2. Sr Debt is unsecured and no longer being serviced.
    3. The same reason Sr Debt provided NOVC with 1% coupon rate for 5 yrs till 1.1.16 will motivate them to cut a deal.
    4. Fortress FIG owns some of Sr Debt but is Trustee managing 100% of Sr Debt for two CDOs Taberna issued by RAS and Kodiak Trust issued by FBR. Wes Edens, CEO the new subprime king per WSJ last yr is CEO of Fortress which owns a chuck of ONE MAIN aka symbol LEAF (AIG x subprime biz + Citi Bank $4B subprime biz) which they bought LEAF in 2010 when the market exploded. IMO Goldman Sachs handed them the market but LEAF is only Sub Prime for personal loans and car loans NOT RE Mortgages mgt which NOVC has specialized in and is the only survivor of the 08 melt down. I believe NOVC Board will cut a deal and Igdaloff, COB (Igdaloff good pals; Tom Akin, Todd Emoff, Howard Amster who are all connected and go back to DX + NOW Gillman/Eberwein. Igdaloff is now in charge as Chairman of the Board CoB I est they own 25% of NOVC.
    5. Once the Sr Debt is recapped the restrictive debt covenants will be gone and NOVC will raise a secondary offering which will put them back in the MBS/CDO/ABS business OR as SPAC. This will pop the share price. Some MBS investors believe that NOVC could dissolve the RET trusts or SIV and refi the assets generating a tax free cash flow of $40M/yr. IF Mr. Market priced the $40m like a bond and gave it 4% ROI 40m/4% = $1 Billion dollar market cap. Say Sr Debt owners/holders/Secondary Offering 20-40MM shares = 91.5m CSOS today = worse case 132M CSOS 1,000,000,000 divided 132M CSOS = PPS 7.57
    (today NOVC been in stealth and shorted to 6 cts.)
    4 Jun, 11:15 AM Reply Like
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