A quick note on the Rentech (NYSEMKT:RTK) deal this morning.
We think it is a huge positive for shareholders, as the Blackstone investment was not at the sort of massive discount that often accompanies capital infusions into small companies. We calculate their purchase as effectively an 8.7% discount to fair value, which is very reasonable.
Secondly, we are excited to see the finance committee. We do not believe that RTK management is capable of allocating capital effectively without oversight, and now that problem is largely resolved. Three of the five members of this committee are independent (two from Blackstone and one from Concerned Rentech Shareholders), which means it will make intelligent decisions.
The amount of money RTK's management has blown by overpaying itself is trivial compared to the amount of money RTK management has blown misallocating capital. We'd still like to see management removed, but this is a great step to avoid serious impairment of shareholders and to start realizing value.
Prior to this morning, we were afraid the company would do a large, dilutive offering, specifically placed away from large institutional holders, towards retail investors, at a huge discount to market price, or else some sort of really awful convert preferred private placement at a bad price to a management-friendly investor. That did not happen.
Good to see things moving in the right direction! Think the stock can continue to work.
Disclosure: I am long RTK.
Additional disclosure: The private funds managed by Aristides Capital LLC are long RTK. The principals and employees of Aristides hold no individual equity positions (other than via our holdings of our private funds).