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CDZI, The Best Short Ever?

|Includes:Cadiz, Inc. (CDZI)

First, the finances:

  • $100 million market cap
  • $58 million in debt ALL DUE JUNE 23, 2013
  • $42 million in Mojave Desert, marked on the books at $1,000 per acre
  • Negative Income
  • Negative Cash Flow
  • Negative Equity
  • Revenue Collapsed from $100 million annually in 2002 to $600,000 annually today

Now, the valuations:

  • P/E Impossible
  • P/CF/ Impossible
  • P/B Impossible
  • P/S 170 (Market average: 1)

Now, some goodies

  • Company is trying to sell $50 million worth of stock into a $100 million market cap so 50% dilution, a 33% loss in the value of shares
  • Company is also trying to revive an already cancelled project to save itself, the Cadiz Valley Water Project

The best part about the Cadiz Valley Water Project is that it's dependent upon using the Colorado River Aqueduct. The CRA is under the authority of the Metropolitan Water District of Southern California. The MWD rejected this project in 2002, and board members have stated they will do so again.

All the while, CDZI is trying to sell this project to the sub-districts around southern California, namely Santa Margarita Water District. Of course, these sub-districts are anxious to get the deal done since they think they can prenegotiate these lower promised rates with CDZI even though the water will be bought from the MWD since the water is supposed to be dumped into the CRA and then pumped to the sub-districts in the same way it is now.

The MWD will reject this boondoggle again like they have in the past since they will never sell to the sub-districts at much lower rates based solely upon the promises of CDZI, a nearly bankrupt company.

All these parlor tricks do is delay the most likely outcome near June 23, 2013: bankruptcy.

I nominate CDZI as the best short ever.

Disclosure: I am short CDZI.

Additional disclosure: I'm long puts on this sucker until it either goes bankrupt, or someone bails them out.

Stocks: CDZI