On November 9, 2012 the dissolution and liquidation of Myrexis, Inc. (OTCPK:MYRX) pursuant to the Plan of Dissolution was unanimously approved by the Board of Directors, subject to an affirmative vote by the majority of shareholders.
Delaware law allows a corporation to be dissolved after the approval of stockholders by filing a Certificate of Dissolution. After being dissolved, the corporation will continue to exist but can only wind up and liquidate. The common stock will cease trading and an initial liquidating distribution will be paid to final record date holders as soon as possible after the filing of the Certificate of Dissolution.
The small cap liquidation is one of my favorite trades. My goal with these trades is to get back my entire investment in the initial liquidating distribution. All other distributions after the initial will be gravy. The company is usually very conservative with the initial distribution and many times you get paid continuing liquidating dividends for years later. The company will disclose on the DEF14A the estimated initial liquidating distribution, the date of the shareholder vote and the timing of additional liquidating distributions after the final record date.
The Myrexis liquidation is pretty standard. Shareholders will vote to approve the Plan of Dissolution on January 23, 2013. The initial liquidating distribution estimated by the company in the DEF14A is between $2.67 and $2.83. The common is currently trading around $2.79. The uncertainty, as in most liquidations, is the amount of the total reserve held by the company. Myrexis estimates a reserve of between $12 and $7 million with $6.5 to $2.8 million of the reserve coming from AIA Litigation and unanticipated claims and contingencies. The amount held in reserves not used and the value of other asset sales will determine the value of additional liquidating distributions after the initial distribution. Myrexis anticipates paying a final liquidating distribution within three years of the final record date.
On December 21, 2012 the company filed an 8k disclosing a settlement in regards to the AIA Litigation. Myrexis settled with AIA for $1,525,000 and will transfer all program rights and assets associated with several of Myrexis' programs. The settlement agreement has a significant impact on the estimated reserves the company is planning in the liquidation. I would expect the company will decrease the reserves and the initial distribution will be closer to the high end of the estimate.
The deal does have risks. The shareholder vote could fail and the estimate of the distributions and timing will impact ROI. In rare instances shareholders could be forced to return liquidation payments if new liabilities or claims arise. Holders are liable limited to the amount of liquidating payments received. This is a good small deal to learn from. Deals get more complex and uncertain when dealing with less liquid assets. The Myrexis deal involves a significant amount of level I assets.
The easiest way to find liquidations is by searching the SEC website using keywords and specific form filings. You can also do keyword searches of press releases on PR websites.
Disclosure: I am long OTCPK:MYRX.