Seeking Alpha

Liquidity Services extends DoD scrap auction deal, shares rally

  • Liquidity Services (LQDT +7%) has obtained a 12-month extension of its scrap auction contract with the DoD. The extension means Liquidity will be "the exclusive sales channel for the disposition of scrap property that is approved for public sale" through June 9, 2015. (PR)
  • Investors and analysts have been nervous about the status of Liquidity's contract renewal talks with the DoD, both for its scrap and surplus asset agreements. Benchmark recently expressed concerns about the deal terms Liquidity would get for a surplus renewal, given a more competitive bidding process.
  • Shares are recouping some of the huge losses they saw two weeks ago, after Liquidity provided weak FQ1/FY14 guidance to go with mixed FQ4 results.
Comments (3)
  • James Sands
    , contributor
    Comments (1924) | Send Message
     
    So what does this mean....a 12-month extension. Seems like a short-term timeframe for another revisit for the company. Is a 12-month agreement a sign for concern?
    4 Dec 2013, 10:35 AM Reply Like
  • SA Editor Eric Jhonsa
    , contributor
    Comments (754) | Send Message
     
    Don't think so. DoD auction contract extensions typically run for 12 months.
    4 Dec 2013, 11:11 AM Reply Like
  • James Sands
    , contributor
    Comments (1924) | Send Message
     
    Interesting, I thought that the initial contract was 5-7 years or something. I guess it will always add some pressure to the company then as it represents a significant amount of revenue.

     

    If the company's long-term strategies pay off and it is able to diversify revenue by customers, this may not be as impactful.
    4 Dec 2013, 12:04 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|