REG CROWDER

Two SPACs and a Biotech Trading Below Net Assets

Cash-per-share versus market-price-per-share is a good starting point. But it isn't the finish line. Before taking a position in a stock based upon cash, spend a little time looking for things that might cause that cash to disappear in a heartbeat. Troll through the SEC filings for evidence of off-balance-sheet debt and other forms of debt that can be kept off the main pages of the financial statements but are too hot to leave out of SEC filings. This would include preferred shares convertible to debt, preferred shares with performance benchmarks that trigger mandatory dividends, options and warrants for so-called equity that has these kinds of provisions, buyback contracts, deferred compensation contracts that create binding obligations for the company -- those sorts of things.

In the case of high-tech stock, there is another, additional, hard-to-find vulnerability. Is the company being set up (from the inside) to be stolen by a buyout fund, private equity technology fund or distressed asset fund? Look for a key person in the high tech company's management (maybe on the board, maybe carefully kept off the board to avoid attracting attention) who is on the board of a buyout fund, private equity technology fund or distressed asset fund.

Is the management's profit sharing plan being moved to an offshore jurisdiction such as the Cayman Islands, British West Indies, the Bahamas or a former British colony in the Pacific region? This is another danger signal.

There is serious money to be made searching for nuggets of gold in obscure and out-of-favor stocks. But as the sergeant used to say at roll-call on Hill Street Blues, "Be careful out there."

REG CROWDER
Freelance Business Journalist
London, UK & Brittany, France

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