Prescience Point Research Opinions:
- Celadon Group (CGI) shares are worth $0.00 per share.
- Over 95% of CGI's reported tangible book value does not exist. CGI's actual TBV is no more than $.42/share.
- CGI will restate its historical results because of the issues exposed in this report.
- CGI will be bankrupt or insolvent within 1-2 quarters; existing shareholders will be wiped out.
- CGI stock should be de-listed from the NYSE.
- Regulatory and law enforcement agencies with subpoena power should launch a full investigation of the company, its accounting, and its practices.
Research Highlights:
- Disclosure of a sham 'daylight loan' transaction in the JV subscription agreement directly contradicts CGI's representations of having collected on a $31.8m receivable; in our view, it amounts to incontrovertible proof that CGI has inflated its financial position and falsified its financial reports.
- CGI's use of off-balance sheet transactions involving its JV with Element Fleet Management and related party 19th Capital inflated Q2'17 TBV and LTM profits by an estimated $104.2m, comprising 34% of reported TBV.
- CGI failed to record a $36m estimated loss from Quality equipment sales on its income statement despite its cash flow statement suggesting that such a loss was incurred.
- CGI's balance sheets and corresponding statements of cash flows do not reconcile. Discrepancies indicate CGI systematically overstated property and equipment by ~$78.8m, comprising 26% of CGI's reported TBV.
- Divergence between net income and adjusted CFFO has exploded. Net income now exceeds Adj CFFO for the first time in eight years.
- CGI management appears to have bilked shareholders out of $4.6m when 19th Capital, a related party, was redeemed at an inflated equity value of 4.5x invested capital, just ~1.25 years after its formation. The redemption may have been paid for with cash misappropriated from CGI's balance sheet.
- CGI's sudden jump (67.4% growth) in Other Revenue from