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Alaris Royalty: Sandbox Investment Demonstrates The Need For More Due Diligence

Mar. 05, 2020 7:33 AM ETAlaris Royalty Corp. (ALARF)12 Comments


  • Alaris Royalty surprised investors with a shoe drop just before the annual results.
  • The decreased value obtained for Sandbox again raises questions of how in tune the management is with underlying portfolio issues.
  • The stock is cheap relative to our benchmark, but the company has been regularly riddled with above-average problems.
  • I do much more than just articles at High Dividend Opportunities: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

Amounts being referenced could be either USD or CAD and will be indicated within the article.

We have always viewed Alaris Royalty (OTC:ALARF) as a high-risk, high-yield investment. At times, we have noted price points where the risk-reward is appealing and made a buy case for it. Alaris got smacked down as it released some new information on its portfolio on February 28, 2020. We decided to take a fresh look and see if this warranted making another case to purchase the stock.

The News

Alaris redeemed its investment in Sandbox, something it had mentioned that it was pursuing.

CALGARY, Feb. 28, 2020 /CNW/ - Alaris Royalty Corp. ("Alaris" or the "Corporation") [TSX: AD] is announcing today the sale (the "Sandbox Sale") of Sandbox Acquisitions, LLC ("SA LLC") and Sandbox Advertising Limited Partnership ("SA LP" and, together with SA LLC, "Sandbox") to a third-party buyer (the "Buyer"). As a result of the Sandbox Sale, Alaris received total consideration of approximately $32,609,236 (the "Consideration") consisting of: $20,003,644 for the senior debt ("Senior Debt") Alaris held in Sandbox; $1,916,903 for unpaid interest on the Senior Debt; $9,144,448 for a partial repurchase of preferred equity held by Alaris in SA LLC, including $4,115,000 escrowed for working capital adjustments and indemnity obligations (the "Escrowed Cash"); and accrued distributions on the preferred equity of $1,544,241. Alaris may also receive up to an additional $2,000,000 ("Earnout Proceeds") pursuant to an earnout if certain financial performance criteria are satisfied. The Sandbox Sale closed on February 28, 2020. Unless otherwise stated all references to dollars are references to United States dollars.

Source: Alaris Press Release

While the markets themselves have been in a rather tumultuous state, there is no denying that the news was not well received and Alaris has dropped 11% since then.

Data by YCharts


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