While not specifically a blank check IPO, Merisel (MSEL) provides a useful example of the value that can be created from a shell with cash. The company, originally a computer distributor, sold off its software business during the summer and became a shell. Management announced that they were going to actively pursue acquisition candidates and hoped to complete a transaction within the next twelve months.
Message 20479354
As of September 30, 2004, MSEL had approximately $48 million in cash. After netting out the liabilities and the liquidation preference attributable to the preferred shares, there was approximately $21.5 million in cash attributable to the common shareholders. This worked out to approximately $2.82 per common share. In early November the stock was selling at $4.20 per share, an approximate 50% premium to its cash value.
Message 20957254
On December 28, 2004, the company announced that it was acquiring three operating companies for $37.5 million in cash and the assumption of $12 million in liabilities. There may also be some future performance based payments totaling $7 million. On an annualized basis, the three entities are generating $66.4 million in revenues and $10.3 million in operating profits.
The stock, which closed at $4.25 per share prior to the announcement, popped to $6.24 the next day, an increase of approximately 47%.
Message 20957426
Cash is king. |
