I bought this in large part because of tangible book value. That idea doesn't seem to be holding up. P/B and P/S are both .01. At end of Q3, they showed book of $1.4B. Even valuing inventory (614M), net receivables (407M), goodwill (18M), and intangibles (57M) all at 0, that still leaves 300M net equity. Or from another angle, if property, plant, and equipment is worth the 2.3B shown, that would about take care of the 2.4B in liabilities, with all other assets being a net positive. Maybe the bottom line is, if the PPE can't make money - for Spansion or anyone else - it's really not worth anything.
The key to liquidation value, in this case, is to correctly estimate the Fair Market Value relative to the Book Value of these 3 assets-
1. PPE
2. Inventory
3. IP
The BV of first two, in all likelihood, is higher than what you will get in a liquidation sale and the third one is a bit tricky to value, and depends on who wants to purchase it and how badly they need it? There has been a lot of noise around CTF technology being the only alternative below 33nm for nand but others also have CTF patents and performance of CTF based products is still a big question mark. Samsung did develop some prototypes based on CTF but went into production with FG. It seems like FG may work for 2x node and there are ways to extend life with FG with x3 and x4 and buy some time and beyond that I think, CTF will be bypassed with 3D structures which is being developed for a few years now. The market price of stock says it all. Sale of assets may not be enough to take care of their liabilities and even if there was something left, it wont be a whole lot. Just my thoughts FWIW! |
