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Strategies & Market Trends : Value Investing

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deeno

To: bruwin who wrote (57995)	9/15/2016 11:41:30 AM
From: E_K_S	1 Recommendation Read Replies (1) of 78748

It is hard to monetize assets located in China (or any assets not in U.S.) as you must follow the BK law where the assets are domiciled (not where the HQ is located). Therefore, when I buy any company based on their tangible BV where there might/may be a chance of BK, I want that company located in the U.S.. Even when that occurs, common shareholders usually get the raw end of the deal (think of MHR BK) and bond holders and/or Private Equity end up w/ the sweetheart deals. I have been following COSI another micro-cap running into liquidity problems. They just hired a PE firm to help turn around and they wanted cash not stock for their 1 year contract (total $1mln of fees). They probably will issue more common shares, sell some/all of the company owned restaurants and as a result the common shareholders will end up eating those PE fees. Even though there is some tangible BV, that will be taken by the PE firm orchestrating the turnaround rather than to the benefit of the common shareholders. Therefore, the value proposition diminishes significantly when the interests of the management (and/or the turnaround investors) are not inline w/ the common shareholders. Many of my recent value Buys like STRL, structured incentive stock plans for the CEO/CFO and private investors which benefited everybody (including the common shareholders) if/when the company became profitable. STRL stock was priced at $2.50/share when the restructure deal (announced new CEO and new CFO) was announced and 18 months later now trades at $7.00/share even after they did a secondary that diluted shares by 20%. You have to look at the details as there can be a lot of moving parts. Also, I have learned you want the restructure plan to be simple and easy to understand. It then is easier for the investor to understand the risk/reward opportunity. EKS

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