Activist Campaign - Help wanted

[schin]

I identified a publicly traded company that is being mismanaged. It has 18M in assets and 2M in debt. So, it's not overly leveraged. The salaries of the officers is causing its earnings to be negative every quarter. The CEO is 71.. so, he bilking it. The SG&A is 100k more than the gross income. The insiders only hold 9% of the company -- so, they don't have that much skin the game.

 

I have never gone activist, but feel this might be an interesting opportunity for a company with a reasonable market cap, and if we gain control, we can right size the S&GA to make it profitable for all shareholders and possibly, transform it into a "Berkshire Hathaway"-esque Holding company for value investing.

 

I've averaged 21% over the last 10 years of investing.. so, I would love to use free cash flow for value investments. Currently, it's trading below book.... so, if we can rightsize the expenses and do a share buyback, that might be a great capital allocation move since it's trading at 1/3 BV.

 

Has anyone launched an activist campaign or have someone or fund I can talk to? The market cap for this is below 10M.. so, I don't need Elliott Management or Paul Ackman... it's not worth their time.. but, this is a great starter, activist campaign situation.

 

I appreciate any and all comments and PMs.

 

Thanks,

Bill

[matts]

Just wanted to let you know that there are multiple active members of the board that have launched successful activist campaigns and now control their respective public companies. I'll let them identify themselves, if they so choose.

[schin]

Just wanted to let you know that there are multiple active members of the board that have launched successful activist campaigns and now control their respective public companies. I'll let them identify themselves, if they so choose.

 

Thanks, Matt!  I hope this gets on their radar. It's always been an approach I wanted to try.

 

I know Tim Eriksen did a successful activist campaign on SODI. It was 2-3 year tug-o-war that I would love to heard the war stories on.

[matts]

If you were to be successful, I think you would quickly discover that an asset base of 18 million is too small to support the expenses associated with a public company. So it will be tough to buy back shares, regardless of the P/B discount. The typical move of new management in these situations is actually to raise capital in order to spread out the fixed costs. Something that will be hard to swallow for investors if you have to issue it well below book.

 

Personally, i'm very weary of stepping into these kinds of situations for the first 2-3 years because of the above issues. Plus management typically finds a much bigger mess at the company than they ever imagined. I'm happy to give up some potential upside to get a much clearer investment picture. That's just an investor's view, but I hope it helps.

 

Edit: Oh and I forgot to mention that current management will spend a portion of that 18 million fighting you for a year or two.

 

[Tim Eriksen]

Just wanted to let you know that there are multiple active members of the board that have launched successful activist campaigns and now control their respective public companies. I'll let them identify themselves, if they so choose.

 

Thanks, Matt!  I hope this gets on their radar. It's always been an approach I wanted to try.

 

I know Tim Eriksen did a successful activist campaign on SODI. It was 2-3 year tug-o-war that I would love to heard the war stories on.

 

I'm more than happy to help anyone.  I will message you.

 

Tim

[wachtwoord]

This is interesting. I don't have experience with activism where I was in the lead, but if this moves further I could be interested in investing.

[porcupine]

This is interesting. I don't have experience with activism where I was in the lead, but if this moves further I could be interested in investing.

 

I second this. 

[lemsinge]

I am interested as well. While I may not have much experience with activism, I am happy to assist in any possible way.

[Steven B]

Same as above. Besides for all the doomsayers you never know what might happen if they think your serious about fighting the "good" fight. Keep me posted as well. Actually, I'd like to hear more about the 20% for ten years part as well....

[Gregmal]

How liquid are these shares? I would imagine not at all. Is it OTC? It sounds interesting and heck a 10% position is less than $1m so if the shares are liquid it wouldnt be hard to get a good 10%+.

 

I would caution that these smaller cap companies that look real cheap and simply need changes to management are a lot more common than everyone thinks. And they are almost always cheap for the reason that management has their claws in deep and has the golden goose well protected.

[rb]

I'm in too.

[The Investor]

Hi all!

 

Sounds interesting.