Philbert77 Posted October 7, 2018 Share Posted October 7, 2018 Equus is a Business Development Company (BDC) selling at a large discount to NAV. Currently priced at 62% of NAV the company provides a large degree of safety. The company has been trying to convert from a BDC to an operating company for quite some time now. In April of 2017 it had a failed acquisition from MVC Capital for U.S. Gas & Electric, Inc.. It was going to merge and shed its BDC status. Since this failed merger NAV has continued to increase. Equus says it is committed to pursue consolidation and conversion from a BDC. In recent months NAV has increased and the share price has dropped as its investments in Pallet One and Equus Energy have continued to increase in value. This conversion process has dragged on for a number of years and there is no guarantee anything will happen or that the discount to NAV will ever be closed. Link to comment Share on other sites More sharing options...
mjohn707 Posted October 8, 2018 Share Posted October 8, 2018 Equus is a Business Development Company (BDC) selling at a large discount to NAV. Currently priced at 62% of NAV the company provides a large degree of safety. The company has been trying to convert from a BDC to an operating company for quite some time now. In April of 2017 it had a failed acquisition from MVC Capital for U.S. Gas & Electric, Inc.. It was going to merge and shed its BDC status. Since this failed merger NAV has continued to increase. Equus says it is committed to pursue consolidation and conversion from a BDC. In recent months NAV has increased and the share price has dropped as its investments in Pallet One and Equus Energy have continued to increase in value. This conversion process has dragged on for a number of years and there is no guarantee anything will happen or that the discount to NAV will ever be closed. Sounds interesting, I'm going to take a look. Appreciate the tip Link to comment Share on other sites More sharing options...
Philbert77 Posted October 8, 2018 Author Share Posted October 8, 2018 No problem. I discovered it by reviewing the holdings of the Special Opportunities Fund. I have great respect for their investing skills. EQS is sitting on approx. 10 million in cash, so approximately 25 percent of the NAV is cash. Pallet One is the largest investment at 19 million - which is a private holding of shares. The biggest risk and likely the reason for the large discount to NAV is that a deal may never materialise or may take too long. In the meantime management continues to burn through the cash while we wait. In some ways it reminds me of investing in DTLA - you know that the odds are you will get a return but you don't know when, how long it will take or even if it will ever happen. Link to comment Share on other sites More sharing options...
mjohn707 Posted October 8, 2018 Share Posted October 8, 2018 No problem. I discovered it by reviewing the holdings of the Special Opportunities Fund. I have great respect for their investing skills. EQS is sitting on approx. 10 million in cash, so approximately 25 percent of the NAV is cash. Pallet One is the largest investment at 19 million - which is a private holding of shares. The biggest risk and likely the reason for the large discount to NAV is that a deal may never materialise or may take too long. In the meantime management continues to burn through the cash while we wait. In some ways it reminds me of investing in DTLA - you know that the odds are you will get a return but you don't know when, how long it will take or even if it will ever happen. Just out of curiosity, have you done any work on their portfolio companies? Link to comment Share on other sites More sharing options...
Philbert77 Posted October 9, 2018 Author Share Posted October 9, 2018 Just out of curiosity, have you done any work on their portfolio companies? I am assuming you mean investigating some of the holdings of the Special Opportunities Fund (SPE)? If so I have looked at a few. It's a lot of CEFs trading at like 10 -15 percent discount to NAV and SPACs. These don't interest me so much. I am an investor in SPE so I have exposure to that already. I have looked at a couple of the other BDCs they hold... I am a holder of Brookfield DTLA Fund Office Trust Investor Inc. (DTLA) preferred stock (which I learned about from SPE) that has not paid it dividend in years and may not pay for years to come. However the dividend is cumulative so the potential payout will be large. There are a number of good write-ups on the company on the internet and a thread here on COBF. I would add there have been some good developments recently - Bulldog got 2 people elected to the board and DTLA had a market update session in May which I think is not something it has ever done. The presentation even had a hypothetical liquidation illustration included. Link to comment Share on other sites More sharing options...
mjohn707 Posted October 9, 2018 Share Posted October 9, 2018 Just out of curiosity, have you done any work on their portfolio companies? I am assuming you mean investigating some of the holdings of the Special Opportunities Fund (SPE)? If so I have looked at a few. It's a lot of CEFs trading at like 10 -15 percent discount to NAV and SPACs. These don't interest me so much. I am an investor in SPE so I have exposure to that already. I have looked at a couple of the other BDCs they hold... I am a holder of Brookfield DTLA Fund Office Trust Investor Inc. (DTLA) preferred stock (which I learned about from SPE) that has not paid it dividend in years and may not pay for years to come. However the dividend is cumulative so the potential payout will be large. There are a number of good write-ups on the company on the internet and a thread here on COBF. I would add there have been some good developments recently - Bulldog got 2 people elected to the board and DTLA had a market update session in May which I think is not something it has ever done. The presentation even had a hypothetical liquidation illustration included. That's probably a more intelligent question that I was trying to ask, what I mean was that being that EQS has a big portion of their assets in one or two affiliated or whatever investees, have you done any work on how they're valuing this stuff? I'm going to read the filings coming up, right now I'm just trying to put together the financials and all and I was just curious how you were thinking about this Link to comment Share on other sites More sharing options...
Philbert77 Posted October 9, 2018 Author Share Posted October 9, 2018 That's probably a more intelligent question that I was trying to ask, what I mean was that being that EQS has a big portion of their assets in one or two affiliated or whatever investees, have you done any work on how they're valuing this stuff? I'm going to read the filings coming up, right now I'm just trying to put together the financials and all and I was just curious how you were thinking about this I have not done any work on that. Page 10 of the most recent 10Q has some details on how they value the assets that are not publicly traded. Link to comment Share on other sites More sharing options...
mjohn707 Posted October 10, 2018 Share Posted October 10, 2018 That's probably a more intelligent question that I was trying to ask, what I mean was that being that EQS has a big portion of their assets in one or two affiliated or whatever investees, have you done any work on how they're valuing this stuff? I'm going to read the filings coming up, right now I'm just trying to put together the financials and all and I was just curious how you were thinking about this I have not done any work on that. Page 10 of the most recent 10Q has some details on how they value the assets that are not publicly traded. Yeah I saw the same section in the 10-K I glanced at, they have a balance sheet for Equus Energy just below that part, and they're valuing it 8M or so even though it has a negligible book value and no real earnings. They seem to own some oil leases and all in it though, and it's certainly possible that it's worth the 8M they have it marked at for some reason that's not obvious just with the financials Link to comment Share on other sites More sharing options...
Philbert77 Posted November 16, 2018 Author Share Posted November 16, 2018 HOUSTON, TX – November 16, 2018 – Equus Total Return, Inc. (NYSE: EQS) (the “Fund” or “Equus”) reports net assets as of September 30, 2018, of $46.6 million, an increase of approximately $2.5 million since June 30, 2018. Net asset value per share increased to $3.45 as of September 30, 2018 from $3.26 as of June 30, 2018. http://www.equuscap.com/pdf/EQS_3Q_NAV.pdf Equus is now trading at 55 percent of NAV. Additionally they own 518 592 shares of MVC Capital which is currently trading at $8.92 with a NAV of $12.62. Link to comment Share on other sites More sharing options...
IceCreamMan Posted November 17, 2018 Share Posted November 17, 2018 It looks like expenses (compensation, professional fees, etc.) averaged ~$4.3 million per year, or 10% of net assets per year. What discount does this level of overhead warrant? Link to comment Share on other sites More sharing options...
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