GLOI - GlobalOptions Group

[ValueSlant]

Curious if anybody has looked at GLOI - a liquidation play. They have completed 2 large tender offers and should be completely wound down in next 12 months. Seems like there is some value remaining but not sure if the "juice is worth the squeeze" unless price drops some more.

 

I did a liquidation value analysis here:

http://valueslant.com/2011/07/27/globaloptions-group-gloi-whats-left-liquidation/

[Guest Hester]

Good writeup.

 

I would say what little to be made here is offset by the risk that would have to be taken on. The assumptions that one has to make about the earn outs, where a significant amount of the distribution value lies, and the fact that there's litigation would make me think a 17% return wouldn't be worth it. What does the litigation consist of? I don't know the law too well but I'd think that the liquidation couldn't be done in full until that's resolved. If it takes a while to be resolved then that subjects the business to more cash burn and the liquidation to a lower IRR.

 

I wouldn't underestimate the amount of time this takes to play out either. This is only in the middle stages and has a long way to go. The imperative sometimes for management is to keep the game going a little longer, as their salaried. Liquidations always take so much time from inception to final distribution. Again, time destroys value and the IRR of the investment.

 

I also fail to see why this would be undervalued, other than a miscalculation by the market of the earnout value. The liquidity and tradability of GLOI shares are decent for a liquidation.

 

 

[cmattporter]

I would keep my eye on this. They have a large proportion of cash to other assets. The risk could be reduced from this and additionally I would wait until the drop down to 2 1/8.

 

Also, when did you enter your info on the value slant website I don't see it?

 

MP

[ValueSlant]

Hester-

 

They don't give much detail on the legal proceedings in their filings. I would want to get more color before investing.

 

You raise good points about needing to watch for timeline and management in liquidations. I actually think in this case the risk of the wind down dragging out is low. All of the assets have already been sold. They just need to wait for the earnouts to be calculated and the escrow releases. I would be surprised if it lasts beyond August of next year. Management has been pretty good in terms of moving the liquidation along. They have already returned about half of the NAV through the tender offers. In terms of alignment of interests- management had a substantial reduction in salary once the change of control was triggered in the business unit sales so they are not still raking in huge salaries. And they do own a good chunk of stock so they will benefit from the return of capital to shareholders. They have done what they said they will do thus far.

 

Having said that, I still agree not enough risk adjusted return at the current price.

 

MP - Does the link in my first message not work for you? The post is on the ValueSlant website as far as I can tell.

[MrB]

VS,

Thought your write up was good.

Can you run us through the shares outstanding calculation please?

Tnx.

[ValueSlant]

MrB -

 

13.5 million shares as of last Q (3/31) -

7.5 million shares tendered in May +

260,000 options =

6.26 million diluted shares

[17thstcapital]

Why would the company deal with the hassle of a $2.60/sh tender if recovery was ~$2.62?  Either they're asleep at the wheel or they think that NAV is meaningfully higher than $2.60.