ragnarisapirate Posted October 1, 2012 Share Posted October 1, 2012 I am kind of surprised that no one has started a thread on this yet... It's been a perpetual net-net (albeit, a small one). 2 of my favorite blogs have already written the company up, so there is no need for me to get into detail here as they have already bested me in that. But the highlights are: $7mm mkt cap $10.389mm tang book, with just under $7mm in treasuries. Debt of just over $1mm from a BK in the early 90's, which yields virtually no interest. ~$750K in earnings last year, which was far from a great year for the company. They have a pretty nice backlog at the moment. Take out excess cash, which is basically what you pay for the company, and you are left with a nice business that is trading at 12x earnings. They have ~$14mm in NOLs that are carried at NOTHING. Not trying to be political, but it seems that the biggest risk are the budget cuts from Washington, though, I would think that personel and amenities/perks for soldiers (no matter how trivial) would get cut before missiles, air craft, and other lifeless forms of defense (which SODI is a part of). If a war breaks out, then SODI (and all the other small defense cos) seem like a good hedge. Blog write ups: http://www.whopperinvestments.com/?s=sodi&searchsubmit= http://www.oddballstocks.com/search?q=sodi A few of us bloggers (an a whole lot of shareholders) would really like there to be an annual meeting, as well. :) http://ragnarisapirate.blogspot.com/2012/09/solitron-and-blogtivism.html Link to comment Share on other sites More sharing options...
Palantir Posted October 1, 2012 Share Posted October 1, 2012 I have looked at this stock as well. What's your catalyst though? I'm worried about investing in net-nets that continue to stay net-nets long after you buy them... Link to comment Share on other sites More sharing options...
Green King Posted October 1, 2012 Share Posted October 1, 2012 Their activist play seems to be catalyst. Although this has been a net net the share price has been growing since the 2000. http://www.otcmarkets.com/stock/SODI/chart Cash is reflected but not business. possible on how much u need and how much is being held by value investors ? Link to comment Share on other sites More sharing options...
Kraven Posted October 1, 2012 Share Posted October 1, 2012 I have looked at this stock as well. What's your catalyst though? I'm worried about investing in net-nets that continue to stay net-nets long after you buy them... Sometimes value is its own catalyst. There is always a risk with any stock that it will take a long time to reach its intrinsic value, if ever. Such is life. The best way to describe these stocks is what a friend called "one day" stocks. That is nothing happens for a while (possibly years) and then "one day" something happens that causes the investment to pay off. You just don't know what that thing will be. Link to comment Share on other sites More sharing options...
Hielko Posted October 1, 2012 Share Posted October 1, 2012 I own SODI as well. Think there is no doubt about it that it's cheap, but the corporate governance situation is obv also far from perfect. Link to comment Share on other sites More sharing options...
infinitee00 Posted October 1, 2012 Share Posted October 1, 2012 I read valueprax's experience with SODI board, oddballstocks letter to the board and also followed Ragnar's blogtivism post. I am disappointed by the CEO's lack of shareholder friendliness and I appreciate the effort to start an annual meeting. Saraf's 30% control of the company is a difficult enough hurdle ( although not impossible) to overcome by activists, especially if SODI's board is dragged into a proxy fight ( I understand that's not the purpose of the blogtivists). Unless, we can get a few of the major shareholders to make some noise, it would be difficult to shake SODI's board off their inertia train (which I think is a major issues here) and get anything done. I have only a very small % of my portfolio is in SODI, so I do not think I have much influence one way or the other. I support the blogtivists in their effort and I would be following the efforts closely. Btw, I was wondering if Ragnar can give us any updates following his blogtivism post. Link to comment Share on other sites More sharing options...
oddballstocks Posted October 2, 2012 Share Posted October 2, 2012 infinitee00 I'm not ragnar, but I was mentioned in your post and above. Thanks for reading, and the encouragement to know there's another shareholder who supports our effort. Here's a little secret, I don't own a huge amount of SODI either, not as much as a lot of people. That's mostly a function of the fact that I don't has as much money as most investors, and I don't manage any funds, so no other people's money to invest. What I do have though is a voice and a readership. I can be most effective rallying the troops and getting interested shareholders on the same page. That's the strange thing about company ownership, there are all these little owners but no one knows who anyone else is, that's something we're trying to rectify with Solitron. Here's more good news, I haven't talked to ANY shareholder yet who's said they disagree with our ideas. Between Ragnar, Valueprax and myself I think we know shareholders who account for 20-30% of the shares outstanding. That's significant because Solitron only requires a plurality of votes. Saraf owns 30% but if 31% votes against his votes the 31% wins. Knowing 31% of the votes, and being in agreement with them is encouraging. When I wrote my letter my main goal was some sort of shareholder return, a dividend, a buyback, something tangible. I wanted an annual meeting as well so we could interact with management and voice our concerns. After thinking about this for a few months I've come to realize what we really need is a better governance, that's it. A new board, annual meetings, proxies, those are the sort of conduits that allow shareholders to interact with the company, and ensure that shareholders are taken care of. As it stands now shareholders are playing second fiddle to Saraf. I think with the pressure we've generated this is changing, and hopefully we can boot out the puppet directors and get Solitron on the right track. I'm glad to see this thread on here. Link to comment Share on other sites More sharing options...
Palantir Posted October 2, 2012 Share Posted October 2, 2012 Yo. This gives me an idea, why don't we organize as a group, and buy shares, and try to get one of us (oddball?) elected to the board? This is a tiny microcap company, we could with a big enough group do it. Call me crazy, but I'm kindof serious...... Link to comment Share on other sites More sharing options...
Hielko Posted October 2, 2012 Share Posted October 2, 2012 They do have a poison pill in place, so you can't own more than 15% if I remember correctly (and I think they should have a poison pill in place, otherwise they could lose their NOL assets?). Link to comment Share on other sites More sharing options...
writser Posted October 2, 2012 Share Posted October 2, 2012 I'm a small shareholder as well. According to the SEC, the "Lauriston group" had close to a 15% stake but in their latest filing they disclosed they have only 2% left. Does anybody have an idea what happened? Could it have to do with the poison pill? I like the idea of trying to nominate a director, but what is the procedure for this if there never is a meeting? Link to comment Share on other sites More sharing options...
watsa_is_a_randian_hero Posted October 2, 2012 Share Posted October 2, 2012 i own a very small amount, but would be comfortable increasing my position somewhat if more votes were needed in a proxy, and I thought there was a legitimate chance of unlocking value. Link to comment Share on other sites More sharing options...
Palantir Posted October 2, 2012 Share Posted October 2, 2012 With a 7M MCap....how much do you think a group would need to control to catalyze change? Link to comment Share on other sites More sharing options...
oddballstocks Posted October 2, 2012 Share Posted October 2, 2012 31% is needed to push an agenda. The issue is if more than a certain amount of shares are acquired by one holder over a given period of time to invalidate the NOLs. So I might take two or three years to build the position. In absolute terms it would be about $2m worth of stock, assuming you could get the shares, and your buying didn't move the price. Link to comment Share on other sites More sharing options...
Green King Posted October 2, 2012 Share Posted October 2, 2012 have u guys take count ? or are u not allowed to discuss that ? i mean the only way to achieve something is to have a goal and know how far we are from it. is this taboo ? Link to comment Share on other sites More sharing options...
Palantir Posted October 2, 2012 Share Posted October 2, 2012 I'm too poor to take a large position, but if we do decide to do this I can probably buy some up. Link to comment Share on other sites More sharing options...
LC Posted October 2, 2012 Share Posted October 2, 2012 have u guys take count ? or are u not allowed to discuss that ? i mean the only way to achieve something is to have a goal and know how far we are from it. is this taboo ? I don't think it's taboo: Warren Buffet did it with other Grahamites in his years running the Buffett Partnerships, albeit usually over dinner or at the country club. Doing it over a forum is simply less private. Link to comment Share on other sites More sharing options...
LC Posted October 2, 2012 Share Posted October 2, 2012 The issue is if more than a certain amount of shares are acquired by one holder over a given period of time to invalidate the NOLs. So I might take two or three years to build the position. Would you mind expanding on this, or pointing me in the right direction to learn more? Is this a broad legal issue or some type of clause in the company's incorporating documents? Link to comment Share on other sites More sharing options...
ragnarisapirate Posted October 2, 2012 Author Share Posted October 2, 2012 The issue is if more than a certain amount of shares are acquired by one holder over a given period of time to invalidate the NOLs. So I might take two or three years to build the position. Would you mind expanding on this, or pointing me in the right direction to learn more? Is this a broad legal issue or some type of clause in the company's incorporating documents? There are limits to how much stock an entity can acquire in a given period of time, as the IRS could view them as a change of control (and this can happen with less than 10% of the stock...) If it happens, the $14mm in NOLs that are carried at nothing will become a non-asset, rather than one that is just hidden. Google "change of control net operating loss" and you will find some good stuff. Link to comment Share on other sites More sharing options...
ragnarisapirate Posted October 2, 2012 Author Share Posted October 2, 2012 have u guys take count ? or are u not allowed to discuss that ? i mean the only way to achieve something is to have a goal and know how far we are from it. is this taboo ? I don't think it's taboo: Warren Buffet did it with other Grahamites in his years running the Buffett Partnerships, albeit usually over dinner or at the country club. Doing it over a forum is simply less private. As long as we don't do anything to trigger the poison pill we should be good. After all, we aren't trying to tender our shares to the company, wreck it, or anything like that. We haven't even formed a group. Just gauging interest... That said, everyone we have talked to, likes the idea of an annual meeting and getting governance on track- certainly, no one has discouraged it... There are a lot of less than happy shareholders out there- If management decides to fight and AGM, it seems to me that they will be doing so against the will of shareholders. More to come. BTW. If anyone wants to get in contact over this, feel free to email me. :)_ Link to comment Share on other sites More sharing options...
infinitee00 Posted October 2, 2012 Share Posted October 2, 2012 Thanks oddballstocks, for the update. I wasn't aware that you guys have 20-30% of shareholders' support. That's great to know. As long as Saraf doesn't have any other friends/family who own a substantial amount of stock and who are willing to pledge their shares in his favor, I think that minority shareholders have a good shot at making the changes necessary. I think the bigger challenge now, is to organize all dissenting shareholders and take concrete steps ( proxy challenge or even a lawsuit if it really comes to that) in moving towards replacing the board. Even if we fail in replacing the board, at least I hope that this challenge by minority shareholders would wake the board up from their sweet slumber. Link to comment Share on other sites More sharing options...
ragnarisapirate Posted October 2, 2012 Author Share Posted October 2, 2012 Thanks oddballstocks, for the update. I wasn't aware that you guys have 20-30% of shareholders' support. That's great to know. As long as Saraf doesn't have any other friends/family who own a substantial amount of stock and who are willing to pledge their shares in his favor, I think that minority shareholders have a good shot at making the changes necessary. I think the bigger challenge now, is to organize all dissenting shareholders and take concrete steps ( proxy challenge or even a lawsuit if it really comes to that) in moving towards replacing the board. Even if we fail in replacing the board, at least I hope that this challenge by minority shareholders would wake the board up from their sweet slumber. I want to take a moment to play down the "support" part. No one that we have talked to has said anything negative as to what we want to get done- generally, they have been interested/optimistic and such. This is not a sure thing yet, though, we do think that we have the law on our side, as well as a whole lot of shareholders. It's a work in progress right now. :) Link to comment Share on other sites More sharing options...
ragnarisapirate Posted October 16, 2012 Author Share Posted October 16, 2012 The 10Q just came out and there were some great developments... http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=8864553-733-76205&type=sect&dcn=0001213900-12-005638 1) The company repurchased ~100K shares of stock (and retired them) for $2.75/share. This is a little bit less than 5% of the outstanding shares. 2) It looks like we will be getting our annual meeting. There is still some work to do, but this is quite encouraging. :D Link to comment Share on other sites More sharing options...
infinitee00 Posted October 16, 2012 Share Posted October 16, 2012 That's quite a bit of progress and a good start! The annual meeting may still be 8-9 months away. Hope to see some more progress on the corporate governance front by then. Link to comment Share on other sites More sharing options...
Orientinvestor Posted October 17, 2012 Share Posted October 17, 2012 it's possible that these changes were brought about by these efforts...this is a victory already! Link to comment Share on other sites More sharing options...
Hielko Posted October 17, 2012 Share Posted October 17, 2012 The company suddenly starting to hold an annual meeting, and increasing pressure from shareholders are probably not a coincidence. Now we'll have to see if the company can be convinced to do something shareholder friendly with the excess cash, that's what really matters. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now