usdtor05 Posted August 12, 2013 Share Posted August 12, 2013 Hi all, Wondering if anyone had looked at STRP, spin-off from IDT. Certainly a number of red flags jump out at you upon first read such as: 1. 26 year old CEO, son of IDT CEO Howard Jonas. 2. Likely cash burn a couple million a year ($15M pro-forma cash balance, no debt) I am relatively new to this industry but the investment case would appear to be relatively straight-forward, (i) what is the spectrum conservatively worth and (ii) is there a catalyst to realizing the value. Probably small enough that it is not worth the time to any significant player and even some of the medium fund guys. Guessing there are a few people here that have experience in this industry and could weigh in. Always interesting to take a look at these spin-offs. Started around $6 and now trading around $4.63 a couple of weeks later (~25% drop). http://www.stockspinoffs.com/2013/07/22/my-name-is-jonas-idts-straight-path-spinoff-nepotistic-ceo-choice-raises-questions-for-investors/ http://www.stockspinoffs.com/2013/08/01/thursday-the-rabbi-went-hungry-straight-path-begins-trading-down-sharply/ Link to comment Share on other sites More sharing options...
Packer16 Posted August 12, 2013 Share Posted August 12, 2013 It appears they sold off what the could before the spin-off. What is left is what they couldn't sell and absent an event to make this spectrum worth something where does this stock go? Packer Link to comment Share on other sites More sharing options...
G2 Posted August 13, 2013 Share Posted August 13, 2013 This particular spin strikes me as an extremely odd duck and I'm taking a wait and see approach on both the stock price and future prospects of the co. The central concerns for me are to understand how 1) STRP's spectrum assets could be incorporated into the development of small cell networks relative to other technologies, 2) the associated necessary costs to achieve that goal and 3) at what rates will spectrum be sold and leased. The strangest dimension of this spin for me is that the core spectrum assets will not appear on the balance sheet because the spectrum licenses were written off as worthless in 2009. The acquisition of the spectrum licenses was noted at a cost of $16.9m in note 25 in a communication between the SEC and STRP: http://www.sec.gov/Archives/edgar/data/1574460/000121390013003121/filename1.htm Meanwhile, the same communication between the SEC and STRP notes that the spectrum business was acquired for $56m in 2001 from Winstar per note 15. One VIC member noted that an offer for $30m for the spectrum licenses was rejected in the past few years yet I've been unable to find any documents related to that offer or confirm with management. The 84.5% ownership of STRP IP portfolio appears to be worth about $10m based on the $1.2m 10% grant awarded to Howard Jonas in September, 2012. The IP assets also do not seem to be included on any pro forma balance sheet for STRP. Lawyers appear to work on a contingency basis which I like and it seems that STRP chose to go after a couple large companies as noted in a couple announcements right after the spin: http://finance.yahoo.com/news/straight-path-ip-group-files-135900147.html http://finance.yahoo.com/news/straight-path-files-patent-infringement-140900620.html My assumption is that the law firms represented on the Board of Directors are those that are pursuing these cases and presumably, the contingency payment structure incentivizes the lawyers to pursue cases based on a combination of the probability of winning vs potential pay-off. I imagine that whatever is earned from the IP division will result in lumpy revenues and I assume this income stream offsets my estimates of $2-3.5m pa in cash burn related to STRP's operating expenses over the next few years. Their final and simplest asset is $15m in cash. I ignore any potential NOLs as those are irrelevant to me until the business is consistently profitable. I also found their discussion unclear and was uncertain on whether NOLs were even still available to shield future profits. At best, one could perhaps estimated value of their assets at $15m cash, $30m in spectrum and $10m in IP, or $55m and then adjust for the main liability of a payment to a former exec of between $1.5m and $6m. The adjusted value would then be $49m to $53.5m and slightly lower when you incorporate the other small liabilities. Granted, the spectrum could be worth considerably more, as evidenced by one sale of portions of spectrum which recorded gains of $5.3m off a cost basis of $1.5m in 2012 so there appears to be the possibility of future upside surprises. I view it as a positive that Howard Jonas appointed his son as CEO. My rationale is that the father's economic ownership of 20% of STRP suggests to me that he would want the venture to succeed in order to maximize his own personal wealth. I'm also skeptical that the father would set his son up to fail in such a public venue. But if he were that vindictive, it seems like common sense that the son would avoid the situation and decline to be CEO. There have been past accusations of nepotism at IDT which I haven't investigated but could be helpful in framing the current context. Also, the CFO is 50, has been involved with IDT since 1992 and got a BA at Wharton and I wonder if he is truly running the show. The lawsuits by former management perhaps represent another silver lining. A settlement was reached with one exec for a $1.5m cash payments and up to $6m based on sale or licensing of certain spectrum assets. After $1.5m payment, the rest is tied to revenue generation by STRP. The second lawsuit is still ongoing. It does seem like poor form to be in the midst of lawsuits as you take a company public but it could also be a sign of former management's perception of potential positive future prospects. At worst, these guys simply view the lawsuits as a call option and are indifferent to the co's future prospects. The discussion of future financing and the threat of equity dilution strikes me as a negative and a risk, albeit a nebulous one at the current stage of the co's evolution. My one fear here is that if the spectrum assets do indeed prove highly desirable and further capital raises are required, is it possible that Jonas will personally contribute the capital and dilute other shareholders and reduce the upside. I'm also not too sure how to think about the FCC and regulation but I wanted to share my initial thoughts after working through the docs on Sunday. Would be curious to hear thoughts from others on the situation. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted August 13, 2013 Share Posted August 13, 2013 If this is a wonderful business, why entrust it to your son who has zero experience in the field? And why was Jonas given 10% of the company anyways? It seems like he is putting family ahead of profits and shareholders. I can't see how it makes sense from a business perspective. Link to comment Share on other sites More sharing options...
CSP2014 Posted August 28, 2013 Share Posted August 28, 2013 It may be a wonderful business, but it does not necessarily require a genius to run it. Only have four employees I believe.. all you need to do is wait around for small cell wireless backhaul to become a big thing, license your spectrum out to the big telecom players, and continue to have K&E do litigation for you on a contingency basis. I think it's very attractive here. Planning a full post with valuation thoughts Link to comment Share on other sites More sharing options...
CSP2014 Posted October 3, 2013 Share Posted October 3, 2013 My full STRP write-up here: http://thevariantview.com/2013/10/02/straight-path-communications-inc-strp-undervalued-misunderstood-micro-cap-spinoff/ Link to comment Share on other sites More sharing options...
AchilliesValue Posted November 29, 2013 Share Posted November 29, 2013 Anyone have any idea what's driving the increase? Up nearly 40% in the last week. Proxy came out with director nominations but nothing exciting. They also presented at a conference on Monday, but they aren't posting the presentation up online until the 4th. A few names I know are on the shareholder roster now. Kahn Brothers, Corsair (though they had IDT as well so might just be from spin). Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted November 29, 2013 Share Posted November 29, 2013 GNE, another IDT spinoff is up a lot too. Seems strange. Link to comment Share on other sites More sharing options...
BG2008 Posted January 11, 2014 Share Posted January 11, 2014 http://public.viavid.com/player/index.php?id=107242 On the most recent conference call, management indicated that they expect some settlements soon. Continues to re-assure investors that they will pay dividends when with incoming cashflow. $3mm cashburn per year with close to $15mm of cash on balance sheet. Seems like they have the strength to wait out any litigations. Link to comment Share on other sites More sharing options...
BG2008 Posted January 11, 2014 Share Posted January 11, 2014 If this is a wonderful business, why entrust it to your son who has zero experience in the field? And why was Jonas given 10% of the company anyways? It seems like he is putting family ahead of profits and shareholders. I can't see how it makes sense from a business perspective. I've spoken with the CFO, not the CEO. I can say this much. The CFO seems to have a very clear cut strategy on how to monetize the assets. They are staying asset light with $3mm cash burn a year. The cash on the BS will allow them to weather the process for 5 years. All the actual litigation is outsourced on a contingency basis. The CFO and CEO's job is to identify, on a probabilistic basis, who will pay and the chance of winning. The spin off is largely driven by the recourse against IDT Corp. When IDT sued Skype a few years ago, Skype counter sue in the rocket docket. It created a timing mismatch where Skype was entitled to money before IDT can get paid. During the rather tumultuous time back then, IDT had to settle. Now that the assets are spun off and the ownership is deliberately separated so that Howard is decisively cut off/separate from STRP aside from his economic ownership, the defendants cannot go after IDT Corp or Howard. That's why Davidi is running the show. I'm sure there is a bit of a grooming your kid for the business aspect here. Link to comment Share on other sites More sharing options...
BG2008 Posted May 14, 2014 Share Posted May 14, 2014 https://www.sec.gov/Archives/edgar/data/1574460/000121390014002729/f8k042314_straightpath.htm Pretty interesting considering that they got Google and Sony to enter into a license agreement. Let's wait and see what the terms of the settlement are. Link to comment Share on other sites More sharing options...
BargainValueHunter Posted April 10, 2017 Share Posted April 10, 2017 Congrats to those of you long this name. Pop the corks! https://www.benzinga.com/analyst-ratings/analyst-color/17/04/9281871/straight-path-communications-buyout-blindsides-short-sel Shares of Straight Path Communications Inc were seen skyrocketing more than 150 percent Monday morning after AT&T Inc. announced a $1.6 billion all-stock buyout of the communications company. The buyout price of $95.63 is an incredible premium to where Straight Path was trading just three years ago. Straight Path spent most of late 2014 and early 2015 trading in a price range between $5.00 and $8.00/share. Link to comment Share on other sites More sharing options...
fareastwarriors Posted May 8, 2017 Share Posted May 8, 2017 http://www.cnbc.com/2017/05/08/unnamed-company-makes-higher-offer-against-att-for-straight-path.html Straight Path stock surges after Verizon raises it takeover offer •Straight Path Communications shares surged by a third after the company announced that an unnamed telecommunications company had raised its offer to buy the wireless spectrum holder. •The new bid is from Verizon, CNBC has confirmed. •The all-stock offer of $184 per share represents an enterprise value of about $3.1 billion, Straight Path said. • The offer reflects an equity value of about $2.3 billion, according to Reuters. Link to comment Share on other sites More sharing options...
Jurgis Posted May 8, 2017 Share Posted May 8, 2017 Should we buy tons of DISH now? I don't know how comparable spectrum is. And DISH market cap is much higher for any deal. But is it likely to spill off? Hasn't spilled off yet... ::) Link to comment Share on other sites More sharing options...
fareastwarriors Posted May 11, 2017 Share Posted May 11, 2017 https://www.bloomberg.com/gadfly/articles/2017-05-11/straight-path-sale-to-verizon-has-lesson-for-short-sellers Link to comment Share on other sites More sharing options...
sae85400 Posted May 11, 2017 Share Posted May 11, 2017 http://brontecapital.blogspot.com/2017/05/selling-our-telecom-position.html?spref=tw&m=1 Link to comment Share on other sites More sharing options...
ValueMaven Posted August 23, 2017 Share Posted August 23, 2017 Anyone interested in taking a look at this Arb situation right now...there is about a 2.7% spread into the deal?! Sincerely, VM Link to comment Share on other sites More sharing options...
writser Posted August 24, 2017 Share Posted August 24, 2017 Doesn't look that exciting, company announced transaction would close 'within 9 months' in May - I'd say it is unlikely deal closes this year. IRR not spectacular, unless you assume the contingent payment rights have substantial value (I have no clue about those .. ). A few months ago this deal was more interesting as the borrow rate was much, much higher - you could lend some of your shares to increase returns significantly. That's not possible anymore with the current borrow ~1%. (just an opinion, haven't had a close look in a while) Link to comment Share on other sites More sharing options...
writser Posted October 31, 2017 Share Posted October 31, 2017 Does anybody have a clue about the value of the intellectual property that will be distributed to shareholders? As far as I understand the trust will contain $4.5m and is entitled to receive 22% of the proceeds from a patent portfolio ("intellectual property primarily related to communications over computer networks."). You can probably pick up the trust for free given its small size and the fact that it probably is non-transferable. You'd have to allocate a lot of capital to get a substantial position and I'm wondering if it is worth the effort. Given the amount of cash they park with the IP I'd say it is worth something around low 8 digits, so ~$1 per share, with, I guess, the potential for a nice payout if they win some lawsuits. Link to comment Share on other sites More sharing options...
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