Description
This is a short writeup, as it's not all that complicated from here on out.
Liquidation Special Sit- appropriate for PAs (IRAs because of the short term cap gain) and small funds
Strategy: buy $1 for $0.77, get most of the dollar by year end.
Bind Therapeutics is in bankruptcy and liquidating. They have sold all their assets to Pfizer, the sale was confirmed by the bankruptcy court and it has already closed. Bind sold its assets for $40m, with $38m upfront and the remainder subject to a holdback for potential adjustments to the sale price, assuming they get the holdback it will be free in December. and distributed shortly thereafter The CEO and the board have already been dismissed. The majority of the liquidation should occur in October after the bankruptcy court approves the dissolution in September.
The company hasn't provided a liquidation estimate, but here's what their attorney said after the deal was approved:
"Pfizer Inc. won bankruptcy-court approval Wednesday to buy the assets of Bind Therapeutics after an auction doubled Pfizer's starting offer, for a final price of $40 million.
The results mean estimated profits of $22.5 million to be divided among Bind shareholders, company lawyer Peter Gilhuly said at the Wednesday court hearing when the sale was approved."
That works out to about $1.08/sh.
As of the end of April Bind had $16m in cash and securities with $14.5m of debt accruing at $3166/day or another 300k if they paid the debt post sale. It burned $5.5m in April and about $13m in Q1 ($4.3m/mo). They filed bankruptcy in April so I think its reasonable to assume the uptick was due to the restructuring. I assume they get the $40m and burn another $1.2m/mo, until they make distributions. I get to about $1.01.
| Counting the Cash |
|
| $16.00 |
Starting Cash (4/30/2016) |
| $40.00 |
PFE Cash |
|
| $(14.80) |
Debt plus int @ $3166/d |
| $(3.60) |
add'l mo's burn ($1.2m/mo) |
| $(16.50) |
Est. May through July 31 burn |
| $21.10 |
Cash left for shareholders |
| 20.80 |
Shares Outstanding (m) |
| $1.01 |
Cash for Dist/sh |
This should be cleaned up by year end and for $0.77 today you can earn 32% based on my estimates and 40% return based on what Bind's attorney says. I can think of a lot worse ways to tie up money 3-5 months.
Risks
They don't get the holdback amount, costs you ~$0.10/sh
I've underestimated the burn rate from here
Some claims against the company's estate emerge
I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.
Catalyst
Clarity in an 8k on distribution est.
Approval of liquidation plan (Sept)