|Shares Out. (in M):||0||P/E|
|Market Cap (in M):||21||P/FCF|
|Net Debt (in M):||0||EBIT||0||0|
Coolbrands International Inc. (COB.to)
Coolbrands is essentially a cash rich shell company run by the family of Canadian billionaire Seymour Schulich that is in the process of finding a suitable acquisition. It had a colourful history as a manufacturer of frozen desserts, but those operations have since been sold. The company today consists of $1.10 in cash per share versus a stock price of $0.40. In other words, it has roughly $63 million in cash versus a market capitalization of $21 million. There is minimal cash burn as the interest expense should offset operating costs.
According to the company, “CoolBrands' management continue to receive and evaluate proposals to invest the Company's cash assets in merger and acquisition opportunities. Until a decision is made to pursue one or more investment alternatives, the Company believes that the investment returns on its cash investments will exceed the level of general and administrative costs expected to be incurred during the year.”
There is one issue with this idea and it relates to a lawsuit, the details of which are given below:
"On October 31, 2006, Capricorn Investors III, L.P. (“Capricorn”), the parent of Americana Foods Corporation, filed a complaint in the Supreme Court of the State of
If Capricorn were to win the lawsuit, the stock would trade down to roughly $0.05 per share as the loss of $60 million would essentially wipe out the current cash balance of $63 million. The company would then have to do the right thing and wind-up the company and dividend the remaining cash back to shareholders.
However, at a price of $0.40, the stock price is essentially discounting a payout of $40 million on the lawsuit. On the other hand, “CoolBrands does not believe thatany of the existing legal matters will have a material adverse affect on its financial condition or results of operations.”
Obviously, this is a source of significant risk and the company has been able to settle numerous prior lawsuits at minimal cost to the company.
Small cap, illiquid, potential for poor acquisition, potential for acquisition in natural resources where pricing could decline, adverse legal outcome
|Entry||12/31/2008 02:40 AM|
|Thank you for the idea. Can you go into a bit more detail on mgmt's background and why you think they will do a good job on a deal?|
|Subject||Question on Lawsuit|
|Entry||01/06/2009 01:02 PM|
|Please give us some background on the litigation. What is or was the business relationship between Capricorn and Coolbrands, and what is the essence of the lawsuit, in business not legal terms? Have you done any work analyzing the merits of the case? Thanks for your answers.|