I call on any experts from the VIC community for any feedback on this idea. This is our first Chap 11 investment we have made.
Warning there is a new court-ordered poison pill at 4.5% to protect NOL's, so this is a max roughly a $700K investment.
This will be a short write up.
Tuesday Morning is most similar to Ollie's Bargain Outlet (OLLI). Tuesday Morning buys deeply discounted inventory from mass merchant retailers and sells at very compelling values. The business has been around since 1974 and Madison Dearborn took private in 1998, then back public. TUES filed for Chap 11 to effectively break unfavorable leases and the business is 100% offline in store only.
I think TUESQ may have 7-10x upside from current prices.
Tuesday Morning (TUESQ)
Mkt cap: $12 million
Total claims: $140 million
Adjusted tangible book was $159.2 as of 7-31 and adjusting for court estimated real estate values below would add $70 million over $20 million carrying value used in the 7-31 calculation or by my math this comes to $220 million or $4.68 a share in tangible book value vs. .32 cent share price. So probably hair cut inventory...but the company is downing quite well on sell through...see filing below.
1. Tuesday Morning's cash position was $64 million as of July 31st it is likely higher today
2. Tuesday Morning owns approximately $67-90 million in real estate (1.3 million sq foot warehouse in Dallas worth $55-75 million (low-mid) and office $13 million from court appraisals). The warehouse is a unique asset in size, ceiling height of 28 feet, and proximity to the airport. A similar warehouse recently under contract at $115 per foot: https://www.loopnet.com/Listing/3817-Irving-Blvd-Dallas-TX/19220180/
3. Inventory is $110 million
4. Business is going quite well, in July TUESQ generated $23 million in cash for the month, yes much of it selling down inventory. Olli's is their closest comp that had 40% SSS.
4. Total claims are approximately $140 million
5. Tuesday is in Chap 11 to break 35% of their leases
6. After breaking these leases, Tuesday should have $650-700 million in revenue and 6-7% EBITDA margins or roughly a $1.00 a share in EBITDA
7. NOL's of $140 million as of June 30th
8. It looks like they should be able to exit Chap 11 with a far more profitable business
The Court put in a 4.5% poison pill to preserve the NOL's very recently
DISCLAIMER: This does not constitute a recommendation to buy or sell this stock. We own shares of the company, and we may buy shares or sell shares at any time.
WATCH OUT FOR 4.5% POISON PILL
This is a fast-moving situation and I could have missed something given all the filings (there are a ton of filings)
The reorganization plan should be out by the end of September.
I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.
less than 10% of tangible book
Fairly liquid balance sheet (30% of book is likely in cash now and w/ RE sale over 60%+)
Exit Chap 11 by end of year w a much more profitable business and $1+ in EBITDA per share
OLLI is valued at 22x, TUES might be worth 5-8x on $1?