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Consider the case of Stanley Furniture Co. (STLY), a designer and manufacturer of residential wood furniture, with a diversified customer base, and until very recently, appeared to be trading at a discount to its NCAV. The company’s most recently filed financial statements occurred in early November. An investor focusing solely on the company’s financial statements as reported would have missed a highly significant event that occurred subsequent to the filing of the last 10-Q.
In December, STLY completed a rights offering, which allows current shareholders the opportunity to purchase more shares in proportion to their current ownership, effectively giving them the opportunity to maintain their proportionate interest in the company (an action favoured by famed investor Sardar Biglari). The rights offering resulted in 4million more shares being issued, raising $12 million cash, which, along with cash raised from the sale of some machinery, went to paying down $15 million worth of debt that came due (it had been classified as a CL for the following calculations).
| Before (As Reported) | After Rights Offering | |
| Current Assets | 76,247,000 | 78,300,000 (est.) |
| Total Liabilities | 44,905,000 | 29,905,000 |
| NCAV | 31,342,000 | 48,395,000 |
| Shares Outstanding | 10,344,679 | 14,344,679 |
| NCAV/Share | $3.03 | $3.37 |
| D/E | 0.25 | 0.00 |
| Current Ratio | 2.24 | 4.1 |
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