What makes it so interesting is that Activist has been a long-term, passive shareholder for over ten years. Over that time, the fund has sat quiet through a tremendous amount of value destruction. For example, the company rejected a buyout offer in 2008 that is almost triple today’s price (the company has undergone a 5 for 1 reverse split since then, so be sure to take that in mind when evaluating prices). The company ultimately decided to just pursue a new direction, but what’s so striking about this is it seems they refused even to allow for due diligence that would have allowed for an even higher price.
Since rejecting that offer, ANLY has gone through an unending stream of write offs and management changes. But it seems the shareholder base won’t stand for that any longer. The new activist is joining another activist in pushing for change, and together they own almost 20% of the company. And when you review the most recent conference call, it seems every single caller pushes for a sale, some in pretty angry language.
So I think the end game here is a sale. Why? Combine the disgruntled share base with high management pay and the fact management owns barely any shares, and it doesn’t seem like management will be able to hold out much longer.
It appears the company’s employees and customer contracts should have some value for the potential acquirer, and there’s a good deal of asset protection here: Tangible book value comes in over $3.60, and NCAV comes in around $3.20. Both are a bit above today’s stock price, and I can’t imagine the company would get sold below book. Combine that with the strong balance sheet (strong cash balance, no debt, assets strongly outweigh liabilities), and it’s tough to see much downside from these prices.
I’m not currently long ANLY (I like ALJJ a bit more), but I will be monitoring the situation and will consider it in the future.
Disclosure: Long ALJJ