AssuranceAmerica Corporation (ASAM) announced a going private transaction (SEC filing) where it will perform a reverse/forward stock split to cash out shareholders owning less than 10,000 shares at $0.04/share. Although the stock is extremely illiquid I was able to pick up some shares at $0.033 for a ~$70 +EV bet.
Disclosure
Long ASAM
I would be careful with this one. I was long ASAM at 0.23 back in Dec. 2011. Since then, they’ve postponed the going private transaction twice(or 3 times? idk) and they’ve restated their financials, decreasing book value by HUGE amounts…management is super untrustworthy and I looked at reviews a while back and people seemed to hate their service. I’m obviously bitter from losing so much(I exited at 0.05…so at least I got 1 cent more than they would’ve forced me into losing), but the point is, I thought going private transactions were a good idea. This was my first one, and I got burned bad because of bad management in a bad business. Just a warning! goodluck!
Yeah, I noticed a long discussion on the history of the offer in the SEC filing. I don’t doubt that you are right that ASAM isn’t a great company, and this is probably often the case for going private transactions. But the absolute amount of money at risk is of course extremely small, and the possible IRR very high. Nearly impossible that it’s a bad bet imo.
Less than a year ago their own valuation methods showed $0.30 as fair value and now they’re stealing the company for an 85%+ discount to that value and over 60% from where it was trading before the management dumped all their shares into the last “going private” news (~$0.15). I’m not sure the whole thing was an orchestrated big pump and dump, but it wouldn’t surprise me.
If you read the SEC filings, they offer nothing for valuation supporting their new $0.04 price aside from recent trading prices and they complete ignore their prior FMV estimate. I guess they figure if they’re just stealing $1k or less from each shareholder, it won’t be worth anyone’s time to investigate dissenters appraisal rights. Forcing them to pay up $0.30 instead of $0.04, or even half that, would make this into a bit more than chump change.
Seems like a complicated way to steal money from shareholders: they are only cashing out the small shareholders. And if management doesn’t own a big part of the company what do they gain by buying out small shareholders? Most likely it’s simply a bad business with bad management.
Read the history on what you own. Management owns over 55% of the shares, so cashing out 10% or so of the (small shareholder) shares at a big discount to FMV is accretative to their stake, not to mention the actual SOX savings that were the original point of this endeavor. A comparison of the management holdings over the past year may be enlightening.
Have to admit that I’m not going to do a lot of background research on a super small position like this, and also don’t really care if management is offering a fair price or not. As long as I’m able to buy at a lower price…