WHY I BOUGHT A COMPANY THAT IS IN BANKRUPTCY TODAY & A RECENT IPO THAT I AM WATCHING LIKE A HAWK
I'll start with the one I took a position in today. I initiated a small position in DPTRQ today. This is a highly volatile bankruptcy play in a company that used to be a significant player in the energy industry. There have been actions taken since the beginning of this year to preserve shareholder equity. It is never easy to tell whether these types of restructurings will end up favoring shareholders...meaning that shareholder equity will end up being preserved as an end result of the action taken. It is not in the hands of management and up to the courts to decide.
I do, however, trust what the market is telling me more than anything else. As of today, the market seems to be saying that shareholders will win. In fact, the market has been saying shareholders will win since the beginning of the year. Only at the beginning of the year it was whispering it. As of today, it is screaming it.
The following is a quote from the CEO on March 20th "We are very pleased to have identified significant additional sources of value for our stakeholders (read: WE ARE THINK WE HAVE FOUND A WAY TO KEEP SHAREHOLDERS FROM GETTING COMPLETELY SCREWED), and we believe the additional time to allow proposals to develop is well justified," CEO Carl E. Lakey said. "Delta's sale process has received significant interest from a variety of companies and investors (read: WE HAVE DISCOVERED SOME REAL SOURCES OF FINANCING), and this extension is intended to facilitate the ability of those bidders to consider structuring alternatives that may preserve certain tax attributes. (read: THOSE WHO WANT TO PARTICIPATE HAVE TO MAKE SURE THEY ARE NOT GETTING SCREWED BY US LIKE SHAREHOLDERS HAVE SO FAR. THEY ARE BEING DILIGENT)"
Prior to this on January 20th, the company pursued DIP financing for north of $50 million in an effort to continue operations. The events of January 20th led to the initial spike in the stock from roughly .10 cents per share to near .35 cents over several days. This type of a financing is a sign that the company is interested in a restructuring...NOT a dissolution of shareholder value, followed by a fire sale of assets.
The situation isn't as clear cut as another bankruptcy play I took part in a couple years back in GSIG, which is why I am not taking on a large position. I am keeping the position small so that in the event I am incorrect, it will be no more than a couple percent of the total portfolio. If I am right, the gains have the potential to be substantial, which is why the risk is worth taking.
Next up is the stock I am watching. SYNC is a recent IPO that I believe will be getting increasing attention over the coming years. It has been bid by insiders since it went public at a price that was below initial expectations of a $10 per share IPO. They are in the "TV everywhere" business. As the name implies, they want to bring your home TV to the numerous wireless devices we carry around with us on a daily basis. Just today, they announced the hiring of a top tier executive from HBO. The right team is always an important component of such a project.
I will have more details on this another time. It bears watching. A roughly $200 million market cap here. Has potential to be a lot larger and eventually become a prime target for acquisition. The technicals are gorgeous as well.
