Left for dead to launch pad
"Broken" security hides a strangely advantaged capital structure. 200% upside potential within 12-18 months
Note: This stock is below my usual trading liquidity parameters for feature articles. This is not one to rush into (not something I ever recommend) as the liquidity isn’t there - at least not consistently (there have been a few decent sized block trades over the past week).
Those potentially interested in this security should take extra caution and be aware of market impact as well as the potential downside risks of trading in less liquid securities. If you are a new subscriber, note that this profile is not typical of my articles.
If events I am anticipating go favorably, I see potential for a substantial increase in the stock’s trading liquidity within the next 6-9 months.
At this point, the stock could be a value even at 50-100% above today’s share price - and perhaps a better risk/reward situation as a key risk will be off the table.
Second, it is one of the more interesting situations I have come across. What at first appears to be a disastrous capital structure hides what I believe to be a highly advantaged position - It couldn’t be re-created from scratch at the prices that exist today.
The underlying business is stable and has significant free cash flow - nearly $2B in revenue, $340 million TTM EBITDA, $100+ million FCF to common equity (currently split between two share classes - one of which I believe will soon be eliminated).
The industry is fragmented with substantial potential for additional consolidation. I have assessed the CEO as a solid operator with a keen eye towards using technology to improve efficiency.
Refinancing risk is less than it appears - the near-to-maturity note (April 2026) is trading within 25 basis points of par.
I see 200% upside potential within 12-18 months, and perhaps far more within 3-5 years.
On the downside, I consider the position to be 100% at risk due to leverage, refinancing risk and limited trading liquidity.