Microcap Potential Activist Opportunities

[EricSchleien]

Hi All,

 

I'm looking to source some microcap activist ideas. I've partnered with Scott Forgey and John King to do Tribal Leadership with companies in the public markets. Over the past several decades of this work in private markets - profits increase on average 300% - 500% within 24 months of doing this work with companies. John helped build the culture at Zappos with Tony Hsieh and Scott currently works with Google, LinkedIn, eBay, and also helped with some turnarounds of a few companies that I can't publicly talk about.

 

I have access to capital for launching proxy battle and doing all the legwork.

 

The criteria is as follows:

 

1) Stock down a lot = pissed off shareholders

2) Management owns small stake in company

3) Ideally a broken organizational culture

4) Institutions or Funds own large percentage of stock already

 

If you are a shareholder in a company like this or know someone who is, please send them my way. All conversations are private.

 

Best,

Eric

[constructive]

It may not match what you are looking for, but here's a letter I sent to USNU ($1.5M market cap) a few days ago.

 

To the board and management team of US NeuroSurgical Holdings:

 

As a fellow shareholder, I would like to share my thoughts on the direction of the company.

 

Congratulations to your team on the positive results from the NYU Medical Center over the last few years. Relative to its market cap, the company has substantial assets and expected short-term cash flows. By my estimation the company is currently worth about $0.55 per share, compared to a current share price of $0.17.

 

However, I believe that if the company continues to invest in and loan money to its subsidiaries, it will have a negative impact on shareholder value. This is especially critical since the company has advanced $2M to subsidiaries over the last year.

 

As you know, all of the joint ventures except BOPRE have a negative equity position and all except CGK are currently unprofitable. This makes these companies extremely shaky credit risks, and I question whether US Neurosurgical is earning an appropriate interest rate on these loans. Although it is somewhat early to assess the results at MOP and CBOP, the initial investments in FOP and CGK were made 9 and 12 years ago. It appears that US NeuroSurgical’s return on these investments has been unsatisfactory.

 

Instead of continuing to invest in these subsidiaries, which do not appear to offer an attractive risk/reward, I believe the company should return excess cash to shareholders. Furthermore, the company is too small to justify the expense of being public. The most appropriate action would be to sell the company or sell the remaining assets and distribute the proceeds to shareholders when the NYU operations wind down.

 

Please let me know your thoughts on this subject.

 

Sincerely,

Nathan Herold

 

 

My math:

$4.5M current assets

$2.3M operating cash flow per year x 20 months = $3.8M

-$3.5M liabilities

Total: $4.8M

[EricSchleien]

It may not match what you are looking for, but here's a letter I sent to USNU ($1.5M market cap) a few days ago.

 

To the board and management team of US NeuroSurgical Holdings:

 

As a fellow shareholder, I would like to share my thoughts on the direction of the company.

 

Congratulations to your team on the positive results from the NYU Medical Center over the last few years. Relative to its market cap, the company has substantial assets and expected short-term cash flows. By my estimation the company is currently worth about $0.55 per share, compared to a current share price of $0.17.

 

However, I believe that if the company continues to invest in and loan money to its subsidiaries, it will have a negative impact on shareholder value. This is especially critical since the company has advanced $2M to subsidiaries over the last year.

 

As you know, all of the joint ventures except BOPRE have a negative equity position and all except CGK are currently unprofitable. This makes these companies extremely shaky credit risks, and I question whether US Neurosurgical is earning an appropriate interest rate on these loans. Although it is somewhat early to assess the results at MOP and CBOP, the initial investments in FOP and CGK were made 9 and 12 years ago. It appears that US NeuroSurgical’s return on these investments has been unsatisfactory.

 

Instead of continuing to invest in these subsidiaries, which do not appear to offer an attractive risk/reward, I believe the company should return excess cash to shareholders. Furthermore, the company is too small to justify the expense of being public. The most appropriate action would be to sell the company or sell the remaining assets and distribute the proceeds to shareholders when the NYU operations wind down.

 

Please let me know your thoughts on this subject.

 

Sincerely,

Nathan Herold

 

 

My math:

$4.5M current assets

$2.3M operating cash flow per year x 20 months = $3.8M

-$3.5M liabilities

Total: $4.8M

 

Nathan - just messaged you.

[Mark Jr.]

I was exploring an idea with a discount long distance telco that is edging into hosted PBX and internet telephony. Revenues are down to 8M from when I started following them (were 19M). Market cap is like 500K right now, they have close to 2M in debt that was used to fund an acquisition gone bad.

 

At one point I had about 1% of the shares and one of the shareholders was going to *give* me his stake which would have put me at something like 12% but after I talked to other shareholders, met the CEO, looked at the debt holders, etc I just figured it was hopeless unless I actually went in and got a lot more involved than I wanted to be.

 

I can message you the ticker if you want.

 

[EricSchleien]

I was exploring an idea with a discount long distance telco that is edging into hosted PBX and internet telephony. Revenues are down to 8M from when I started following them (were 19M). Market cap is like 500K right now, they have close to 2M in debt that was used to fund an acquisition gone bad.

 

At one point I had about 1% of the shares and one of the shareholders was going to *give* me his stake which would have put me at something like 12% but after I talked to other shareholders, met the CEO, looked at the debt holders, etc I just figured it was hopeless unless I actually went in and got a lot more involved than I wanted to be.

 

I can message you the ticker if you want.

 

Hi Mark,

 

Please do.

 

Best,

Eric

[CorpRaider]

I always think someone could/should take over a crappy, small AUM, closed end fund (at a discount) and put the funds in a low-fee index replication that you lever with a cheap, non-callable preferred.

[EricSchleien]

With the market down again - I'm just going to re-share:

 

If you are a shareholder in a company and the stock has these following characteristics:

 

- market cap is under 400m and ideally under 200m

- insiders own 10% or less of the stock

- company is being mismanaged in some way

 

please let me know and if it seems like a good fit for what I can do in implementing tribal leadership, I will pay for ALL of your expenses related to the proxy battle to replace management.

 

 

 

[EricSchleien]

launched a website about it:

 

https://www.proxyactivism.com/

 

please contact me if you fit the criteria.

 

With the market down again - I'm just going to re-share:

 

If you are a shareholder in a company and the stock has these following characteristics:

 

- market cap is under 400m and ideally under 200m

- insiders own 10% or less of the stock

- company is being mismanaged in some way

 

please let me know and if it seems like a good fit for what I can do in implementing tribal leadership, I will pay for ALL of your expenses related to the proxy battle to replace management.