Q2 2021 180 Degree Capital Corp Earnings Call
This is Daniel Wolfe, President and portfolio manager of 180 degree capital, Kevin and D, and our Chief Executive Officer and portfolio manager and I.
And we'd like to welcome you to our call. This morning.
All participants are currently in a listen only mode.
Our prepared remarks, we will open the line to questions. If you would like to ask a question. Please type star six on your phone and click the ask a question icon, if you're participating but participating by a computer I would like to remind participants that this recall is being recorded and and were you referring to a slide deck that we've posted on our Investor Relations website at IR Dot 180 degree.
<unk> Com under financial results. Please turn to slide two that contains our safe Harbor statement.
This presentation may contain statements of a forward looking nature relating to future events statements contained in this presentation and that our forward looking statements are intended to be made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act and 1995. These forward looking statements are subject to the inherent uncertainties in predicting future results and conditions.
These statements reflect the company's current beliefs and a number of important factors could cause actual results to differ materially from those expressed here and we see the company's filings with the Securities and Exchange Commission for a more detailed discussion on the risks and uncertainties associated with the company's business that could affect the company's actual results except as otherwise.
And as required by federal Securities laws, and 180 recap the Corp undertakes no obligation to update or revise these forward looking statements to reflect new events or uncertainties I would now like to turn the call over to Kevin.
Well, thank you Daniel and good morning, everyone.
On slide three is a snapshot and the summary of our Q2.2021 performance a bit a groundhog day for US is our public performance of five 9% or six 8%. If you include the carry on our SMA was slightly offset by a decline and our private portfolio and <unk>.
Total we grew our N V by 1% by growing our cash and liquid securities to a record 79 million or $7.59 per share.
Our public performance was up $4.4 million on the strength of Potbelly, synchronous, which we'll speak about and detail and Armstrong flooring.
Larger declines and value occurred and quantum saw on them and David will have more specifics on our holdings and a few minutes.
Our private portfolio decline was led by hail due to financing risk and AG volume due to terms and the new financing.
Our SMA increased in value by $2.7 million and is now over $42 million that's true.
And <unk> period.
<unk> please.
Slide four is the look at our LTV growth before one <unk> existence and thereafter.
And see our net asset value was and steady decline for over four years and that decline and literally stopped with the advent and early 2017 for our new strategy of focusing our investments on public companies with an activist approach I think we can all agree we're in a much better place today due to our shareholders decided to part with our old model.
And we get a brand new ones and <unk>.
And now at a six and a half year.
Slide five shows just how successful our new strategy has been.
Starting with just $2 a share or $20 million and early 2017, we've grown our cash and liquid securities to 78, four and $7 million at quarter end, whereas I said $7.59 per share given our share price closed at roughly the same price last night and you can see on our private portfolio is being price at zero.
And based on the 630 close.
Slide six shows our discount to any day.
As you can see here, we've made some progress from where we started but in actuality given our cash per share is roughly our share price. The market has placed a greater discount on our private portfolio than when we started we still have more work to do on this page to close the gap.
Slide seven is our normal sources of change in our net asset value for the quarter and as you can see we start with a $10.67, and a day at 42 cents of games and our public portfolio.
<unk> 19 cents of losses from our marks and the private portfolio and 15 cents of expenses, which includes a seven and send accrual for a bonus pool based on our current performance. We ended the quarter at $10.60 gig on a day.
Year to date on slide eight shows a $2 and won some gain and our public portfolio of 33 and hit from our privates and 28 cents of expenses, which again includes the accrual I spoke about accrual I spoke about which is variable and 100% dependent upon our performance.
If you ever Wonder why we changed our stripes and 2017 slide nine tells the whole picture.
And our rate at $6.43 sets of gains and our public portfolio 91 says the losses and our privates and expenses are shown here for the last four years again, ending with a and a $2.68 at the June close.
Slide 10 is a look at our holdings performance for the quarter, which yielded a five 9% return for the quarter, including the.
Or six 8%. If you include the potential carry from our SMA.
Let's talk about what some of the movements for individual.
On slides 11 and 12.
Potbelly reported solid results for Q1 with weekly average same store sales exceeding and 2019 levels beginning in April of 2021, the company accelerated its expectation and generating positive cash flow to Q3, 'twenty, one with enterprise level profitability and the second half of this year the comes.
And just reported Q2 results last week, which were solid and they pulled forward cash flow from the second half of the year to now it's been a remarkable turnaround led by the new management team.
180 actively engaged with the management and management of synchronous about having the company focused on refinancing the expensive and restrictive outstanding preferred Securities B Riley successfully led a financing solution of common stock bonds and a breach preferred security and we invested $10 million and the common stock portion of that finance.
Daniel will have more on this later.
Armstrong flooring aided our performance by nine cents per share, but we were very active and name during the quarter coming off and asset sale and improvement and the business. Following the Q1 earnings we became very worried about supply chain issues and increased cost for raw materials and rising shipping costs, we cut our position.
And half during the quarter were $5.46 per share because of this concern and.
While we still believe and the long term and believe the stock will trade in the double digits, we're taking a wait and see approach until we're more confident these transitory supply chain issues abate.
On the negative side quantum decreased NAV by <unk> as the company highlighted a shortage of a critical part required for its tape drive systems.
Reported two days ago, and once again highlighted the shortage would remain for this quarter quarter, but begin to target. Some relief on this issue as early as late in the third quarter with the stock declining by a healthy amount of use the current weakness to once again and build up our position.
It's on them as a broken thesis for us what started out as a properly timed recap and 75 cents and.
Watching the stock double off that price following on a couple of decent quarters. One issue has cropped up after another and most of those issues and negative <unk>.
AT&T walked away from purchasing one of saddam's phones.
<unk> extended what we thought was the end of its investigation and the company started missing financial targets. The biggest issue for US was our inability to sell because we added board involvement and the restrictions that placed on us as board members to transact and the stock.
And while many of that followed us into the stock at the recap price made good money and the months ahead as the stock doubled to $1.50, I feel like we were the only ones who didn't make any money and now we no longer believe and our original thesis that position has been sold its entirety and while the stock was a complete sale. The good news is we lost just $1.3 million along the way.
Part of that was because of our sell discipline to move on one wall, but also because when we buy anything we're always looking to minimize the downside by adhering to our strict valuation process on entry.
Slide 13 shows our performance year to day for all of our holdings Big games, and alter Armstrong Maven, Potbelly and synchronous and I always say if youre right two out of three times, we will have a nice careers and investor as long as the one time you are wrong doesn't outweigh the two times that you are right for us. This year through June has been a homerun for our.
Shareholders 15 of our 16 holdings.
<unk>.
<unk> been up this year, although shown positive performance with Saddam being the only on loser.
Slide 14, and as our performance for our entire history.
Twenty-seven winters and five losers the biggest winner showing gains were a desk, though where we made $14 million Potbelly 5 million quantum 9 million and the street and $7 million and many others were up north of $3 million and the great News here is that isn't one loser on the pace of this cost us $2 million and <unk>.
<unk> had a good batting average and and even better slugging percentage as we like to say, let your winners win and cut your losses and you'll be okay, and this business with all that we have a 44 and 5% gross IRR since we started.
Slide 15 is a bar graph depiction of how when we have one we have one big and when we've lost we have been able to contain those losses.
Slide 16 is our scorecard, a very good quarter, a very fine year and as you can see outsized returns on both a three year and inception and they look.
Have done what we hope and we're going to do when we started back in 2017.
Flipping to slide 17, we show the contribution of our game based on our sectors. As you can see here, we generated good performance from our consumer discretionary names and material companies and not a lot of losses to speak up.
Slide 18 shows the dramatic change and our balance sheet. Since we started our cash and liquid securities now represents 70% of our entire asset base and that does not include the $40 million that we manage for SMA.
You know I'll never be satisfied until the great portion of that Pie chart equals zero, we have made progress and to think we have nearly $80 million and permanent capital versus a startup point of 'twenty 180 degree capital is and very fine shape and Thats a rosy future ahead, if we can continue to execute by buying the right public secured.
Please.
Daniel.
Thank you Kevin Please turn to slide 19.
I'm now going to discuss a couple of companies that we have built core positions and during the quarter the first being PFS.
We began building our position and PFS web and Q1.2021, but it became a core position in Q2.
PFS W is the company that manages the consumer shopping experience for major branded manufacturers and retailers throughout two business segments Library of professional services and PSS operations.
<unk> provides a comprehensive set of digital agencies to search services to support develop and improve customer experiences both online and in store PFS operations provides services to support or improve.
And the physical post click experience, such as logistics and fulfillment customer care and distributed order orchestration and payment services, we followed PFS and <unk> for a number of years, but honestly, we couldn't build and an investment thesis that we believed and given our concerns with the company's long term value potential.
During the early phases of COVID-19, pandemic PFS W faced headwinds and its business driven by a quarantine mandates cautionary discretionary spending and financial weakness of retail partners and as the pandemic progressed the shift towards E. Commerce led to unprecedented volumes and order activity for PFS W's online brand Bill.
And <unk> capabilities and fulfillment services, while the business was actually improving the company's stock price didn't reflect these towers, particularly when the business was evaluated on a standalone basis.
And each business was standalone basis, PFS W's Board and management began to take public steps towards separating the businesses from financial personal and reporting perspective, it became clear to us that PFS W was another TST or and the street and that the company had two distinctly separate businesses that did not belong in.
One small publicly traded company.
Clearly we like these types of some of the parts place as long as the management team and board agree. It is time to break them up and sell the businesses for PFS W and similar to TST. It was clear that everyone was on the same page.
Our team's diligence led us to believe that on a standalone basis, the valuation of Lai various segment could be between one eight and $2 five enterprise value to sales and the PFS operations segment was roughly eight to 12 times EV to sales.
And estimated multiple of revenue of 1.8 or the low end of that range for the library and business. We believe there could be valued at between six and 660 based on the 222020 actual in 2021 estimated revenue respectively, using an estimate and multiple EBITDA on the low and again of buybacks for the PFS operations.
Business, we believe it could be valued at somewhere around $4.60 to $5.30 per share based on again 2020 actual in 2021 estimated EBITDA.
Richard respectively.
Some of the parts analysis yields are estimated value PFS study on a combined basis of around 10.60 to <unk> 90 per share.
On July six 2021, PFS of you announced the sale of its library of business to Merkle for $250 million, which equates to three times 2020 revenue and $2 seven times 2021 estimated revenue at the company estimates. The net proceeds from this transaction will be approximately 185 million to 200 million or eight.
22 to 888 per share this.
<unk> increased our estimated value of PFS W to around 13% to $14 a share when using the low end of our estimated multiple to EBITDA range for the remaining business.
Our cost basis is approximately $7.13 per share.
We note that we owned approximately 105 million shares of our 105000 shares and PFS debut as of the end of Q1, but we chose not to disclose the investment as we were in the process of building our position. We ended Q2 with approximately 530000 shares on PFS W.
Please turn to slide 20.
Synchronous technologies as Kevin mentioned earlier is provider of software platforms and solutions that aims and drive revenue growth and consumer engagement for global network operators, particularly currently and the telecom industry.
Synchrony house or S. NCR classifies its offerings into three main business segments cloud, which is a private label personal cloud storage business messaging, comprising white label E Mail offerings, and Rcs advanced messaging platform and digital suite of products for carriers that include wireless customer customer activation.
And services and network management platform.
In early 2017 synchronous acquired a company called <unk>.
<unk> holdings to broaden the company's product offering into enterprise data collaboration while simultaneously divesting a large portion of its carrier activation business.
Transaction Cross.
The transaction resulted and synchronized falling behind on reporting requirements triggering debt default by <unk> and in Q1.2017.
And to solve this issue Essent and see are ultimately sold <unk> to a company. That's a group called serious capital group and issued $185 million.
Convertible preferred security that had an interest rate of 14, 5%.
Two serious capital in conjunction with the deal.
And to that since 2017, the interest on this preferred security was being paid in kind or pik, which drove the principal plus interest balance to over $270 million.
Figure nurses and other name that we've been following for some time the problem for us to make it a core position similar again to see was that the continuously growing preferred security maybe can be difficult to investing.
We began working with management to brainstorm on ways to remove this overhang and ultimately introduce the company to our friends at B Riley financial and <unk>.
June 30th of this year Essent and see our closed a three part financing deal led and Backstopped by B Riley.
And the deal involved $100 million common equity offering of 125 million senior note offering and 75 million preferred offering with the proceeds being used to fully redeem the outstanding preferred stocks held by Sirius 180 degree invest approximately $10 million from our balance sheet and our separately managed account and aggregate.
And the common stock portion of this financing at $2.60, a share with.
With the close of this recapitalization Essent and see our is now free to explore strategic options for its business.
We believe the first step on this path is to monetize its messaging business and use the proceeds to pay off the preferred security issued at B Riley once complete the balance sheet would be drastically improved and the business will become a cloud services business focused on primarily on the fast growing segment of cloud data storage.
These types of businesses have sticky recurring revenue streams, and we believe that they trade at significantly higher multiples than where they ask and see our trace today and our average cost basis and $2.74 a share.
Please turn to slide 21.
This slide lists our 10 largest legacy privately held holdings by value and so at the end of the quarter.
As Kevin mentioned for the quarter, our private portfolio decreased in value by approximately $2 million or <unk> 19, a share the largest decreases were Hal and I buy on during.
During the quarter I'll also note that we had one of our smaller positions loader Therapeutics Corporation was acquired by Zymogen and in an all stock transaction.
Shortly after the quarter cut the company and which black Silicon Holdings has a profit interest in and has agreed to be sold and we currently anticipate this tranche transaction will close before the end of Q3.2021, we will receive approximately $1 million from this transaction.
And almost every shareholder letter we state while we desire to shepherd, our existing privately held portfolio to exits or explore opportunities to sell our positions and those companies. We have the luxury of being able to sell our private holdings. When we believe it makes sense.
And for shareholders, rather than being forced you to survive the.
And the remaking of our business and our significant cash and securities and public portfolio company and so we built means we don't have to sell anything unless we feel it is right thing to do for shareholders.
As we said as we continue to say we can tell you that we have rejected numerous bids and we continued to yourself from the private portfolio from sharks thinking they can come in and steal it from us that'll never happen under our watch.
Can't emphasize enough the difference between having to sell and wanted to sell <unk>.
Our success and remaking our balance sheet, we don't have to sell any of our holdings and we won't unless the price makes sense.
Since the start of turn and.
And beginning of 2017, our private portfolio has reduced NAV by <unk> 91 cents a share while our public investment strategy has increased now by $6.43 per share.
And 2016, we had holdings and its 32 private companies today, we have 19, but only 10 and that really matter.
And those 10 private holdings comprised 93% of all the private assets.
And our hope is the ones, we still don't have limited downside and decent ups on.
Please turn to slide 22 as.
As we've noted in previous letters and we've dramatically reduced our cost structure and a new strategy and 2016 before our change and investment focus and management team our operating expenses <unk>, excluding stock based compensation and interest on outstanding debt average approximately $1.3 million per quarter for.
For Q2, 2021 our operating expenses, excluding accruals for potential bonuses equaled approximately 780000.
Given our persistent and outsized performance the compensation committee approved and additional accrual of approximately 793000 and the quarter.
For a potential bonus pool at the end of this year should be noted that pool amount will fluctuate on her.
Based on our compensation committees assessment of corporate and individual performance over the rest of 2021.
Please turn to slide 23, and 24, we continue to anticipate that reductions and our operating expenses as a percentage of net assets will be based on growth and our net assets rather than further reductions and our expenses remain and we remain committed to treating every dollar of shareholder money with the utmost care and consideration.
As we continue and always will say it is much easier for us to grow and where it is expense load or where it is today.
I will now turn the call back over to Kevin.
Thanks, Daniel as you can see from our some of the parts charter stock price trades right in line with our public holdings at the end of the day the floor of our share price has risen as we've gone from $2, a share and cash and liquid securities to well into the $7 range. This should provide a floor for our share price.
A few words about the current environment, which you can read from the letter we posted on our website, where valuations are low there were a number of issues that are plaguing, our world and the short term high raw material prices inflation seems to be everywhere and significant supply chain issues simply put the market has cheered vaccinations and the hopeful and of the pandemic with the <unk>.
Straight line up stock market that said the global economy is struggling to reopen at the pace that the market expects part of that is because of the new delta very.
Part of that is because vaccination rates are not where they want them to be in our country and clearly the rest of the globe doesn't have vaccination levels anywhere near on ours.
We all watch the Olympics there are no fans because Japan as stay at home orders and is going to take a couple of quarters for some of these supply chain issues to normalize and.
Part of the problem for US is while we invest and U S. Domestic companies millions of them source their raw materials from Asia and much of that region as months behind the United States and reopening.
And this doesn't cause us to lose faith and the recovery over the next few years, but and listening to our holdings, whether its armstrong flooring or quantum just two days ago, we're feeling some of the short term pain.
Again stocks are reasonably priced and many of the names that are being currently affected.
Thank you have a 100% upside over the next several years. So we will use this opportunity to add to the names that we feel best about over the next few years.
I'm sure you feel the same way the pandemic has been exhausting and while I want to say it's over.
There are clear of lingering factors something short term growth.
Hopefully the next five years will be as good for our shareholders as the last four and a half years. We think we have a bright future ahead brighter than it's ever been because of the health of our balance sheet, we just need to keep finding winners and we will win.
On the private side as Daniel mentioned, we've said countless times. This year as you know that we expect monetization we've gotten a couple although small here and the first half of the year and I'd be very disappointed and the next six months, we don't hear some.
News of potential monetization from a more significant portion of the private portfolio, that's not a promise.
Nor a prediction, but that is our expectation here that we'll get some better news here in the months ahead with that thing and why don't we open it up and take some questions.
It sounds good and if you have a question. Please type star six on your phone or click the ask a question icon. If you are participating via computer.
Your first question comes from Adam Waldo Adam. Please go ahead.
Good day, Kevin and there are no. Thank you very much for your comprehensive report and package as always and.
Nice job on the second quarter on the public side given the.
This morning, and a lot of the micro cap nano cap names and which you invest.
On a couple of questions two categories, and which I'd like to explore one is third party asset growth initiatives and second is the questions about a couple of your holdings on.
On the third party asset growth side, Kevin and.
Our first quarter call you commented about.
Both the progress of what I'll call institutional separately managed accounts initiatives and kind of.
Opportunities and challenges of that but also about some work you were doing to offer.
On a broker dealers platform are there any updates that you can offer on either of those initiatives.
No we continue and good to hear from me Adam as always.
We continue to pursue strategies and which.
It makes economic sense for us.
Go out and find outside assets to manage.
We want to do so and a way that makes economic sense.
Because.
It's not permanent capital and because we don't own 100% of the asset the.
And the finance the economics around managing that money just have to be attractive for us. So we've had a number of conversations where we've been turned down because of the structure that we have a lot of people say to ourselves and say to us.
And we really wanted to give you money, but we don't really understand what the public company is for these private companies and we wanted to spending 100% on this and they've used that as an excuse there's been other times, where we have rejected outside capital because the economics doesn't make sense.
Theres nothing to report now other than I want to make sure that everyone understands the estimate that we have is now ballooned to over $40 million.
And the carry that we've been able to generate this year Adam is literally 85%. If the year ended in June which we know it doesn't but if the year ended in June the carry that we had would have offset 85% of our normal operating expenses. So we basically this.
And this year have reduced the burn to almost zero.
We will continue to pursue opportunities like that.
We were shifting our focus a little bit in terms of who we want to deal with I'm not at Liberty.
To talk about sort of a partnership that were.
Debating signing here on the next few days.
On a weeks ahead, maybe we will have a little bit more on that Adam and the third quarter, but rest assured when we have something to say.
Thats concrete you know us we'll be transparent and reported immediately so we keep working at it.
The good news is we have 80 million and private of permanent capital. That's the best kind of capital and you can have we got $40 million plus and our SMA at very good economics, and they're really really good partnership there and we will pursue others as time goes on I know you wanted to ask about a couple of holdings.
Right. Thank you.
On a couple of holdings.
Obviously.
Like Mark down on AG by them.
And dominant private holding.
But a lot of good progress going on and the company at least based on what I can see and the public domain.
Public sources like Crunch base don't show anything new in terms of.
Financing that I could pick up since the 2018 series C. Round. So can you is there anything more you can say about what caused the.
The adjustment and the carrying value of this quarter was there some small new financing that's just not.
And in the public domain or was it an adjustment to the series C. Round from 2018 anything you can say on that yes, Dan and you wanted.
Thanks, guys.
Yeah, So can't really go into details on it.
Because were.
And we're restricted obviously based on what is public.
All I can say is that AG volume continues to make progress and their business.
And we're encouraged by the opportunity into the future and that will be able to provide additional color around that probably next quarter would be my guess.
Okay fair enough.
Adam I just wanted to say when companies do do financings.
You know because of the options pricing methodology, sometimes the liquidation and the stack changes the capitalization changes there and there was no there was nothing negative with regards to their business.
But sometimes valuations change based on our option pricing methodology, when indeed and financing.
On the financing.
And as either done or taking place I guess, that's the best that we can say now and hopefully we'll have more next quarter.
Okay. So just so I'm really clear on that is this a rising from a new financing or is it arrives me from a prior financing and changes and the.
The valuation and <unk>.
Preferences of their securities and the capital stack.
I think I would I would take it I would think of it and I think Kevin described it.
And there's been a change and you know and how the liquidation stack is reflected within the option pricing methodology.
And that's what led to the majority of the change.
Okay. So it's not a new capital raise and debt closed recently.
Fair enough.
And there's only so many ways, but only somewhat true yes.
Yeah, Okay I'm sorry.
Sorry.
We're looking at ourselves and trouble, Okay. So no fair.
Fair enough.
On the probably on the Republic.
Youre looking at the right.
You're researching the right places to find out when there are new financing and so okay.
And there is one you'll you know where youll know youll see it because you know where to look.
Okay, Alright fair enough I'm, sorry, guys and then on the public side obviously.
Obviously.
Some really great.
Results with PFS, what we didn't even see really as a meaningful position last quarter. So great great call there and obviously, it's been crazy again here and the third quarter, but.
You've got on the point, where you have three or four holdings now and are about 10% of the public portfolio or more.
And its decision just because of the great conviction, you have and those individual securities or.
And I guess, how are you thinking about sort of portfolio of sizing.
Position sizing.
Parameters at this point.
So one of the things, we've talked about and detail on the shareholder call and so.
And so many people model or try and model our performance and try and figure out where our antibody is going to be and they do the best they can they take our.
Quarter, and the share count and the positions that we talked about.
And they assume we just have the same share count throughout the quarter and then they obviously theres a change and the stock price and they try and get at what are with an expectation would be for a public based on that.
What people don't know.
And what we talked about and our shareholder letter and specifics is sometimes we have positions that we don't disclose and PFS web was one of them because we were building the position.
Sometimes you don't know what we're doing within the context of the quarter itself and America Armstrong flooring was a perfect example of that we bought a bunch of stock below five it rose to basically six and change it came back to about $5.50, and we became worried about and we sold half of our position and now the stock is.
For that's not captured if you just look at where we are at the end of one quarter and trying to straight line. It to the next so.
In general if you looked at our performance base. If we went on vacation basically did nothing our public portfolio performance last quarter would have been up less than 1%, but given all the changes we made synchronous which people didn't know about PFS web, which people didn't know about Armstrong flooring changes from Walther sales.
And we were able to generate a return that was five 9% or six 8%. If you include the SMA. So.
And we try and do our best we will we're always managing for the long term, but as you know have a long procurement made up as a series of short terms and we're going to take advantage of market volatility when we see it and when we think theres an opportunity as it relates to position sizing Trust me, if we have a 10% position and something it means we liked it at last sales.
If we didn't.
Like in the case of Armstrong flooring, which was at one point, a 10% holding for US we literally cut the position back and half overnight.
Because we were worried about supply chain issues.
And if quantum.
Which has pulled back here recently.
And recently and then again to yesterday it was.
Crazy day for the stock yesterday.
That's a position that we actually feel really really good about and the next three years at the position size was a little less than where we would like it and that's a position that will easily take back up to 10% or more if we have the conviction that the stock and double again, and we think the stock will double again so.
Yes, 10% for us is.
Position size, where we really have good conviction and the name we only want a hole and you remember seven to 10 names and general.
That usually means that.
Sure.
If we're going to have 10, and we love them all they should all be 10% physicians right. If we have no cash. So that's kind of the way we think about position sizing when we start something it will never be less than one or two or three that's just not what we do.
We're running a concentrated portfolio and I ran the basic value on Blackrock, We had 80 names and 3% to 5% was the high end of where we are and now thats. The low end of where we want to be for any position.
Well.
Terrific very helpful.
For the update on that.
The balance of the year.
Thanks, Adam.
Got it.
Our next question Hi, Please go ahead Sam.
Yeah, Good morning, Kevin and Dan you've done well and.
And your.
Roche is very good.
Do you have any thoughts on the FCC rule 15 C to dish, one where all of these.
Companies that don't provide.
<unk> are restricted.
From being bought by the public.
Dave.
Does that give you an opportunity with these type of situations and what's your thoughts there.
And number one Sim it's always good to hear from you. We haven't heard from you and a couple of quarters. So glad to hear from you I have not the SEC.
Spokesperson for 180, so day I don't have any value add on that one Daniel and I don't know if you do I don't.
And so the only thing I would say is.
Sam we're always looking at again also reiterating Kevin's statements always good to hear your voice we're on.
Always looking for inefficiencies, we're always looking for especially information and efficiencies, but also.
Inefficiencies were.
There is an opportunity for shareholders to buy for investors to buy and at one point, where theyre not able to go on another point and so yes, I mean, if you look at quantum for example, when we first invested in and it was delisted OTC traded company that was trading below <unk>.
$300 million market cap and there is a number of brokerage houses out there that will not allow.
Investors to actually buy retail investors are actually any investors on their platform to buy into those into those names. So, but we are able to do so.
So we're always looking for interesting opportunities and and that's that's another set and another place that we can look at.
Well. Thank you alright, thank I sort of agree with you then.
And I think this will be more opportunities.
Where the market will become more innovation.
And we'll see what happens but and.
And as far as the spec did you indicate that you're doing this back I didn't understand that.
Yeah, so what.
What we can say is that we have agreed to and and this is and our SEC filings and as wells that we have agreed to.
B a join US sponsor group of Ace back.
And it will we've said that we would commit up to $2.7 million into that effort.
Can't really go into more detail on more discussion on it because they are and the registration process, but you can look at our SEC filings and other filings related to specs and and get more information on it and we'll be able to talk more about the stack efforts into the future.
Okay.
Thanks.
Both you're doing a great job and Oh.
And this was.
180 degrees.
Substantially and efficient and.
It's becoming more and more efficient so good rock strength.
Thanks, Sam and just mentioned two things about the specs we earn.
We do not have a skill set to source.
Private companies, but.
But what we do have a skill set and.
Evaluating.
The financing around a private company.
And supporting management teams that know how to do this.
So.
It's not that Daniel and I are going to scour the world and <unk>.
Try and find some private company to turn into a spec.
We're going to focus our time and effort first of all on smaller companies and many of these specs on a $1 billion specs were focused on the same asset size come.
Company of the company that we're investing and on the public side and.
And then we're going to focus our attention on ensuring that the management teams that are sourced from new if their names are finding names that are investable and could be good public company. So it's a good place for us to put some of our assets and we can talk about it.
As time goes on but as.
As I've said with Adam's earlier on if we love something will have a 10% position and at the.
And the commitment that we've made to fund the first back, but we're going to be a sponsor of.
It's basically about 3% on the assets.
It's not a significant number and it can grow and that's the beauty of the economics of a spec, but at the starting point, we're talking about $2.7 million.
And we just put $10 million and synchronous so and you can.
Think about it from a sizing perspective, as you analyze and two seven versus say and you can see where most of our energy is still focus.
Well, Kevin this is very good and.
Good.
Keep up the good work.
Thanks, Sam or truck.
It depends on mix and.
Okay.
Hi, Robert Please go ahead.
And you'll have you'll have some small companies and one of them.
It may even.
Alright, I was notified by my brokerage house.
One day.
TD Ameritrade.
I will not be able to buy any more securities and that stock and previously fidelity restricted us on that.
And they've had trouble with their finances.
230 million shares.
It's nice to hear that you guys can buy something on that stock, but the average invested cash.
And it.
And we will be.
And we'll be in a position that they currently sell it and I'm really worried that the stocks will drop on much.
You can get that company back on the SEC trail, so that they will take it off the restricted list I mean, how are you going to get these stocks are up the restricted list. When you have 230 million shares.
And.
The financials and added up to date I know you guys have restricted stock, but I'm, giving that as one example of what I'm really worried about coming coming coming.
Coming out with some of these stocks it could be highly illiquid.
Thank you for your question so here's what we'll say about the maven and you can read about it and our shareholder letter.
Company, who said to me.
We had a number of acquisitions over the last few years.
Street was one sports illustrated and other history biography Maxim.
They are delinquent in their <unk>.
<unk> <unk>.
They've been delinquent and the results trying to assimilate all these acquisitions and the good news is they are basically on the verge of being current this quarter with an eye towards and uplift.
In either late this quarter, probably more on the back half of the year. So this will go from a pink sheet at stock to a listed stock on.
Daniel on or if it's going to be the NASDAQ and New York, but I don't know if you have any color there but the.
They're going through that process now and we're not going to have to wait a year for you to be able to transact and the stock. It's basically a couple of months out finally.
For this company to actually do and uplifts staying on offense.
Anything else you want to add.
No.
On the and I think the plan is to list on NASDAQ, but nowadays and honestly it doesn't matter, which exchange you're on.
And just depends on how much you want to pay and exchange fees.
But for these guys, Kevin summarized and I think the other aspect is as well.
Look we obviously when we invest and we hoped and expected that they would be current faster it has taken longer because of the issues that Kevin and mentioned.
They are continuing down that path near term issues and stock price and Sally I mean, there. There is although there is 230 million shares outstanding only $40 million of those are actually tradable.
And.
But that's even more details I think the way to think about Nathan is.
There is.
And the expectation is is that in the coming.
Quarter quarters. This will become a traditional listed up to date company.
And with similar to all of our other holdings and we think that that sort of coming out party. There is opportunities for additional value creation and recognition so yeah.
Yeah, I mean I.
That's that's what we can that's what we know right now we're not over the wall with May and then.
And on purpose and.
And so and I think that.
That's what we know at the moment.
What is our current position and amazing and how many of those shares are restricted and.
And the ability to purchase stock on May.
And because I think maybe and could drop quite a bit.
And it fluctuates quite a bit it goes through and you wouldn't be too.
75 cents and.
Not really.
So it might as well just be private.
The way, we were able to initiate positions were when the company was raising capital.
And basically we did a pipe transaction two of them actually.
Which is what we've done and other we did on the street, we did that.
And the other names as well a turtle beach, if you remember correctly.
And but you can look at it right now and say well, it's 62 down.
<unk>, probably traded 100 shares it's not real.
And as well just be private right now and it.
It's not going to have any sort of volume, it's not going to trade.
Like a regular stock until they actually do the uplift that's traded 330 shares today, So I agree with you with it.
I guess it could drop if somebody decides they want to be out of 20000 shares tomorrow.
You'd have to find 20000 shares of a pinch heated stock to buy so.
This is all on the comm and this is and the next couple of months, hopefully youll get an uplift and you'll get a real.
You'll get some real volume and Youll have the ability to transact now you don't.
What can we do to make them move a little quicker because.
Frame is involved and our company and some capacity.
And I think bill there's nothing.
I just we just explained to you over the past and what you can't force the FCC to do any day.
<unk> got to get their numbers currents.
As I said theyre going to get they're going to get there this quarter and then theyre going to do and uplift. That's the path. There's nothing and you can't you can't yell at them to come public it doesn't work that way they've got to go through their auditors have to sign off on all their numbers, which they are currently doing and then they have to apply.
And for registration to become a listed stock on the NASDAQ or the New York and then they can do the uplift.
Okay, and we have other companies on that list also.
Do does 180 no yeah.
No.
Now all of our other all of our other holdings at the moment are all current and and.
And for the most part freely tradable.
Alright, thank you.
Okay keep up the good work thank you.
Take care, thank you very much.
I do not have any further questions and the Q.
Thanks, Danielle it's been a very very good year.
Year, obviously up over 40% through the June quarter.
I would say the current environment.
There's a little more choppy.
You saw that and quantum yesterday.
On the supply chain issues need to need to fix themselves in order for the market to have sort of what we hope will be the second leg of growth.
The good news is for us.
We've found some names whose valuations are fairly inexpensive.
So we've targeted Armstrong is a.
Double digit stock, we think quantum is a double digit stock and many of them a pullback and the short term because of some of these supply chain issues. So we'll use the current environment to take our positions backup and the things that we feel the strongest about and obviously.
And portfolio transition out of some of the names that we don't feel as good about as always we thank you for your time and consideration and we look forward to recruit and reporting our Q3 results and and three.
And three months, so happy investing and hope everyone has a good rest of the summer.
Thank you everyone you can now disconnect.
Goodbye.