Friday, May 3, 2013

Alco-Stores: Large Shareholder Disappears

As previously discussed on this site, shares of Alco-Stores (ALCS) trade at a deep discount to the company's net current assets. While that discount started to narrow late last year, it started to widen again over the last few months. At the same time, a large shareholder (who previously owned more than 15% of this illiquid stock), started to sell piecemeal! My guess is that the latter may have been causing the former.

On Wednesday, however, this large shareholder disappeared all in one go, managing to unload 500,000+ shares (whereas average volume is only a few thousand per day) in a single trade!

The large shareholder is technically considered an insider, but I'm not so sure investors should worry that these guys were selling. I couldn't find any performance data for the funds that reported to hold these positions, nor has anyone appeared to have written about the investing prowess of these guys running it, though they have been forming funds since the 1990s. Instead, there is a plethora of information about numerous funds they have opened (though many of them were no doubt quietly closed), which tells me these guys are probably better at raising money than they are at managing it. These may be exactly the kinds of guys you want to be trading against!

Now that this seller is out of the market, perhaps the company's 50%+ discount to its net current assets will start to narrow again. Unless, of course, the new buyers are now looking to turn around and sell for a quick buck! Hopefully we find out who the new buyer is soon. Here's hoping that it's a value investor!

Disclosure: Author has a long position in shares of ALCS

4 comments:

Anonymous said...

Barel,
What's your take on the announcement made on Friday:

"
The adoption of a rights agreement is
designed to ensure that all shareholders are treated fairly and protect against an attempt to acquire
control that does not provide full and fair value to all of the Company's shareholders.
"

Saj Karsan said...

I see as both good news and bad news.

Good: There may be a potential buyer

Bad: Management is looking to entrench itself (by not letting shareholders decide whether to accept an offer)

Anonymous said...

Barel,

What happened here?

Can anything be learned from ALCS over the past 6-8 months?

Regards,

Frank

Saj Karsan said...

Hi Frank,

I think so. I've written some thoughts on it here: http://www.barelkarsan.com/2014/10/alco-stores-bites-dust.html

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