Tuesday, March 10, 2015

Data Group's Debt Doesn't Reflect Improved Performance

A year and a half ago, I wrote about Data Group's debentures as a potential value opportunity. At that time, they traded for 58 cents on the dollar with maturity in less than four years, for a yield to maturity of 20%. Today, those same debentures trade at 71 cents; but as maturity is now just over 2 years away, the yield to maturity is even higher, closer to 25%! This is despite the fact that business conditions for the company have improved markedly. Read more...


Anonymous said...

Saj, thanks for the article. DGI stock and debenture dropped significantly the day after the the company released Q1 results, which shows negative EPS and only mild debt repayment. Has the thesis changed for you?

Also, do you have any thoughts on the rights offering in which the CEO signed a standby agreement to absorb any shares not bought up by investors?

Saj Karsan said...

Hi Anon,

I thought it was a very poor quarter, and now I understand why a new CEO was brought in.

The backing of the rights offering suggests the new manager has confidence in the equity, so hopefully he's able to improve the situation.