Thursday, October 11, 2012

Net-Net For Sale?

A common criticism of investing in net-nets is the lack of catalysts. Sure these companies may be undervalued, some say, but how many years will it be before that value is unlocked? But occasionally, net-nets stay net-nets even after a catalyst is encountered. TAT Technologies provides such an example today.

TAT just announced a possible change of control. TAT's majority owner appears to have racked up so much debt that it may have to give up its ownership stake in the company to help repay obligations.

Chances are, the lender wants nothing to do with the company itself, and will therefore want to sell its stake, potentially putting the whole company in play. Nothing is assured here, however. But a potential catalyst has emerged for a company trading at a 40% discount to its net current assets.

Disclosure: Author has a long position in shares of TATT


jeff said...

It is unfortunate that this would cause the company to lose all of it's NOL's. Sure, they weren't on the books, but they were a nice asset.

Do you know if there are any other change of control items? Maybe in an employment agreement?

Anonymous said...

The link is bad.

Saj Karsan said...

The announcement link works for me. Which one doesn't work for you?

Anonymous said...

Sorry, it must have been down on there side.
This looks like a good stock pick

Chris of Stumptown said...

I find it interesting that TATT distributed a special dividend earlier this year. Most likely it was to distribute cash to the distressed owner.

If one were to look back a few years from now this may look like shareholder friendly behavior.

A few questions:

1) is there any way to follow the parent company similar to EDGAR/SEDAR?
2)does anyone have opinions about the NOL question raised by the first comment? I would not expect US tax law to apply to TATT.