Special Situation Investment Opportunities

This site covers special situation investment ideas and arbitrage loopholes with short term catalysts. All investment opportunities are tied to some specific corporate actions or events that are expected to generate returns in the near future with lower risk. Covered special situations include Merger Arbitrage, Liquidations, Tender Offers, Going Private Transactions, Spin-offs and split-offs, and various others types. Unbiased high quality research is provided for each idea.

Previous ideas are free to view for all visitors, however currently actionable ideas are restricted to members only. Currently there are 8 Actives Ideas posted on the site.

 

RECENT WINNING IDEAS

PennTex Midstream (PTXP) +32% in 4 months

Back in Oct 2016 Energy Transfer Partners acquired 65% of PTXP and hinted its intention to buy-out the remaining public shareholders. Despite this PTXP was still trading significantly below the value at which ETP made the purchase and also at discount to its fair valuation. At the time when I published this idea (Feb 2017) ETP was pre-occupied with the merger of Sunoco Logistics and I reasoned that as soon as this merger is completed, the announcement will be made regarding the remaining public equity stub of PTXP. 

That is exactly what happened – SXL/ETP merger was completed at the end of April and just yesterday ETP announced buyout of the remaining PTXP shares at $20/share.

 

Tangoe (TNGO) +25% in 1 month

Tangoe was a company in a bit of a turmoil – financials were non-current, previously filled financials had to be restated, there was a pending class action lawsuit as well as ongoing SEC investigation. Despite this couple parties have expressed the interest to acquire Tangoe and shares were trading with a narrow spread relative to the expected acquisition price. However, in March TNGO delisted from NASDAQ and forced selling caused shares to drop 20%. This created a great buying opportunity. I reasoned that TNGO acquisition offer is still on the table as one the potential acquirers expressed their full awareness of financial mess TNGO was in and suggested that this situation did not reduce their interest. At the same activist investors were pressing the company to sell itself.

Just few weeks later, it was announced that Marlin Equity Partners have agreed to acquire TNGO at $6.5/share.

 

Wingstop (WING) +10% in two weeks

Wingstop share price jumped +14% to all time highs after release of Q1 earnings due to good looking headline revenue and EPS numbers. However, the headline figures were misleading and were driven purely by non-cash accounting changes and one-time revenue item. In reality Q1 earnings showed hardly any positives with first ever decline in same store sales and continued deterioration in growth. I reasoned that such exuberant trading was likely caused by algorithmic robot trading or completely superficial retail investors who misread the headline numbers for huge improvement in operational performance. And due to that I shorted WING expecting fast share price correction at least towards pre-release numbers.

WING shares started dropping the next day and now stand close to the levels before the earnings release. All worked out exactly as expected with short position generating 10% in 2 weeks (option buyers generated multi-bagger 4x).

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Inactive ideas

  

PennTex Midstream (PTXP) – Acquisition Target – 50% upside

Current Price – $15

Expected Buyout – $23

Upside – 50%

Expiration Date – TBD (expected in H1 2017)

Penntex Midstream is likely to be fully acquired by ETP, which already owns 65% of the company. This is similar to OCI/OCIP transaction that was posted on the site earlier as well as a number of other consolidations in the MLP space (TRP/CPPL, TLLP/QEPM) whereby general partner which owns majority of MLP buys out the remaining limited partner units.



Wingstop (WING) – Irrational Algo Trading – 10% upside

Current Price – $32.99

Expected Price - <$30

Upside – 10%+

Expiration Date - Two weeks

This is a slightly different Special Situation opportunity. Yesterday WING stock jumped +13.8% in after-hours trading following the release of Q1 earnings. I believe this trading was mainly caused by algorithmic robot trading or completely superficial retail investors who misread the headline numbers for huge improvement in operational performance. In reality Q1 earnings showed hardly any positives.I expect the share price to revert at least to pre Q1 release levels ($29)



Tangoe (TNGO) – Forced Selling + Merger Arbitrage – 25% upside

Current Price – $5.13

Expected Buyout – $6.5

Upside – 25%

Expiration Date – TBD

This is a fairly straightforward situation. Tangoe received non-binding proposals to be acquired by Marlin Equity Partners (10% shareholder) at $7.5/share and by Clearlake Capital Group and Vector Capital Management (jointly 25% shareholders) at $7/share. Following further discussions Marlin later reduced their proposal to $6.5/share. Clearlake/Vector have not issued any further updates with regards to their offer so it is not clear whether their proposal still stands.

 

Global Eagle Entertainment (ENT) – Expected Tender Offer – 80% upside

Current Price –$6.2

Offer Price - $11

Upside – 80%

Expiration Date - TBD (likely H2 2017)

Global Eagle Entertainment provides satellite based entertainment and connectivity services for aviation and maritime industries (think wifi on the plane or Gogo). Company presentation is here. Its systems are installed in 750 aircraft currently and the company has contracts for further expansion. Revenues are growing at 30%+ annually, but ENT is still loss making and burning cash. I am no expert in technology investments and find these



OCI Partners (OCIP) – Merger Arbitrage – 5.3% upside

Current Price –$7.5

Offer Price - $7.9

Upside – 5.3%

Expiration Date - TBD (expected Q1 2017)

This is a merger arbitrage situation, where current acquisition proposal understates the value of the company and the risk of deal getting cancelled is low. The spread is at 5.3%.



Pendrell (PCO) – Going Private – Potential for 18% upside

Current Price – $6.36

Expected Cash-out – $6.55-$7.5

Upside – 18%

Expiration Date – expected by June 30, 2017

In the base case this trade has only $20 upside, but there is an embedded free option which might or might not materialize. It is definitely an interesting case from educational perspective.

 

Zweig Fund (ZF) – Merger Arbitrage – 7% upside

Current Price – $11.16

Expected Buyout – $11.85

Upside – 7%

Expiration Date – 31st of March, 2017

This is a relatively straightforward situation and I will keep the write-up light as I am travelling today (happy to expand more in the comments section later).

Zweig Fund (ZF) and Virtus Total Return Fund (DCA) will be merged by the end of March. Both closed end funds are administered by the same asset manager and shareholders have already agreed to the merger.



Syngenta (SYT) – Merger Arbitrage – 17% upside

Current Price –$79.34

Offer Price - $93

Upside – 17.5%

Expiration Date - TBD (likely in H1 2017)

Let me start by saying that this is a large cap transaction and the deal is widely followed and analysed – I do not have any superior insights with regards to the likelihood of the transaction going through so my opinion is as good as anybody’s else. However, I believe this opportunity is quite interesting, spread is large (17%) and therefore worth flagging.



Implant Sciences (IMSCQ) – Liquidation – 45%+ upside

Current Price –$0.105

Expected pay-off – $0.15+ (potentially $0.25+ or more)

Upside – at least 45%+

Expiration Date - TBD

This is just a quick note as I have not had a chance to look at this more in depth and should be able to do that next week. This special situation concerns nano-cap company (market cap only $10m), thus stock can be really volatile, so do your own due diligence before investing. I have a small long position in IMSCQ.



Nuveen Nasdaq 100 (QQQX) – Arbitrage Trade – 4% upside

Current Price – $20.05

Expected Price – $19.20

Upside – 4%

Expiration timeframe – 1-2 weeks

This is a fairly simple and straightforward arbitrage idea. QQQX is a closed and fund that is mimicking Nasdaq 100 index and trying to juice up the returns by selling covered calls. Historically this fund has always traded at c. 5% discount to NAV – discount to NAV prevails mainly due to funds admin fees, which are levied on shareholders returns. You can see NAV vs share price



Trez Capital Mortgage Investment (TZZ) – Odd Lot Tender Offer – Free Option

Current Price – C$7.99

Offer Price – C$8.0 – C$8.3

Upside – 4% (C$30 for odd lot holders)

Expiration Date – 14th of Feb 2017

This is a tiny opportunity in Canada. Currently the shares trade one cent below the lower limit and thus odd-lot holders are guaranteed that their shares will be purchased at least at the same price in one month.  This is a free option on any potential share price appreciation in the meantime or tender being priced at the upper limit