Special Situation Investment Opportunities

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We focus on special situation investment and risk arbitrage ideas with short term catalysts. All investment opportunities are tied to some specific corporate action or event and are expected to generate returns in the near future with lower risk. Unbiased and high quality research is provided for each case.

Previous ideas are free to view for all visitors, however currently actionable ideas are restricted to members only. Currently there are  7 Actives Ideas posted on the site. For examples of previously published ideas check here.

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Essex Rental (ESSX) – Liquidation – 67% potential upside

Current Price – $0.21

Expected Payout – $0.17 – $0.35

Upside – 67% (at high end of the expected range)

Expiration Date – TBD

Essex Rental was a struggling and over-leveraged crane equipment rental company. Over the last year the company has liquidated/agreed to sell both of its operating divisions and shareholders approved plan of dissolution on the 5th of June. The proceeds for equity holders are expected to be in the range of $0.17 – $0.35 per share.



White Mountains Insurance (WTM) – Odd Lot Tender – $1200 upside (unlikely)

Current Price – $863

Offer Price – $825 – $875

Upside – $1200 (for odd lot holders if priced at the upper limit)

Expiration Date – 14th of September, 2017

This is a short note as situation is straight forward and most of the members already have familiarity with odd-lot tenders. I am mostly flagging this due to high potential upside in dollar terms (percentage wise it is only 1.3%). Risk/reward is unfavorable and I have no position at the moment.



Ferronordic (FNMA-PREF.ST) – Preferred Redemption – 12% upside

Current Price – SEK 1070

Expected Price – SEK 1200

Upside – 12%

Expiration Date – Q3-Q4 2017

Ferronordic  preferreds are very likely to be redeemed by the company at 12% premium to current market price. Recent communication by the company hints that this is likely to happen before the next dividend payment (Oct 2017). Preferreds trade in Stockholm and it is possible to buy then through IB.



Prospect Japan Fund (PJF.LON) – Merger Arbitrage – 44% upside

Current Price – $1.26

Expected Buyout – $1.81

Upside – 44%

Expiration Date – expected in H1 2017

Prospect Japan Fund trades below its NAV and received a non-binding all-stock buyout offer from the related party. This offer values the fund at $2.15/share – equivalent to 70% upside. The merger is very likely to go through. The biggest risk is market price of the acquirers shares which affects not only the eventual payout (no possibilities to hedge) but also the NAV of PJF.



Tropicana Entertainment (TPCA) – Tender Offer – 5.5% expected upside

Current Price – $42.6

Offer Price – $38 – $45

Upside – 5.5% (if priced at the upper limit)

Expiration Date – 2nd of August, 2017

This tender offer seems to be a step towards Carl Icahn taking the company private. Icahn’s IEP already owns 72.5% of the outstanding shares and will have 80%-95% after the tender. Due to this reason I believe that tender pricing at the upper limit is very likely (thus low risk 5.5% upside). After the tender Icahn will

 

AP alternative Assets (AAA:AMS) – Liquidation/Arbitrage – 8% upside

Current Price –$35.5

Offer Price - $38.5

Upside – 8%

Expiration Date - Q1 2018 (or earlier)

8% in a year might not sound overly attractive at first, but I consider this arbitrage opportunity to be close to risk free. The partnership will gradually distribute its only asset (which is ATH shares – large cap health insurer) to unitholders and then liquidate. AAA trades in Amsterdam and it is possible to purchase units using Interactive Brokers.



Rite Aid (RAD) – Merger Arbitrage – 77% upside

Current Price –$3.67

Expected Price - $6.5

Upside – 77%

Expiration Date - Dec 2017

This is my second look at the pending WBA/RAD merger – I was spectacularly wrong the first time and the only consolation is that market was wrong as well – the spread narrowed to 3% before the deal started collapsing. The merger agreement has been adjusted – instead of $9/share WBA is planning to acquire RAD at $6.5-$7/share (77% upside) and higher number of stores will be divested



China Digital TV (STVVY) – Ex-dividend day – 70% potential return

Current Price –$1.4

Expected Price - $0.35 (if today is the ex-dividend day)

Upside – 70%

Expiration Date - May 26th, 2017

This is a quick message, as this is a timely situation and I did not have time to do a full write-up. Shares at current prices are either a good short (if today is ex-dividend) or a good long (if today is not ex-dividend), so if anyone manages to figure out which way it is, you stand to make a ton of

 

CIT Group (CIT) – Odd Lot Tender Offer – Minimal upside currently

Current Price –$46.86

Offer Price - $43 – $48

Upside – 2.5% (if priced at the upper limit)

Expiration Date - 24th of May, 2017

This is a tender offer with shares currently trading in the middle of the buyback range. Tender offer has high likelihood of being priced at the upper limit and proration is expected to be low. There is no proration for odd-lot holders.



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.