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  10 Actives Ideas posted on the site. For examples of previously published ideas check here.

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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.

 

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.