Bind Therapeutics (BINDQ) – Liquidation – 15%-35% upside

Current Price –$0.92;

Expected distributions – $1.08 – $1.25;

Upside – 15% to 35%;

Distributions are expected to be completed by Q4 2016 or beginning of Q1 2017 (within 6 months). Funds will be distributed only for record holders as of 30th of August.

Plan of liquidation

Caution: The below listed idea involves company in bankruptcy and therefore is more complicated and risky than the usual ideas posted on this site. Please due your own due diligence before investing.

 

Background:

BINDQ is a bankruptcy liquidation story with all the assets having been sold (to Pfizer in July 2016) and majority of employees terminated/transferred. The company has no current operations and currently exists only to distribute remaining assets among creditors and equity holders.

 

Estimation of liquidation proceeds for equity holders:

The numbers in the below are based on the Plan of Liquidation (August 15th, 2016), and might not be final. However margin of safety seems to be large enough for shares to be attractive at current prices. Refer to pages 32-34 of the liquidation plan for further details.

Cash (August 15th) – $28m

Receivables and Security Deposit (August 15th) – $5.2m

Total assets to be distributed – $33.2m.

 

less claims

General Unsecured Claims (August 1st) – $5.2m

Priority Tax Claims (August 1st) – $0.207m

Further expected expenses (after August 1st) – $2m

Cowen success fee – $1.5m (based on Docket #378)

Total claims and expenses before equity distributions – $8.9m

 

Remaining equity distributions: $24.3m

Shares outstanding 20.9m

Expected equity distribution per share $1.16 (vs current price of $0.92 or 26% upside).

 

Additional upside comes from $1.975m holdback held in escrow till Dec 1st 2016 pursuant to the asset sale agreement to Pfizer. BINDQ’s receipt of some portion, or the entire amount, of the holdback depends on the claims, if any, asserted by Pfizer against the holdback prior to December 1.

Remaining equity distributions including holdback: $26.3m

Shares outstanding 20.89m

Expected equity distribution per share $1.26 (vs current price of $0.92 or 35% upside).

 

Wall Street Journal had a slightly lower estimate of total equity distributions $22.5m – equivalent to $1.08 per share - this estimate was based on figures before the recent August Liquidation Plan, which overall showed lower cash burn then initially projected.

 

Risks

There might appear some other claims which are not yet included within the ‘General unsecured claims’ section – Creditors have till 30th of August to file any further claims and till 14th of September to dispute the current liquidation plan. However, I do not foresee any further material increases in claims. Some details in the 10Q give confidence about this. E.g. in the latest 10Q, it is noted that so far the company received only $7.5m in scheduled and asserted claims, out of which $5.1m have already been paid or cured by the 12th of August (I assume the remaining balance is covered in the $5.4m of ‘General Unsecured Claims’). Claimants had almost 4 months since the bankruptcy in May 2016 to file their claims, so my guess is that anyone who wanted to file, has already done so. Any unexpected new claims should be immaterial.

Overall claims need to increase by more than $5m (or double the currently outstanding general claims) for the equity investors to start loosing money at the current share prices.

Equivalently, equity investors will start loosing money at the current share prices, only if zero of the indicated receivables (part of which is security deposit) are received.

Seems like a rather safe bet, but as I have limited experience in bankruptcies, my thoughts should be taken with the grain of salt.

Caution: This idea involves company in bankruptcy and therefore is more complicated and risky than the usual ideas posted on the site. Due your own due diligence before investing and do not consider anything written on this site as an investment advice.

29 COMMENTS

  1. dt

    Update – share price of BINDQ dropped after the record date (30th of August) has passed. Those buying the shares today will not be entitled to any distributions – in other words shares are worthless for today’s buyers. A case could be made for short selling these.

    Record holders as of 30th of August can sell the shares today/yesterday and pocket both the upcoming distributions + the current share price.

    As per recent filling:

    “Under the Plan of Liquidation, only stockholders of record as of the close of business on August 30, 2016 (the “Distribution Record Date”) are entitled to payment as part of the initial cash distribution or any subsequent cash distribution(s) that may occur pursuant to the Plan of Liquidation. Any person who purportedly purchases or purportedly is transferred the Company’s common stock subsequent to the Distribution Record Date will not be entitled to payment as part of the initial cash distribution or any subsequent cash distribution(s) if the Plan of Liquidation is confirmed by the Bankruptcy Court.”

  2. dt

    Trading in BINDQ shares has finally been suspended – normally this should have been done on the 31st of August. So anyone who entered short position in Sep/Oct will get 100% return in a few days (IB already shows 0 value for BINDQ)

    And for all those who had owned the stock as of 30th of August, now it is time to wait for distributions of $1+. These will likely be done by Q4 2016 or Q1 2017.

  3. brian walsh

    How many shares outstanding? If they are distributing 8 million, what is it per share?

    1. dt

      Brian, 20.9m shares outstanding so it works out at c. $0.38 per share. This is just initial distribution. More to come.

  4. Ben

    If there are any non-US investors here, did you get charged withholding tax on this distribution, or not?

    1. dt

      Hi Ben, this distribution for some reason (really don’t know why) was treated as regular dividend and therefore will face the same withholdings taxes as any other US dividend.

    1. dt

      Distributions hit the IB accounts yesterday (12/20). For other brokers dates might be different.

  5. Joel Wittenberg

    It seems clear that shareholders of record on August 30th will be entitled to the distributions. To your knowledge, has anyone — the company, NASDAQ or the bankruptcy court — ruled whether normal three-day settlement rules will apply (i.e., only shareholders with a purchase trade date of August 25th or earlier will be shareholders of record as of August 30th) or will a shorter settlement period apply, as has sometimes been the case in situations where a company makes distributions that are large relative to its pre-distribution value?

    1. dt

      I am not able to advice you on this as I am not an expert on settlement date specifics. There has clearly been confusion about settlement period in the market as BINDQ traded at $1+ right up to August 30th. So as you suggest investors expected shorter settlement period due to large distribution. As it turned out the ex-dividend date is 26th of August with a standard T+3 settlement period. I haven’t seen anything specific with regards to settlement dates in any of the fillings.
      I also did not expect this distribution to be classed as dividends.

  6. Nathan

    U.S. investor here,

    Does anyone know if this first dividend distribution gets taxed in 2016?

    If I am reading this right, it is a return of capital and lowers the cost basis of the stock, but by broker lists it as a regular dividend.

    1. dt

      IB also lists this as dividend, which is quite surprising as I was almost sure it would be return of capital. Hopefully the second larger distribution will be treated differently for tax purposes.

  7. Nathan

    dt,

    I use IB too, and saw that on the statement.

    The reason I am asking is because they have made mistakes in the past about these kind of things. In each of the past few years they send me my tax forms in February and then send me a corrected tax form a month or two later.

    That dividend took me over the $3,400 unearned income limit for my Earned Income Tax Credit. I sold my IMSCQ today at a loss because of this.

  8. KF Wheeler

    Where’s my distribution? I had 100 shares of BIND that I bought in Feb 2016 and got nothing.

    1. dt

      Check your statements for Dec cash inflow. The first distributions happened in mid Dec 2016.

  9. brian walsh

    Just received Corporate Action doc from Bindq. Anybody has opinion? Actions to take?

          1. dt

            If you are referring to equity distribution form with regards to the second distribution, then this has been challenged and I doubt will be required.

            “ORDER PROHIBITING TRUSTEE FROM CONDITIONING DISTRIBUTIONS TO SHAREHOLDERS ON SUBMISSION OF EQUITY DISTRIBUTION FORM”
            https://cases.primeclerk.com/BIND/Home-DownloadPDF?id1=NTY3NDcw&id2=0

            My understanding is that the hearing date has been set for 17th of May.
            https://cases.primeclerk.com/BIND/Home-DownloadPDF?id1=NTczMzA0&id2=0

            Trustees explanation of why the form is required can be found here:
            https://cases.primeclerk.com/BIND/Home-DownloadPDF?id1=NTgxMzMy&id2=0

            So my understanding is that until this is resolved on the May 17th there is no need to fill any kind of forms.

    1. dt

      Yes, distributions are still pending. Previously announced tax form submission deadline was August 7th – but the requirement to submit these tax forms continues to be challenged and now the court date is set for 16th of August, which is after the submission deadline.

Leave a Reply

Your email address will not be published. Required fields are marked *