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.
The thesis is quite simple. Implant Sciences is a tiny equipment manufacturer for defense industry and recently received few large orders from transport security administration. Subsequently, L-3 Communication agreed to purchase IMSCQ assets for $117.5m and assume certain liabilities. In connection with the sale a voluntary bankruptcy process was started and an auction is being launched to see if there are any higher bidders for the assets. If higher bidders emerge, the share price will shoot through the roof!
Using L-3 offer equity should be worth at least $0.15 per share or 45% upside. This is still a moving target as final equity value depends in working capital adjustments and final creditor list. But L-3 offer at least gives a good downside protection. Equity committee was established and seems to be quite actively defending shareholder interests.
At the moment it is still not certain if company will liquidate after the asset sale . Another option on the table is merger with Zapata Industries and uplisting to NASDAQ. Zapata Industries is famous for their flying hoverboard prototypes. Shareholder vote will decide the way forward for the company, liquidation is likely to be a better choice from valuation perspective.
Share price is currently depressed as majority of shareholders pre-bankruptcy were retail investors, who might misunderstand the voluntary bankruptcy process and are simply selling out of the position completely disregarding L-3 offer, which values equity 45% higher.
There is Seeking Alpha article by hedge fund on the subject, but for the moment it is behind paywall – should be available to everyone tomorrow.