Current Price – $0.81
Expectect Payout – $1.00
Upside – 23%
Expiration Date – Q1 2018
This idea was shared by Vladimir.
TCPIF (producer and marketer of CFL and LED lighting products) has agreed to be taken private by founder, major shareholder and ex-CEO at $1.0 per share. Merger agreement has already been signed. The acquirers (Yan family) own 70% of the shares.
Company stopped publishing its financial results in 2015 (so it is dark OTC company avoided by absolute majority of investors), had a conflict with its founder and CEO (resigned) and lately filed a suit against him for unfair competition. Also audit committee investigation in 2016 revealed misbehavior by the previous execs (i.e. Yan family) and independent accountants resigned recently. Company IPOed in 2014 and than ran into reporting problems a year later. On top of that this is a tiny nano-cap with very limited trading liquidity. So there are plenty of reasons to doubt that Yan family’s true intentions and whether they will carry out the transaction as expected.
Deal is subject to financing (equity + refinancing of debt) and approval of 90% of shareholders (suggesting that 2/3 of non-affiliated shareholders need support the offer). As of 2015 company had $98.7m in debt and $34m in cash.
Unaffected price is $0.27 (66% downside) and merger agreement expires by the end of Q1 2018.
It is really hard to judge about the value of company as of now, but it dropped almost 10 fold since 2014/2015. The latest reported financials indicate that operations have been cash burning in 2015 (but the disclosed weakness in financial reporting makes even these financials questionable).
Yan family signed a supporting agreement prohibiting to sell their shares before long stop date or completion. So they can’t use the price bump to exit from the company (anyway I don’t think it is possible given very low trading volume).
It is dark OTC with significant risks.