SSI WEEKLY NEWSLETTER
This weekly newsletter intends to share the most interesting event-driven situations I’ve looked at over the week as well as other updates and highlights from SSI.
Here is what you will find in this week’s newsletter.
- Monthly Performance Report For October
- New Guest Pitch: LTG:L
- Portfolio Idea Updates: OCI:AS, MSTR, MRL:L, BOOM
- Quick Pitch Updates: EQLS:L, MON:V, GRFS, FNCH
Disclaimer: All content on Special Situation Investments site and in the newsletter is not and should not in any circumstances be considered as investment advice or trading recommendation. All information presented is strictly for illustrative and educational purposes only. Please carry out your own research and due diligence.
MONTHLY PERFORMANCE
SSI Tracking Portfolio was down 3.1% in October and is up 6.6% YTD. As usual, I have prepared a monthly report with a detailed performance breakdown by each stock in the portfolio.
NEW GUEST PITCH
In case you missed it, a new guest pitch was posted on SSI last week:
Learning Technologies Group (LTG:L)
This idea was shared by Giorgi. At the end of September, LTG announced it had received multiple offers from PE firm General Atlantic, with the latest at £1/share (10% spread remains). Management has indicated support for this bid if the buyer makes it binding. Due diligence and negotiations are underway, with a PUSU deadline on November 22. With management indicating support for the price, most major shareholders likely rolling over their stakes, minimal regulatory risk, and a serious buyer, the spread will almost certainly vanish if a definitive agreement is reached. There’s also a possibility of competing bids emerging. LTG:L quick pitch.
PORTFOLIO IDEA UPDATES
OCI N.V. (OCI:AS) – updated look at pro-forma numbers
I’ve refreshed my calculations of OCI’s valuation in this comment. The main takeaway is that the company currently trades at €10.85/share, compared to pro-forma net cash of €15.6/share. On top of that, OCI retains its European Nitrogen business, which management estimates could generate €250m in normalized annual EBITDA. So the stock is trading at a substantial discount to pro-forma net cash, with no value attributed to the European Nitrogen operations. Several factors could explain this discount (but I think it is mostly Nr. 1 and Nr. 2):
- Concerns around capital allocation – what OCI plans to do with the $3.6bn in cash and MEOH stock;
- Doubts about the closing of the Methanol business sale (expected in H1 2025);
- Uncertainty around the potential capex for the Blue Ammonia plant, which OCI is obligated to cover (currently assumed at €850m).
- Uncertainty around the €250m EBITDA estimate for the European Nitrogen business.
All of these are valid concerns, yet at the current discount level, I think that OCI remains quite attractive. The next key catalyst is management’s update on its capital allocation strategy. Full OCI write-up.
DMC Global (BOOM) – new major shareholder
Activist investor Voss Capital reported 5.9% stake in BOOM. However, the filing was a 13G – meaning Voss is not planning to get active just yet. Still, the growing lineup of prominent activists, including Radoff (who already has a board representative) and STCN (in a way) is a plus. All eyes are on the upcoming Q3 earnings, expected this or next week, where management will hopefully provide more clarity on the recent strategic review and future plans. Full BOOM write-up.
Marlowe (MRL:L) – new major shareholder, buybacks continue
Oasis Management has taken 5% stake in MRL. Oasis is one of Asia’s top activist hedge funds with a strong track record (e.g. their Nintendo campaign or RENN litigation settlement). They’ve also been involved in other cases covered on SSI, such as HOLI and Sun Corporation. Meanwhile, MRL’s daily buybacks continue, with £48m of the total £75m allocation repurchased over the last four months. Full MRL write-up.
Microstrategy (MSTR) – big plans for further capital raises
MSTR has reported Q3 results. The key takeaway was the announcement of a $42bn capital raise over the next three years, split evenly between $21bn in equity and $21bn in fixed-income securities. The proceeds will be used to purchase more bitcoin “as a treasury reserve asset.” This planned raise is significant compared to the company’s current $47bn market cap and $51bn EV. MSTR’s share price has been drifting higher over the recent weeks, partially tracking BTC’s rise. The premium to NAV remains wide at around 250%, matching the all-time high. I continue to think that MSTR’s bubble is unsustainable and the premium should eventually normalize closer to historical levels (30-50%). Full MSTR write-up.
QUICK PITCH UPDATES
Equals Group (EQLS:L) – the offer was slightly improved
EQLS released a positive update on the takeover negotiations. Due diligence has been completed, and the buyer consortium has sweetened the 135p/share offer with an additional 2p/share special dividend. The PUSU date has been extended to November 20, with both parties now focused on finalizing paperwork for the deal. EQLS’s share price jumped by 10% on the news, yet 11% spread remains. Given the reputation of the buyer consortium and this price bump post due diligence, I see this spread as too wide. EQLS:L quick pitch.
Montero Mining and Exploration (MON:V) – Tanzania continues to pay its obligations to another junior miner
MON is one of three similar junior miners that have been fighting against Tanzania over expropriated mining licenses. The other two, IDA and WINS, have already reached settlements. Last week, IDA received its second installment of $25m from Tanzania, consistent with the established timeline. This has brought the total payments received by IDA so far to $60m, with the final $30m due by late March 2025. This development underscores Tanzania’s commitment to honoring settlements, signaling positive prospects for MON’s potential award recoverability.
MON’s hearing is scheduled for late November, with a potential settlement anticipated in the first half of 2025. At current prices, MON trades at a steep 83% discount to the claim value. Using more conservative assumptions, the discount to more “realistic” claim value is 63%. For context, IDA’s settlement was reached at a 5% discount to its original claim, while WINS’ settlement came at 68% discount. MON-V quick pitch.
Grifols (GRFS) – delays in securing financing
According to Spanish media, the potential GRFS takeover is facing further delays, as Brookfield reportedly hasn’t secured financing yet. This could push the timeline back by at least another month. Despite that, rumors suggest Brookfield remains committed to the transaction. Speculations of the potential price range at €11-€12/share, in line where Class A stock (GRF:MC) currently trades at. The discount between Class B (GRFS or GRF-P:MC) and Class A shares has widened to 22%. GRFS quick pitch.
Finch Therapeutics Group (FNCH) – update and valuation model from SSI member
If you haven’t seen it yet, SSI member Ex Dividend has shared a detailed update on the FNCH setup, with a valuation model and a thorough write-up for context. The main takeaway is that under conservative assumptions FNCH trades at about 50 cents on a dollar, with significant upside potential if the judge awards enhanced damages, a higher Rebyota royalty, or attorneys’ fees. Key risks include uncertainty around how the potential proceeds would be split and FNCH’s need for additional financing to support the Ferring/Rebiotix appeal.