Frustratingly changed my mind on Emergent Capital. original post here.
I’m concerned about debt level / lack of liquidity and the fact the company has 9 months (approx) opex on hand. I wasnt right about my initial belief red falcon had liquidity available – I’d misread the statement.
There is an opportunity with the strategic alternatives process for this to do very well but re-reading this – the possibilities are not all are positive. It has also now been over 3 months – should have been done.
Taking my medicine and getting out at about a 10% total loss. Shareprice move down has also unsettled me – and I shouldnt be – if I was really that confident I wouldnt blink and would buy more.
I’m taking the view that return of capital is more important than return on capital….
I realise I am posting just over a week after going into the thing – but I changed my mind and that’s it. I should add I dont necessarily post when I sell – as its not always in my interest and sometimes it is more to do with portfolio management rather than any other reason.
I may get back in if this falls to a level at which the risk / reward is more compelling. Perhaps $1.65 a share.
No doubt an announcement will come tomorrow that the’ve sold the portfolio and are returning cash !
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I think you are making a mistake. Maybe the price is falling precisely because of marginal action on a most illiquid stock by people who are giving up after relatively quick /not thorough enough due diligence and lack of patience. Except for the lawsuit lost, which was not essential to the case, the thesis is unchanged for me.
I think your right in that I didn’t understand this well enough. I got the remaining capital wrong – I thought it had a few years, not months.
Problem is if I was right originally and there is 100-150% upside there is an increased (vs my initial assessment) chance of a 100% loss.
Odds are still probably better than 50/50 this will work out but are not compensated at this level. I tend to put a decent amount of capital behind most ideas so I can’t afford 100% losses unless I get a very good return…
Highly leveraged plays do not play to my strengths as an investor. I do far better with unleveraged things and then waiting…
Best of luck with it though, I will watch with interest and may re-enter if it goes sub $2.
Share price now down to $1.90. Kind of glad I held off buying. Still not clear to me how easy it id to lose lose everything in this kind of investment. I’ll continue watching.
I’m very glad to have exited this – but remember the share price is only a guide to the value – not the value itself. TJI fell to a third of what I paid – before ten bagging.
This could simply be due to lots of sellers and few buyers.
I am going to reassess this at $1.60 – a good chart entry…
At $1.45 as I type
Yes, volume increased too. Very glad I got out. Question is now at what price do I consider getting back in ? Remember there is an offer on the table – supposedly.
Where did you hear there is an offer on the table? As far as I know there have only been inquiries- in some cases for only portions of the portfolio.
I assumed the strategic alternatives announcement on 1st August as an offer – well not directly but a process which could lead to it or something very similar…
http://ir.emergentcapital.com/2016-08-01-Emergent-Capital-to-Explore-Strategic-Alternatives
Currently at $1.30. It’s been bouncing between $1.10 and $1.30 for a few weeks now. Still not holding. I can’t get my head round the degree of risk with this as an investment.
Yes Doug – I keep looking at this too – dont think time is right – for a potential 100% loss reward needs to be higher in my view – so price needs to be lower still – I might well miss out though.
I often think this is a weakness of mine – I want a 5-10:1 return if I face a 100% loss rather than say a doubling or tripling…. Real investors enjoy risk more!
News out (dated 3rd January):
http://www.prnewswire.com/news-releases/subsidiary-debt-of-emergent-capital-restructured-to-access-near-term-cash-flow-300384461.html
The share price is down to almost $1 so it has not been well received.
Hi Doug, That isn’t what happened. The release yesterday said they get $232m over 5 years, (http://ih.advfn.com/p.php?pid=nmona&article=73525338)
The correction today says they get $163.6, over 6 years.
http://ir.emergentcapital.com/2017-01-03-C-O-R-R-E-C-T-I-O-N-Emergent-Capital-Inc#assets_3:23
To me market reaction is (as I type) down 40% on yesterday or $12m off the market cap.
I found it odd it wasn’t up yesterday – surely bringing cash forward is a good thing – even if decreasing value to EMG buying time until the lot can be sold…
I bought a little today at $1.14 – its now worth even less at 71c. Volume has been huge – 10% of MCAP. But remember the market is a voting machine not a weighing machine.
I recon this deal – pulling money forward means the chances of their survival has significantly increased, hopefully they can get book value, or half book value, or anything for the rest….
Blimey now at 54 cents. I’ve been poised to buy some at under 70 cents but not pulled the trigger. A major shareholder must be selling down. I assume they see a chance of a 100% loss on this one. It also just shows how misleading director buys can be. Not necessarily a buy signal.
Maybe management is selling new shares using an ATM offering. They are definitely not shareholder friendly 🙂
I’m surprised they have fallen as much as they have and as quickly. I thought I got caught out by the messed up press release.
I want to wait for high probability knowledge that they can finance themselves for the next 2 years. Problem is that when/if this becomes fact the price will increase significantly faster than I can react – I therefore need to be in first, but of course this means I am exposed to the risk of a 100% loss.
George is right – this could be them accessing ATM outlined here. They can sell $50m shares at market (less than the $1.5m they have already sold).
http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&ref=10815251&type=HTML&symbol=EMG&companyName=Emergent+Capital+Inc.&formType=424B5&dateFiled=2016-03-14&cik=0001494448
This is the first US share I have ever bought and I think it might well be time to sell up again and go back to the drawing board. Its a different world to Europe / the UK where I am much more comfortable operating…
For example that ATM wasn’t disclosed in the 10K – in the UK such things don’t commonly exist and if they do they would be mentioned in the annual report.
I’m the sucker at this card table so probably time to walk away… I will keep watching this one though…
Big changes at Emergent Capital. Phil Goldstein, and Gerald Hellerman have resigned from the Board of Directors. They lose their annual board salary, but are probably happy to dis-associate with Emergent which was a disaster under their watch.
The company has been re-capitalized. The next conference call should be interesting.
Thanks George I will take another look.