After the Court date SCHS should be at least $.50. Here's why. SCHS (1) is selling assets, not going out of business, (2) Canadian operations is not in bankruptcy, (3) Bayside is supplying "debtor in possession" financing of $50 million that will convertible, in part, into equity, (4) Company engaged Perella Weinberg late last year as financial adviser, which is a top line investment banker with over $9 billion in commitments that committed to preserve shareholders equity, (5) Bank of New York is an unsecured creditor with $158 million at 3.75% due in 2026, which means they have not leverage but to accept an equity interest. Finally SCHS had sales of $732 million in fiscal 2012 and sanctioned to conduct business in the educational markets. Its licenses are a valuable intangible and would be lost if the company's is liquidated, which is not management's intent. All in all, SCHS is a safe play to continue as a going and profitable concern with its current shareholders being preserved, and the material dilution would still warrant at $1.50 share to the existing equity holders.
You notice that the volume is contracting, the size on both sides are less dramatic? That's a common reflect when uncertain and fear rules. The only mistake I made is to pull the trigger to earily. I;m in just above 14, while 10 would have been nicer. Be as it may, I;m still confident that "commonsense" prevails. SCHS is still a going concern and the bankruptcy is a 'clean' means to protect the ingetrity of its business. Dave Ploeg the chief financial officer was appointed that position in 2008 and is directly responsible for the 'mess' the company's in. If he does protect shareholders equity at this stae, a suspect that a major legal would by lodged against him, including president Lavelle.
To your question - delisting will attract market markers with a real financial interest in the stock, and trade it based on merit, not fear or misinformation. Trading Nasq listed numbers are computer generated. With delisting, we'll finally have a real face behind the stock. By the time it trades in the so called 'pink sheets' volume will stabilize at round 500,000 shares and a gradually appreciation --- you must look beyond 5 month for this thing to work. Imm playing the trade on purely risk/reward and will dollar average shortly.
Based on Judge Carey's comments. Bondholders will not go with plan, and claims company has intrinsic value, which means their subordinated position has standing to enhanced the overall worth of company, including equity holders. A higher bid means more value to equity holders. Also, management understands the risk of underpricing the company's true worth.
I hope you're correct. Unfortunately, common shareholders are at the back of the line in these situations. I am very concerned about the manner in which this all happened. In addition, the panic dumping of a major share holder starting on the Thursday before the announcement looks real bad. the lack of a going concern warning from the company is also a question. I'm sure that most everyone working at the company had some stock, so there is hope that they will attempt to retain some value, but the other thing is that whatever happens they all get to keep there jobs. With proper incentives, at least the senior management will recover quickly.
Good points. I look at playing 'undervalued' situations purely on a reward/risk ratio. SCHS is not a company lacking a business plan or without expert management. SCHS has been in business since 1959, has 1800 employees and excellent reputation in the field. Trashing deep pocket shareholders is not an option, and management knows it. It's a long term play and worth the risk, especially under 15 cents.
Honorable Kevin J. Carey, United States
Bankruptcy Judge, in the United States Bankruptcy Court for the District of Delaware, 824
N. Market Street, 5th Floor, Courtroom No. 5, Wilmington, Delaware 19801:
Only the Judge will know for sure what the outcome will be. I am sure you can write a letter asking his position
Sentiment: Strong Buy
You need to remember that ZACK gave SCHS a 'buy rating' on 01.22.13 at over $0.60 with a Outperform upgrade and apparently blind sighted by the bankruptcy. ZACK is a reliable firm with an excellent track record. So what's the deal? Nothing really, except the price is lower and a bargain. The other difference -- the fundamentals have improved.
After shifting through the noise and making at least 30 calls and other Wall Street sources, I am at BUYER at $0.1454. The SCHS play had superior upside potential with limited downside risk -- this type of "reward ratio" usually works when patience and prudence combines with commonsense.