The Reporting Persons oppose the announced transaction between New Residential Investment Corp. (“NRZ”), Hexagon Merger Sub, Ltd. and the Issuer pursuant to that certain Agreement and Plan of Merger, dated February 22, 2015 (the “Merger Agreement”). The Reporting Persons do not believe a transaction at GAAP book value adequately compensates the Issuer’s shareholders for the value of its assets, which have historically traded between 1.2x - 1.3x book value according to the Issuer’s September 2014 Investor Presentation. The Reporting Persons further note the overly conservative nature of the assumptions underlying the Issuer’s book value, including (i) an assumed weighted average prepayment rate of 18% versus the actual 10.3% for the nine months ending September 30, 2014, (ii) an assumed weighted average delinquency rate of 25% versus actual non-performing residential assets of 18.5% of UPB as of September 30, 2014, (iii) an assumed weighted average discount rate of 19% versus a 10% discount rate used by NRZ to value its own MSR assets, and (iv) the exclusion of any value from deferred servicing fees, which were $470M at year-end 2013.
The Reporting Persons believe that adjusting these assumptions to reflect recently observed rates and the discounted value of deferred servicing fees, among other factors, could add more than $7 per share of additional value above the stated book value.
There is no reason for shorts to cover above the buyout price unless they think there is a chance a higher price will emerge. Investors paying more for shares certainly believe there is a decent chance at a higher price. The stock trading at $18.65 reflects more far than just some short covering - volume is over 20 million shares so far. Listen to the call - hopefully they take questions from shareholders that think $18.25 is too cheap.
"We began this dialogue with the hope of highlighting past mistakes and offering solutions. Thus far, our efforts at engagement have been met with denials, counter-arguments, and a poison pill. It remains our sincere hope that this exercise will prove to have been constructive and that the Board will take decisive action to improve shareholder value by embracing our recommendations, at least in some form. However, this circular process of us pointing out areas in need of improvement and you denying the weaknesses and ignoring the suggestions is not constructive. We are simply asking that you expand a program you have already embraced (share buybacks), return to a strategy that was previously a core part of your value proposition (dividends), and work to ensure that corporate governance issues are appropriately addressed. This should be an easy conversation! We are prepared to wait a bit longer for movement on your end. However, if we do not see some meaningful action within the next 30 days or so, we will assume that no such action is forthcoming. We will then assess our options to enhance shareholder value through external means, having failed to convince you to do so internally which we would very much prefer."
IMRIS Regains Compliance with NASDAQ Listing Requirements
PR NEWSWIRE 5:01 AM ET 2/17/2015
MINNEAPOLIS, MN , Feb. 17, 2015 /PRNewswire/ - IMRIS Inc.(IMRS)IMRIS Inc.(IMRS) (the "Company" or "IMRIS") today announced that it has regained compliance with listing requirements of the NASDAQ Global Market.
As previously reported, the Company received a letter, dated August 25, 2014, from the NASDAQ Stock Market LLC ("NASDAQ") stating that for the previous 30 consecutive business days the bid price of the Company's common stock closed below the minimum $1.00 per share required for continued listing under NASDAQ Listing Rule 5450(a)(1).
On February 13, 2015, the Company received a letter from NASDAQ stating that since the closing bid price of the Company's common stock had been greater than $1.00 for the last 10 consecutive business days, from January 30 to February 12, they determined that IMRIS(IMRS) was in compliance with Listing Rule 5450(a)(1) and that this matter was now closed.
StealthGas Inc : MLV & Co cuts price target to $12 from $14; rating buy EOM
"recruit some of the other major holders - Royce, for instance"
Royce added 60,100 shares in 3Q14 which brought their total to 1,650,945 shares.
So far the stock has not responded much to Hilson, but it appears they are just getting started. GASS responded to Hilson's first letter (dated November 28) by writing a December 14 letter trying to defend itself and enacting the poison pill plan announced late December. Hilson's last letter basically shredded management's attempt to defend itself and made good suggestions for moving forward. There is a good chance that others will become involved with this situation as management does not appear to own enough shares to prevent activists or other firms from making a move. Certainly Hilson will be in contact with many other large GASS shareholders who are underwater and also looking for shareholder relief. I'll be surprised if the stock moves much lower in the face of various positive outcomes.
Hilson makes a number of good points in their letter which is easy to see via Google. Given insiders relatively low ownership it is possible that activists could shake things up or bigger firms may be enticed into attempting a buyout. The lower the stock goes and the longer it stays depressed the greater the odds of such an event. A strategic buyer could strip out related party and other costs and nicely benefit even after paying well above the stock's current price. Ironically management makes Hilson's case when they highlight in their quarterly slides how cheap the stock is and how they expect bright future results in many scenarios. Too bad for them and shareholders that the market does not give management any credit for creating value. It'll be interesting to hear the grouchy CEO comment on this if any of the analysts do their job and dare to ask him to respond to Hilson on the next call. I was a buyer last week near the lows.