It is interesting that my conclusion of weakness in the share price, which was first presented about a month ago, appears to be working yet is rejected by a number of posters some of whom may be recent buyers of the stock. If for no other reason why would anyone want to support the price prior to the spin off and help enrich the employee option holders and add to the NAV dilution? These employees have demonstrated no interest in either buying shares in the open market or retaining an ownership interest.
My observation covers not only what may happen but also the perception of what may happen. Clearly, the market should be gun shy about purchasing before the spin off.
The primary reason for the stock price languishing is buyers holding back for three reasons. First, the prospective buyers know that there is a potential 40 million option exercise shares to be sold into the market with probably no more than 25% buybacks of those shares; Second, some of those option exercise shares are probably now being sold; Third, the lower the price between now and the spin off the less the dilution and the lower the price of buybacks.
In summary,, a lower share price between now and the spin off is a win win for those who hold through the spin off and a lose lose for those selling before then.
Thanks for your reply. I share your concern about the high tax bill on a sale of ACAS. I believe you are correct that it may take a year to achieve a fair value for ACAS. My worry is that a bear market may intervene before then and the time table could be extended. I hope lightning strikes and fair value is axhieved sooner.
I understand your view that there is value to be unlocked here. What I don't understand is your willingness to view this as a long term investment with a management that appears to put its interests ahead of stockholders' interest. Many investors cite the quality of management as the most important factor in selecting an investment.
It did not bounce on the possibility of a spin-off, or plan for a spin-off, or filing a plan with the SEC. Now we eagerly await the spin-off anticipating that this will unlock value. Is it possible that it will not and we will then hope that the passage of time will unlock the value - say another year or two? Is it possible that if and when the value is unlocked that the appreciation from now will be no greater than that of the overall market? I do not know the answer to these questions but I continually ponder them.
By buying out the options of employees who want to exercise and sell this will have two positive effects: it will eliminate the downward pressure on the stock price from those intended sales and it will eliminate the need for
ACAS to buy back those shares when it is facing a limit on buybacks to 25% of the trading volume.
I believe that there are exceptions to the 25% rule. For example a direct purchase from a major holder. Alternatively, why doesn't ACAS buy out an employee who want to exercise an option an sell. If the spread is $100,000 then buy him out the option for $100,000. There would be no need to buy these shares back.
On another subject, will the spin off ultimately add shareholder value? All events to date have not: the possibility of a spin-off, then the announcement it was under consideration, the there was a plan, then it would be filed with the SEC in the 3rd Q Now we are waiting for the filing - what will be the market's responce?
It matters to those who would like to increase their holdings while the price is low. They may be better off waiting until just before the spin off.
I expect that the option holders will be waiting for a higher price before exercising and then immediately selling the shares. This should result in millions of shares being dumped on the market just prior to the spin off. The market knows this and will hold off buying until after the spin off. Hopefully, ACAS will be aggressively buying these dumped shares.
Is this the beginning of the stock option exercises which must be exercised before the spin off? There are about 40 million of these options with most of the resulting shares being dumped onto the market. This selling activity will over power the stock buyback program
Generally prohibits a trade on the open or the last 10 minutes of the day. Short sellers know this. Note the sharp fall off for ACAS in the final minutes of trading yesterday and the opening this morning. If you are a buyer this is when you want to time your purchases. If you are a seller you want to avoid these times.
Note tha tI concluded AT LEAST 10 times NOI. NOI could be higher than $1.60 and I believe the multiple could probably reach 11 times.
The principal take away from my calculation is the focus on NOI not NAV. For over a year now posters on this board have focused on NAV and the discount from NAV while it is lear that the market has been focusing on anemic earnings. NOI drives market valuations not NAV.
I agree. My focus is on NOI before tax. It climbed 21% from Q! to 34 cents Q2. This is an annual rate of $1.36. I hope it can be increased to $1.60. If $1.20 is allocated to ACIN it will support a price of at least $12.
With 40 cents available to ACAS (even with a tax expense for accounting not cash flow) it wll result in a market value of at least $4.
In summary, I believe that the total values of the post spin off companies will be at least 10 times the combined NOI before taxes. NOI is the driver of value not NAV.
If the stock is at least 15% below NAV. Assuming $13 price this is about 23 to 46 million shares which should substantially off set dilutions from stock market exercises.
I hope you are in the ballpark. Regarding the market, I continue to be bothered by the terrible performance of FSAM. Granted, they are a bad apple but some of it could rub off on ACAS.
Thank you again. To summarize, you believe that there will be about $1 dividend from and $12 value in ACIN but are not sure as the the earnings or value of ACAS. However, it would appear that in order to achieve a $3 value, for $15 combined value, it would have to have NI of at least $.25.
Thank you for the explanation. I have assumed that the accounting would probably change valuations. However, I am working with a pre split value of hopefully about $19 per share of which 80% will go to ACIN and 20% to ACAS. The question is what discounts will be applied to these values? Presently, the discount is over 30%. My hope is that the ACIN portion will be no worse than 20% for a market value of about $12. Hopefully ACAS will be no worse for a value of at least $3 resulting in a combined value of at least $15.
However, all of the is based on the earnings of the combined companies. Using a PE ratio of 11 it will require at least $1.36 of earnings to support the $15 value.
I am lost. Are you saying that the combined NAV of the post split companies will not be equal to the NAV of the pre-split ACAS?
I don't follow your math. If ACIN has NAV of 13.33 then ACAS would have NAV of 25% of that or 3.33. The combined NAV 16.66 is well below my projection of about 19 (assuming stock buy backs equal to option exercise proceeds).
Next, I assume that the combined companies will sell for about 11 times combined earnings. If ACIN could earn a dollar it might only sell for 11 not 12.