That position does not give him any leverage, especially since you seem to believe it is worthless. It is certainly not a controlling stake. His 10% stake gives him no leverage in the talks that have already been ongoing for several months. And it is laughable to suggest that he, as a minority equity holder, has the ability to take the company into BK. I think management and the creditors would find your position ridiculous.
I think raging bull has the correct take on this. Based on my experience (I have seen this movie before) the equity will be worth $1.50-$3.00 in the reorganization. That is the bet Koshla is making.
"Shareholders will be ZEROED out." "Khosla buying shares now is cheap and gives him leverage for long term gains." Say what? Do you read what you write? Why would Khosla buy shares that will have no value? How does owning worthless stock give him leverage? Your post is nonsensical.
The debt repayments were accelerated since they blew the covenants. That is the problem they are facing and the reason for the BK filing.
I may be wrong, but don't they have a debt payment due today or tomorrow, in which case they need to make some sort of announcement.
Don't know about the timing, but I think the likelihood is that they file a prepackaged BK soon. But I also assume that the shareholders will get to keep a share of the equity. Depending on the details, the stock could go up on the news (or down, although I am guessing up).
I'm sure bidders have already been solicited. In fact, I think we have to assume that GNK has put together a prepackaged BK and they are out soliciting approval from creditors. With so many parties involved, word of the plan is undoubtedly leaking out. With the stock going up, the most likely conclusion is that the plan treats the shareholders fairly well.
I was more concerned with the pattern of selling.You don't need big volume to periodically hit the stock and drive it down a dime, and then step away. But maybe that's just me being paranoid.
I think the debt holders are working hard to keep GNK's stock price down, hoping to get a better conversion price or warrant pricing in the reorg. Clearly some big sellers who seem more interested in bombing the stock than in working out of a position in an orderly fashion.
My prediction: debt holders will take converts or warrants in exchange for waiver. Shareholders will be diluted but not wiped out. No BK, too costly for everyone. I guess we'll know in two weeks or so.
Institutions were net buyers of almost 3 MM shares in Q-4 . Late day and strategic selling pressure, which has become increasingly common,was not coming from the institutions. Oddly enough, In spite of institutional buying, short interest remained flat. Just another reason to believe that there is a lot of naked short selling. Who else can be providing shares to institutional buyers who already control almost 100% of the outstanding shares? Actual short position could be huge. Much bigger than the reported short position which is already very large. Not sure what could initiate a short squeeze, but unless ACCO trends toward bankruptcy (which is certainly not happening) a short squeeze seems inevitabel
BTW, somebody is short a lot of this stock and is working hard to keep the price down. Notice how frequently a seller comes in to hammer it on the close. My suspicion is that there may be a lot of naked shorting going on. That shouldn't be a problem over the long run if thecompany can keep generating cash and deploying it wisely. but it is frustrating on a day like today.
I agree. They should generate enough cash ($200 MM) over the next 16-18 months to reduce debt to their target level. From that point forward they will be generating about $1.20/share in FCF which could be used to buy back a lot of stock if it is still at this level, which I doubt it will be. The key to any FCF story is what managment does with the cash. Buying back stock at 6/share gives them an immediate after-tax 20% return, even assuming no growth, and is hugely accretive to earnings.
Hearing Boris talk about acquisitions on the earnings call makes me a little nervous. I don't think they could make any acquisitions that will give them the same return as buying back their own stock at current prices. But I agree that paying down debt should be their #! priority.
Your $12 target sounds about right although I think it could be higher.
Obviously they aren't generating enough cash to make the loan payment. Nobody disputes that. But with rates at current levels they can pay the interest The question is can they resolve their debt payment problem thru debt renegotiation, asset sales, etc without going through BK. The longs think they can. Time will tell. The concern I have is how much it will cost in equity dilution to get a waiver. I am betting that any negotiations will be successful enough to result in a higher stock price.
Lets get one thing straight. Nobody buys debt at 90% of face hoping to take a company thru BK. It is a long, complex, and very expensive process. All of that to get a 10% return? Any value over the value of the debt would go to the convert holders, or to the original equity holders if the converts are made whole. It makes no sense. Nobody can "handily force BK without further ado". The debt holders who bought this $.90 debt know their debt is 100% good, otherwise they would not have bought it.
And GNK is not losing any cash. They can easily cover the interest expense but they cannot meet the amortization payment. The debt holders have some leverage over the company but they maximize their return by making the company pay a steep price for a waiver, with a higher interst rate and/or warrants. Taking the company into BK would be a very risky and potentially costly strategy, and one which these particular debt holders have not been known to pursue in similar situations in the pasrt.
If you believe that, you should be shorting the heck out of this for a guaranteed 100% profit. I guess I've been buying the stock you are shorting.
I assume they bought all the debt they could. I wouldn't expect them to buy all the debt because it is held by several different lenders, many of whom might willingly want to hold on. So, step one, buy all the debt you can at a discount and, step two, try to buy the equity.
I think the purchase GNK's debt at 90% of face value was the initial move on the part of the distressed debt holders to buy the entire company. By buying the debt at a discount they lock in some savings, and then they go after the equity with a $4-$5/share bid. With only 46MM shares O/S, it wouldn't cost much, relative to the investment they've already made in the debt, and they could own the whole company. The upside then becomes much greater than a paltry 10% return on their debt investment. The fact that they are willing to buy the debt at close to face value shows their confidence in the future of the company.
As a shareholder, I would prefer a debt restructuring as outlined in scenario #1, but a quick double from here would be OK also.