TURN buyback, part 2
18 minute call had a few interesting details
This post is Part 2 on my TURN buyback review - see Part 1 from yesterday.
I listened to TURN’s 17 minute, 55 second call on the buyback announcement yesterday and in typical microcap fashion there were zero questions and some interesting details. My thoughts:
Rendino announced the ~370K share buyback at $4.41 was at 67% of NAV. One way to interpret this information is there is $5m (the share repurchase authorization) worth of buying power around this price (assuming constant NAV), and if NAV increases the company arguably would like to do buybacks if the stock doesn’t move
The company was par-for-the-course bullish on the microcaps it owns and specifically called out Synchronoss (SNCR) as being mispriced; the company has a $1.15/share offer out from B. Riley (RILY is the largest current holder of the stock) and Rendino seemed to suggest the FCF it produces makes this price low. Why SNCR trades at $0.90, I’m not sure
Arena Group (owner of Sports Illustrated, ticker AREN) is another one TURN owns where it is down big YTD (-61%+) but seems to have no intention of selling. TURN was pleased with earnings and attributes the decline completely to a refinancing wall at year end. B. Riley owns most of the debt and Rendino said it is highly likely RILY would refinance the debt (IIRC RILY has a long relationship as AREN’s bank and I think led some other capital markets deals for them)
Daniel Wolfe (President) gave an overview of operating and other expenses and looks like some small victories here for TURN - they got some savings hiring a new auditing firm and mutually agreed with Tonia Pankopf to end her board term, so one less member of the board means less board pay
TURN received another $1m+ payment from Petra in April and has some more cash coming in 2024
TURN sold its ALTG (Alta Equipment Group) position around $18 for technical reasons but likes the management team & business and would look to own again if the price were right. This isn’t new news as the sale was before 3/31, and you can tell from the slide below the company ended up with $7.2m in cash from the sale of ~411K shares. I am not sure where they deployed it, but what this does show is the TURN portfolio can turn over quickly (no pun intended), and I am convinced they can keep playing the buyback game when appropriate in part because the public market doesn’t know what NAV is at any point in time
Overall, I’m in for the long term with TURN even though the stock price has been a dud for years now (-30% over last 5 years). At some point I expect the stock picking to turn around and NAV to increase. I have no idea when the ~30% discount to public securities and cash will close, but I do know management has shown they’ll buy the stock when this discount exists. There is no debt on the company. I appreciate having two experienced and honest managers who specialize in microcap activism; there are hedge funds that would charge you an arm and a leg in fees for the same thing, and likely have performed worse this year.
As always, watch the business and not the stock, so I’m turning a blindeye to the lackluster stock performance this year and giving another year+ for the TURN thesis to pan out.