Any thoughts about this?

Anyone know if Klarman is prone to initiate liquidations himself?

But the company has been capitalized so it can spend the money it has. Using liquidation value you’re assuming the company will liquidate, and maybe it will if the activists are strong enough. But it doesn’t make much sense to me to liquidate a company that has been given cash for the specific purpose of spending it to develop drugs.

I understand that liquidation value is also helpful to find a worse-case value. However, if FACT doesn’t liquidate itself, it’s hard to imagine this cash will be there under a worse-case scenario.

Liquidation value can be a helpful measure, just not in this situation.

If FACT was going to keep paying its full lease liability it could just sublet the building.

More important, in a breach of contract action the plaintiff has to “mitigate” damages. In this case that means renting the facilities to another renter. FACT will only pay for the portion of the lease liability that is not mitigated by the landlord.

I find this significant since the lease liabilities are pretty much the bulk of the debt.

I was just reading the Def 14A last night, and noticed that the vote is only for holders of record on Apr 1.

I’m just hoping this new slate of directors gets elected. I can’t imagine why anyone would vote for the incumbent directors (except possibly their mothers) as they have no plan to improve shareholder value.

I decided to tip my toe in on this one, but it’s certainly up in the air until the shareholder vote.

Sorry, misunderstood your point. You’re right. Your downside is limited to the value of your stake, not to your last shirt button.

Let’s talk AMLN calls.

G

Yeah, so the maximum downside is the market price, or 100% of you investment.

‘unlimited’ loss comes from asymetric positions like short sales, where you can lose more than 100% of your capital – i.e. unlimited.

Now lets talk amln call options, j/k

We’re considering the possibility that FACT becomes a valley of ashes before the alternate slate gets control. We’d guess that the share price will be much lower in 12 months if the status remains quo.

G

I’m not trying to nitpick – seriously – but the upside is 23 – 31, the downside is 9.05 or whatever the market price is, not unlimited.

Also – i love the idea and i love the blog. This is why Carl Icahn is so attracted to biotechs etc – b/c most value investor shy away from them so there is less money chasing and therefore better risk/reward.

Every value investor on the planet – from my 5 year old nephew to Marty Whitman – knows how to analyze a burger joint.

Cheers.

It’s an activist play. You could speculate about the future earnings, but you’d be doing just that: speculating. It doesn’t have any earnings history, ergo, no earnings power. The best valuation for this company is one based on its assets. We can’t project the value of the IP reliably, so we’re looking only at the most conservative valuation: its liquidation value excluding the IP, and that valuation starts at nil because of its contractual obligations, cash burn and termination payments.

G