Spencer Capital Management LLC has announced that it intends to nominate an alternate slate of candidates for the board of Trident Microsystems Inc (NASDAQ:TRID). We’ve been following TRID since January 21 this year, arguing that it’s a good candidate for an activist campaign for the following reasons:
- It’s large for a net cash stock: As its $1.30 close yesterday, the company has a market capitalization of $83M. That puts it into the strike zone for funds with around $100M under management.
- It’s deeply undervalued: We estimate its liquidation value is around $167M or $2.66 per share, which is more than 100% higher than its close yesterday.
- Its value is predominantly cash: TRID is trading at half net cash value of approximately $155M or $2.48 per share.
- Its stock is liquid enough: According to TRID’s Google Finance page, the average volume for the stock is more than 530,000 shares per day. It traded more than 655,000 yesterday. With 63M shares on issue, an investor seeking ~5% of TRID needs a few more than 3M shares, which should be readily achievable in a reasonably short period of time.
- Management holds a vanishingly small number of shares and are net sellers.
Spencer Capital Management is a “New York-based fund advisor that specializes in deep value investing” headed by Kenneth H. Shubin Stein, MD, CFA. We’re not sure how much stock Spencer Capital Management holds. TRID doesn’t seem to feature in its most recent Form 13F and no 13D has been filed since December 31, 2008, the end of the period covered by the Form 13F. The investor’s press release reads as follows:
SPENCER CAPITAL MANAGEMENT, LLC SEEKS TO RESTRUCTURE THE BOARD OF DIRECTORS OF TRIDENT MICROSYSTEMS
Effort Aimed At Strengthening Corporate Governance And Repositioning Struggling Technology Company
Spencer Capital Management LLC, a New York-based investment partnership, announced today its intention to put forth a slate of candidates for election to the board of Trident Microsystems, Inc. (TRID). Trident Microsystems, based in Santa Clara, California, is a designer of integrated circuits for the digital television market.
Kenneth H. Shubin Stein, MD, CFA, and founder of Spencer Capital Management is leading the effort to restructure the board with an aim towards improving corporate governance and repositioning the company.
“This is a company whose revenue has deteriorated significantly, product line has lost ground and business model is under enormous pressure,” said Dr. Shubin Stein. “We intend to run a slate of candidates whose interests will be aligned with shareholders and who have the investing and technological expertise to effectively analyze the assets of the company and maximize their value. We encourage all shareholders to reach out to us to further discuss this proposal.”
Hat tip to JM.
Alas – TRID looks like a horrendous investment after looking at yesterday’s earnings release and listening to a sad sad excuse for a conf call.
Without going into the gory details, the cash burn was $9.6 mm (close to my estimate) but TRID guided to cash burn of $17-$22 mm in the June quarter!! No explanations given and the half-witted sell side analysts didnt bother to ask management to elaborate…..
oh, did I mention that the CFO said that they paid in stock for a recent acquisition because they wanted to conserve cash. I would be conserving cash in his place as well because how else will I pay my salary for the next few years?
Cheers!
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Ugly.
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In the press release it has this paragraph:
“In connection with the acquisition, Trident will issue 7.0 million common shares to Micronas, which are valued at approximately $11 million, based on the closing price of Trident common stock on Monday March 30, 2009. Trident will also issue warrants to Micronas to acquire up to 3.0 million additional Trident shares. One million warrants will vest on each of the second, third and fourth anniversaries of the closing of the acquisition, with exercise prices of $4.00 per share, $4.25 per share and $4.50 per share, respectively. If not yet exercised, the warrants will expire on the fifth anniversary of the closing of the acquisition. Upon closing, Micronas will own approximately 10 percent of Trident, without giving effect to the exercise of the warrants or any other dilutive securities.”
This statement clarifies that the company will be a going concern and liquidation is not on there mind.
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Good pick up, Jim. We’ll have a close look at it.
G
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Greenbackd, check out TRID’s latest news. http://sev.prnewswire.com/computer-electronics/20090331/AQ9205131032009-1.html
They estimate their cash to be $200 Million this quarter as opposed to $212 of last quarter. They don’t mention their liabilities though. Their acquisition seems interesting as a going concern.
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Can any one comment on Shubin Stein’s background? Has he ever been involved in shareholder activism? successfully? The contraction in his fund’s assets (based upon what I can ascertain from 13F-HR filings alarms me).
Thanks.
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Double F, we’ve not come across Shubin Stein before. We’d also be interested to hear anything about him.
G
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