Yesterday was the record date for the first dividend in the liquidation of Leadis Technology Inc (NASDAQ:LDIS). The dividend is likely to be approximately $0.93 per share. The board estimates that “if we are able to dispose of substantially all of our non-cash assets, the aggregate amount of all liquidating distributions that will be paid to stockholders will be in the range of approximately $0.93 to $1.20 per share of Leadis common stock.” After the initial $0.93 dividend, the remaining dividends will be in the range of nil to $0.27 ($1.20 less $0.93). LDIS closed yesterday at $0.99. If the stub starts trading tomorrow at $0.06 ($0.99 less $0.93), it becomes an interesting security offering the potential for some substantial upside.
The definitive proxy filings have the detail:
How much can stockholders expect to receive if the Plan of Dissolution is approved at the special meeting?
At this time, we cannot predict with certainty the amount of any liquidating distributions to our stockholders. However, based on information currently available to us, assuming, among other things, no unanticipated actual or contingent liabilities, we estimate that over time stockholders will receive one or more distributions that in the aggregate range from approximately $0.93 to $1.20 per share. This range of estimated distributions represents our estimate of the amount to be distributed to stockholders during the liquidation, but does not represent the minimum or maximum distribution amount. Actual distributions could be higher or lower.
This estimated range is based upon, among other things, the fact that as of August 31, 2009, we had approximately $28.6 million in cash, cash equivalents, restricted cash equivalents and short-term and non-current investments. In addition, subsequent to August 31, 2009, we received approximately $3.2 million in connection with the sale of certain assets to IXYS Corporation. We expect to use cash of approximately $2.3 million to satisfy liabilities on our unaudited balance sheet after August 31, 2009. In addition to converting our remaining non-cash assets to cash and satisfying the liabilities currently on our balance sheet, we have used and anticipate using cash for a number of items, including but not limited to: satisfying capital leases and other contractual commitments. In addition to the satisfaction of our liabilities, we have used and anticipate continuing to use cash in the next several months for a number of items, including, but not limited to, the following:
• ongoing operating expenses;
• expenses incurred in connection with extending our directors’ and officers’ insurance coverage;
• expenses incurred in connection with the liquidation and dissolution process;
• severance and related costs;
• resolution of pending and potential claims, assessments and obligations; and
• professional, legal, consulting and accounting fees.
We are unable at this time to predict the ultimate amount of our liabilities because the settlement of our existing liabilities could cost more than we anticipate and we may incur additional liabilities arising out of contingent claims that have not been quantified, are not yet reflected as liabilities on our balance sheet and have not been included in the estimated range of potential distributions, such as liabilities relating to claims that have not been resolved and claims or lawsuits that could be brought against us in the future. If any payments are made with respect to the foregoing, the estimated range of distributions to stockholders will be negatively impacted and less than estimated. If the ultimate amount of our liabilities is greater than what we anticipate, the distribution to our stockholders may be substantially lower than anticipated. Therefore, we are unable at this time to predict the precise nature, amount and timing of any distributions due in part to our inability to predict the ultimate amount of our liabilities. Accordingly, you will not know the exact amount of any liquidating distributions you may receive as a result of the Plan of Dissolution when you vote on the proposal to approve the Plan of Dissolution. You may receive substantially less than the low end of the current estimate.
For some further background, see Shake&Bake’s take on LDIS.
Hat tip Joseph.
[Full Disclosure: We have a holding in LDIS. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]
Greenbackd 
i get distributions of $.93 in Dec + $.11 in Q1 from LED driver business + .08 final distribution target of YE 2010
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Taking a look at the most recent 10-Q balance sheet, this information is revealed:
Cash and cash equivalents: $25.107 M
Short-term investments: $3.556 M
Accounts receivable, net : $2.522
Inventories: $176 K
Receivable from sale of assets and technology: $3.313 M
Income taxes receivable: $335 K
Prepaid expenses and other current assets: $1.371 M
Property and equipment, net: $717 K
Other assets: $ 1.531 M
Total Liabilities: $4.217 M
Adjustments to Asset value:
Cash: $25.107 M (no adjustment)
ST Investments: $3.556 M (no adjustment)
Accounts Receivable: If a company is liquidating, that means they aren’t sticking around to wait for clients to pay their bills. I have a thorough understanding of the receivables business and tow options are present concerning receivables during a liquidation.
#1: The company miraculously receives all payments that are owed to them for products sold to the client before the liquidation takes place.
#2: A receivables business offers to purchase the receivables at a large discount. Currently, receivables companies are offering between $0.04 – $0.06 on the dollar. I’m invested with one particular receivables business who has been purchasing these obligations for as low as $0.02 on the dollar. Having knowledge of this information and assuming Leadis Technology has the best receivables in town, I’ll value their receivables on the high side.
Accounts Recievables: $2.522 x .06 = $151.3 K
Inventories: Consists of $122 K of finished goods & $54 K in Work-in progress. Calculations as follows:
$176 K – $54 K = $122 k x .50 = $61 K
Receivable from sale of assets and technology: $3.313 M (no adjustment; these items were purchased by a company and they often pay, in addition, this amount is worth going to court over and easier to receive a judgment from than general receivables).
Income Tax Receivables: $335K x 0 = $0. This is a non-cash item and without knowing the tax situation after the liquidation, I have no idea whether the company will owe taxes or if this amount will be suffice since it was an overpayment in a previous time period. In any event, its a credit and isn’t considered a readily ascertainable cash item.
Prepaid expenses and other current assets: $1.371 M x 0 = $0. Prepaid expenses is not a tangible item. Other current assets are typically useless items that carries no value and without having knowledge of a description for these ‘assets’, they are really no asset at all.
Property and equipment: $717 K. Its difficult to assign a value to P&E without knowing exactly what it is. Since I haven’t reviewed previous filings other than the most recent 10-Q, I can’t confidently place a close estimation of value to these items. Depending whether the property is a couch, television, coffee maker, it may carry very little value compared to if it were a building or ownership of land. For the sake of being conservative, the following formula is used:
P&E: $717 K x .50 = $358.50 K
Other Assets: $1.531 x 0 = $0. Other Assets are typically worthless. If they held significant value, they would be listed as PPE.
TL: $4.217 (no adjustment)
Outstanding Shares: 30.08 M
Liquidation Valuation Per Share: $0.82 per share
This valuations doesn’t take into effect any contractual obligations the company may have regarding executive compensation, long term health care benefit packages, or any additional items such as these. Also, the valuation doesn’t take into effect any legal fee’s, auction fee’s, sales fee’s, and/or advisory fee’s that may have a material adverse affect on the asset value of the company.
I believe the company is being overly optimistic in regards to their dividend projection and would caution that even if the dividend is payed and the stock falls to $0.06, as mentioned in this article, I would be very cautious of forming a position in the company in hopes of more to come. I see no margin of safety and would stay clear of this one.
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Double check your math. Using your numbers, I get a total value of $28.3m or $.94 per share.
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You’re correct, I wrote down the wrong number. Looks like we share something in common because the correct number isn’t what I wrote OR what you wrote. The correct number is $0.96 per share. Thanks for the heads up :)
Regardless of the corrected valuation, there’s no margin of safety to justify the purchase.
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