Soapstone Networks Inc (NASDAQ:SOAP) has engaged an investment bank to explore strategic alternatives for enhancing shareholder value, which may include paying a cash dividend, repurchasing shares, selling or spinning off assets, merging, sale or liquidation.
We started following SOAP on February 2 because it was trading well below its net cash value with an activist investor, Mithras Capital, disclosing an 8.7% holding in October last year. At its $2.54 close yesterday, SOAP has a market capitalization of $37.7M. We estimate the company’s net cash value to be 142% higher at $91.2M or $6.15 per share 128% higher at $86.1M or $5.78 per share [Thanks, shp].
The company’s announcement is as follows:
Billerica, MA, February 19, 2009 – Soapstone Networks Inc. (NASDAQ: SOAP), today announced that it has engaged Morgan Stanley & Co. Incorporated (“Morgan Stanley”) as its advisor to assist the Company in exploring strategic alternatives available to the Company for enhancing shareholder value, including but not limited to, continued execution of the Company’s business plan, the payment of a cash dividend to the Company’s shareholders, a repurchase by the Company of shares of its capital stock, the sale or spin off of Company assets, partnering or other collaboration agreements, a merger, sale or liquidation of, or acquisition by, the Company or other strategic transaction. There can be no assurance that the exploration of strategic alternatives will result in any agreements or transactions, or that, if completed, any agreements or transactions will be successful or on attractive terms. The Company’s strategic review is underway, but no timetable has been set for its completion.
“Like many companies in this macro-economic environment, we have heard from certain of our shareholders that, for their particular interests, a near-term cash return from the Company is desirable,” said Bill Leighton, the Company’s CEO. “With the help of our outside advisors, we will carefully consider this expressed interest in a cash return, within the process of evaluating a range of alternatives, understanding that our goal is, as always, to provide enhanced value to all of our shareholders.”
We continue to believe that SOAP is one of the best opportunities available at the moment. The company’s ongoing business is small in comparison to its net cash position, so it shouldn’t dissipate its cash any time soon. It has no off-balance sheet arrangements, little in the way of ongoing contractual obligations and no material litigation, so the cash position seems reasonably certain. The company’s engagement of an investment bank to explore strategic alternatives is a promising step in the right direction.
[Full Disclosure: We have a holding in SOAP. 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.]
In the second quarter of 2007, SOAP paid a special cash dividend of $28.3 million or $2.00 per share. Even after paying the dividend SOAP’s balance sheet value is still predominantly cash in the amount of $98.1M. Deducting its total liabilities of $6.9M, we estimate SOAP’s net cash value to be $91.2M or $6.15 per share. The company is now largely a cash box with little ongoing business.
Greenbackd 