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Posts Tagged ‘Liquidation Value’

Tiberius Capital sends letter urging MATH shareholders to tender at $1.25

Posted in Activist Investors, MathStar Inc (OTC:MATH), Stocks, tagged , , , on July 13, 2009| 2 Comments »

Tiberius Capital has sent a letter to MathStar Inc (OTC:MATH) shareholders urging them to tender all of their MATH shares at $1.25 per share. Tiberius Capital’s offer expires on July 20, 2009, at 11:59 p.m. New York City time. Said John M. Fife, a principal of Tiberius:

The MathStar Board shut down business operations over a year ago, and since then there has been no deal, no merger partner and no value creation for the MathStar shareholders.

We’ve been following MATH since December last year (see our post archive here) when it was trading at $0.68. We initiated the position because MATH was trading below its net cash value and had two substantial stockholders lobbying management to liquidate. The stock is up 76.5% to close Friday at $1.20, giving it a market capitalization of $11.0M. We last estimated MATH’s liquidation value to be around $11.7M or $1.27 per share. That value is predominantly cash and short term investments and doesn’t take into account any further value that the sale of the FPOA technology and intellectual property may yield. The board’s estimate of the company’s liquidation value is slightly higher than ours, at $1.40 per share. From the amended Recommendation Statement:

As of March 31, 2009, the Company had cash, cash equivalents and long-term investments of approximately $14,782,000. After full payment of the Company’s outstanding obligations for its leased space and its contractual obligations for design tool leases, and assuming liquidation expenses of approximately $500,000, the liquidation value per Share would be approximately $1.40.

This board’s estimate of the liquidation value also excludes revenue from any sales of the MATH’s existing inventory of field programmable object array chips or its FPOA technology.

Tiberius Capital’s letter to shareholders is set out below:

An important message regarding your MathStar common shares

OFFER TO PURCHASE FOR CASH

All of the Outstanding Shares of Common Stock

of

MathStar, Inc.

at

$1.25 Net Per Share

pursuant to the

Offer to Purchase dated June 1, 2009, as amended,

by

Tiberius Capital II, LLC

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE

AT 11:59 P.M., NEW YORK CITY TIME, ON JULY 20, 2009,

UNLESS THE OFFER IS FURTHER EXTENDED.

July 8, 2009

Dear Fellow Shareholders:

My name is John Fife, and I am a principal of Tiberius Capital II, LLC (“Tiberius”), a value-opportunity fund located in Chicago that, like you, is a MathStar, Inc. shareholder. I am sending you this letter to make sure that you are aware that Tiberius is offering to purchase all outstanding shares of common stock of MathStar, Inc., a Delaware corporation, (“MathStar” or the “Company”), par value $0.01 per share (the “Shares”), at a net price per share equal to $1.25 in cash (without interest and subject to applicable withholding taxes), upon the terms and subject to the conditions set forth in the Offer to Purchase (the “Offer to Purchase”) and the related Letter of Transmittal (the “Letter of Transmittal” and, together with the Offer to Purchase and any amendments or supplements thereto, the “Offer”). The Offer to Purchase and the Letter of Transmittal are attached as Exhibits to our Tender Offer Statement on Schedule TO filed with the SEC on June 1, 2009, and subsequently amended. References in this letter to “Purchaser”, “we”, “us” or “our” are to Tiberius.

IF YOUR BROKER IS THE HOLDER OF RECORD (DIRECTLY OR INDIRECTLY) OF MATHSTAR SHARES HELD FOR YOUR ACCOUNT, THEN A TENDER OF SUCH SHARES CAN BE MADE ONLY BY YOUR BROKER (OR YOUR BROKER’S NOMINEE) AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. PLEASE SEND YOUR BROKER THE FORM ACCOMPANYING THIS LETTER IN ORDER TO INSTRUCT YOUR BROKER (OR YOUR BROKER’S NOMINEE) TO TENDER MATHSTAR SHARES HELD FOR YOUR ACCOUNT, SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE OFFER.

WE URGE YOU TO INSTRUCT YOUR BROKER TO TENDER YOUR MATHSTAR SHARES TO TIBERIUS FOR SEVERAL REASONS:

1. MathStar curtailed business operations in the second quarter of 2008, and since that time no “deal,” merger partner, or technology licensing has materialized;

2. In Tiberius’ opinion, MathStar’s Board of Directors (the “Board”) is only interested in entrenching themselves and not in enhancing or preserving shareholder value. CEO Pihl’s total compensation for 2008 was $463,331 (although he apparently repaid $119,441 in 2009). The four other MathStar directors received total 2008 compensation of $141,035;

3. In Tiberius’ opinion, the Board’s articulated desire to preserve MathStar’s net operating losses (“NOLs”) for a prospective business combination is unrealistic. Tiberius tried working with the Board to preserve the NOLs prior to making the tender offer, and its proposal received no response from the Board;

4. The upcoming shareholder vote on whether to liquidate MathStar is advisory only. Even if the shareholders vote in favor of liquidation, the Board might, in our opinion, be inclined to ignore the will of the shareholders; and

5. If shareholders don’t tender their Shares to us, and if we withdraw the tender offer, the value of those Shares, in our opinion, could very well decline as the Board continues to spend cash and deplete the Company’s assets. We believe our tender offer is a superior proposal for the MathStar shareholders in that it gives you liquidity for all of your Shares, without the worry that the price may decline if other shareholders decide to sell at the same time.

TIBERIUS BELIEVES IT IS OFFERING VERY CLOSE TO LIQUIDATION VALUE IN CASH TODAY, BASED ON PUBLICLY AVAILABLE INFORMATION RELEASED BY THE COMPANY

A. It its June 26, 2009 press release, the Company stated that it had “cash and securities in the amount of $14.0 million”. Subtracting from that number the total liabilities of $530,000 (as reported on the Company’s March 31, 2009 balance sheet), and also subtracting “off balance sheet” liabilities such as $806,000 in future obligations due under the “non-cancellable lease” (as reported on page 8 of the Company’s March 31, 2009 10-Q) and $216,286 due to Mr. Pihl in severance under his employment agreement, leaves cash available to distribute to shareholders of $12,447,714 or $1.36 per Share (based on 9,181,497 Shares outstanding, as reported in the Company’s March 31, 2009 10-Q).

B. However, in calculating the liquidation value, the $1.36 per Share does not include windup expenses, or the ongoing expense of operating MathStar as a public company during the windup. During the first quarter of this year (the most recently reported quarter), MathStar’s net cash used in operating activities was approximately $290,000 or 3.2 cents per Share (according to MathStar’s March 31, 2009 10-Q). If liquidating MathStar takes four months and if, during this time, the Company’s operating expenses were the same as in the first quarter of this year (adjusting pro rata for the longer period), and other expenses associated with liquidation and windup are $275,000, the liquidating value payable to shareholders would be $11,786,047 or $1.28 per share — very close to the $1.25 in cash that Tiberius is offering today.

Furthermore under the Tiberius offer shareholders get cash today rather than risking that the management of MathStar will continue to resist liquidation as they have done in the past and as they continue to do.

We also point out the following quotations from MathStar’s own 2008 10-K, filed on March 31, 2009:

•“On May 20, 2008, the Board of Directors voted to curtail research and development activities and ongoing operations.…”

•“[MathStar’s] FPOA chips are highly complex and may contain defects, errors or failures. … [MathStar] has experienced defects in the past and may experience defects in the future.”

•“[MathStar’s] technology does not have patent protection outside of the United States. This could result in the appropriation of [MathStar’s] technology outside of the United States, which could have an adverse effect on [MathStar’s] ability to sell or otherwise capitalize on [MathStar’s] intellectual property.”

•[MathStar’s] common stock is thinly traded, and [MathStar’s] stock price may be volatile, which means that purchases of [MathStar’s] common stock could incur substantial losses.”

•“If there are substantial sales of [MathStar’s] common stock, [MathStar’s] stock price could decline.”

•“[MathStar] may be at risk of shareholder litigation. … Some MathStar shareholders have informed [MathStar’s] Board that they believe [MathStar] should enter into particular transactions, including mergers and liquidation, and that they disagree with the Board’s actions to date.”

In light of the above uncertainties and risks, Tiberius urges all MathStar shareholders to tender all of their shares.

Your attention is directed to the following information about the Offer:

•The Offer price is $1.25 per Share, net to you in cash without interest and subject to applicable withholding taxes upon the terms and conditions set forth in the Offer to Purchase and the Letter of Transmittal. All shareholders who have tendered will receive this Offer price of $1.25 per Share;

•The Offer is being made for all of the outstanding Shares;

• THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., NEW YORK CITY TIME, ON JULY 20, 2009, UNLESS THE OFFER IS FURTHER EXTENDED;

•The Offer is conditioned upon, among other things, Purchaser being satisfied, in its reasonable discretion, that: (i) there have been validly tendered and not withdrawn prior to the expiration of the Offer at least 3,000,000 outstanding Shares; (ii) no takeover defenses (such as a “poison pill” shareholder rights plan, a staggered board of directors, an increase in the size of its Board of Directors from its current five members, or any issuance of preferred stock) exist for MathStar immediately prior to the expiration of the Offer; (iii) Purchaser will control MathStar’s Board of Directors immediately after the Offer is consummated (which condition has been waived by Purchaser); (iv) MathStar retains a minimum of $13.75 million in cash or long-term marketable securities immediately prior to the expiration of the Offer; (v) the restrictions on business combinations with interested stockholders set forth in Section 203 of the General Corporation Law of the State of Delaware are inapplicable to the Offer; and (vi) the total stockholders’ equity of MathStar is at least $14 million immediately prior to the expiration of the Offer. Other conditions of the offer are described in the Offer to Purchase under the caption “Conditions of the Offer.” The Offer is not subject to any financing condition; and

•Except as otherwise provided in the Letter of Transmittal, stockholders who tender Shares will not be obligated to pay brokerage fees or commissions to the Information Agent or the Depositary or stock transfer taxes with respect to the purchase of Shares by Purchaser pursuant to the Offer.

The Offer is being made solely by means of the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares, including holders of Shares located in jurisdictions outside the United States. Purchaser is not aware of any U.S. state statute that would prohibit Purchaser from making the Offer to holders of Shares in that state. If Purchaser becomes aware of such a statute, Purchaser will make a good faith effort to comply with such statute in making the Offer. Only to the extent permitted by Rule 14d-10(b)(2), the Offer will exclude all holders of Shares in a U.S. state where Purchaser is prohibited from making the Offer by administrative or judicial action pursuant to a state statute after a good faith effort by Purchaser to comply with such statute. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdiction.

In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) Share certificates (or a timely Book-Entry Confirmation), (ii) a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof), with any required signature guarantees (or, in the case of a book-entry transfer effected pursuant to the procedures set forth in the Offer to Purchase), an Agent’s Message (as defined in the Offer to Purchase) in lieu of a Letter of Transmittal) and (iii) any other documents required by the Letter of Transmittal. Accordingly, tendering shareholders may be paid at different times depending upon when Share certificates or Book-Entry Confirmations with respect to Shares are actually received by the Depositary. Under no circumstances will interest be paid on the purchase price to be paid by Purchaser for the Shares, regardless of any extension of the Offer or any delay in making payment.

Please instruct your broker to tender any or all of your Shares by completing, executing and returning to your broker the instruction form accompanying, this letter. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified in your instructions.

[Full Disclosure:  We do not have a holding in MATH. 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.]

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Lloyd I Miller III discloses DITC holding; Supports Lamassu Holdings’ candidates

Posted in Activist Investors, Ditech Networks Inc (NASDAQ:DITC), Greenbackd Portfolio, Lamassu Holdings LLC, Lloyd I. Miller III, Net Cash Stocks, Net Net Stocks, Stocks, tagged , , , , on July 10, 2009| Leave a Comment »

Lloyd I Miller III has disclosed a 5.9% holding in Ditech Networks Inc (NASDAQ:DITC). According to the 13D filing, Mr. Miller supports Mr. Leehealey and Mr. Sansone – the director candidates nominated by Lamassu Holdings for election to the board of directors at the DITC annual meeting – as “candidates who are independent of management and he seeks to encourage greater attention to corporate governance by all members of the Board of Directors.”

We’ve been following DITC (see our archive here) because it is trading below its net cash value with an investor, Lamassu Holdings LLC, disclosing a 9.4% holding in November last year. Lamassu has previously offered to acquire DITC for $1.25 per share in cash. Lamassu says that it “anticipates its due diligence requirement will take no more than two weeks and there is no financing contingency.” Lamassu has now nominated two candidates for election to the board “who are committed to enhancing shareholder value through a review of the Company’s business and strategic direction.” The stock is up 49.4% from $0.89 to close yesterday at $1.33, giving the company a market capitalization of $35M. We last estimated the net cash value at around $32.2M or $1.23 per share and the liquidation value at around $43.4M or $1.65 per share. While the deterioration in value is a concern, Mr. Miller’s support of Lamassu Holding’s director candidates introduces a new element to the position. We’re inclined to hold on to see how the annual meeting plays out.

[Full Disclosure:  We do not have a holding in DITC. 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.]

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Ditech Networks Inc (NASDAQ:DITC) 10Q update

Posted in Activist Investors, Ditech Networks Inc (NASDAQ:DITC), Greenbackd Portfolio, Lamassu Holdings LLC, Stocks, tagged , , , on July 10, 2009| Leave a Comment »

Ditech Networks Inc (NASDAQ:DITC) has filed its 10Q for the period ended April 30, 2009.

We’ve been following DITC (see our archive here) because it is trading below its net cash value with an investor, Lamassu Holdings LLC, disclosing a 9.4% holding in November last year. Lamassu has previously offered to acquire DITC for $1.25 per share in cash. Lamassu says that it “anticipates its due diligence requirement will take no more than two weeks and there is no financing contingency.” Lamassu has now nominated two candidates for election to the board “who are committed to enhancing shareholder value through a review of the Company’s business and strategic direction.” The stock is up 49.4% from $0.89 to close yesterday at $1.33, giving the company a market capitalization of $35M. We last estimated the net cash value to be $34.3M or $1.31 per share and the liquidation value to be around $47.5M or $1.81 per share. We’ve now reduced our estimate of the net cash value to around $32.2M or $1.23 per share and the liquidation value to around $43.4M or $1.65 per share.

The value proposition updated

DITC has continued to consume cash in its operations through the last quarter, bringing the cash burn over the last year to $22.6M. At April 30, 2009, all of DITC’s short-term and long-term investments were held in corporate notes and asset backed auction rate securities. According to the 10Q, the long-term investments are tied to auction rate securities that failed to settle at auction beginning in fiscal 2008, and for which there appears to be no near-term market. Although these securities would normally be classified as short-term, as they typically settle every 28 days, DITC has reclassified them long-term pending them settling at auction. At June 30, 2009, DITC continued to hold auction rate securities with a par value of $13.7 million. Our updated valuation follows (the “Book Value” column shows the assets as they are carried in the financial statements, and the “Liquidating Value” column shows our estimate of the value of the assets in a liquidation):

DITC Summary 2009 4 30In the last 10Q, DITC wrote that it believed its “legacy business to be at or near cash flow break even” which would “begin to be more evident in our financial results in the coming quarters.” That rosy prognosis has not manifest itself this quarter. Maybe DITC management meant the next quarter.

Off-balance sheet arrangements and Contractual obligations

According to the 10Q, DITC has around $4.0M in contractual commitments (including $247M in operating leases and $2.7M in purchase commitments), around $2.6 of which falls due this year and the remainder falling due within the next 3 years. DITC has no other material commitments or off-balance sheet liabilities.

Conclusion

The deterioration in DITC’s value is a concern, but, for reasons we’ll discuss in the next post, we propose to continue to hold DITC in the Greenbackd Portfolio for the time being.

[Full Disclosure:  We do not have a holding in DITC. 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.]

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BA Value Investors files 13D for VXGN; calls for immediate $10M distribution to shareholders

Posted in Activist Investors, Stocks, VaxGen Inc (OTC:VXGN), tagged , , , , on July 9, 2009| 7 Comments »

BA Value Investors has disclosed a 5.1% holding in VaxGen Inc (OTC:VXGN) and, in a letter to the board of directors, called on VXGN to “act promptly to reduce the size of the board to three directors; reduce director compensation; change to a smaller audit firm; terminate the lease of its facilities; otherwise cut costs; make an immediate $10 million distribution to shareholders; make a subsequent distribution of substantially all the remaining cash after settling the lease termination; distribute any royalty income to shareholders; and explore ways to monetize the public company value of the Issuer and use of its net operating losses.”

We’ve been following VXGN (see our post archive here) because it is trading at a substantial discount to its net cash position, has ended its cash-burning product development activities and is “seeking to maximize the value of its remaining assets through a strategic transaction or series of strategic transactions.” If the company is unable to identify and complete an alternate strategic transaction, it proposes to liquidate. At its $0.46 close yesterday, VXGN has a market capitalization of $15.2M. We estimate the company’s net cash value to be around $26.5M or $0.80 per share. VXGN has other potentially valuable assets, including a “a state-of-the-art biopharmaceutical manufacturing facility with a 1,000-liter bioreactor that can be used to make cell culture or microbial biologic products” and rights to specified percentages of future net sales relating to its anthrax vaccine product candidate and related technology.

VXGN’s main problem is a lease dispute with its landlord, in which the landlord seeks $22.4M. From the last 10Q:

In February 2009, a lawsuit was filed against the Company by plaintiffs, Oyster Point Tech Center, LLC. The plaintiffs generally allege that the Company defaulted on the lease on the 349 Oyster Point, South San Francisco facility. The complaint seeks possession of the premises and the balance of lease plus unpaid rent and expenses totaling $22.4 million, as well as an award of plaintiffs’ attorneys’ fees and costs. The Company’s biopharmaceutical manufacturing facility is located in the leased premises that are the subject of the dispute. At a February hearing, the court denied the writ and the temporary protective order sought by landlord. The parties are currently in discussions to achieve an amicable resolution to the matters alleged in the complaint and a negotiated termination of the lease. However, if necessary, the Company intends to vigorously defend against such allegations.

The Company may incur substantial expenses in defending against such claim, and it is not presently possible to accurately forecast the outcome. The Company does not believe, based on current knowledge, that the foregoing legal proceeding is likely to have a material adverse effect on its financial position, results of operations or cash flows. In the event of a determination adverse to the Company, the Company may incur substantial monetary liability and could have a material adverse effect on the Company’s financial position, results of operations or cash flows.

If the lawsuit is succesful, then VXGN has next to no value. We’re taking our guidance from the company, which “does not believe, based on current knowledge, that the foregoing legal proceeding is likely to have a material adverse effect on its financial position, results of operations or cash flows.”

The letter from BA Value Investors to VXGN is set out below:

BA Value Investors, LLC
1 North Federal Hwy., Suite 201
Boca Raton, FL. 33432

June 12, 2009

The Board of Directors
VaxGen, Inc.
379 Oyster Pointe Boulevard, Suite 10
South San Francisco, California 94080

Gentlemen and Lady:

BA Value Investors, LLC is the owner of more than 5% of the stock of VaxGen, Inc.

VaxGen refers to itself as a biopharmaceutical company. This may have been the case at one time. It is not the case now. The Company has burned through over $200 million in invested capital. It is burdened by a 65,000 square foot facility that sits idle. It has terminated all product development activities. It has sold or otherwise terminated its drug development programs. It experienced a $12 million net loss in 2008. Its share price has fallen by over 95% in the last five years, and it now has a market capitalization of only $16 million. Its principal remaining assets of some $36 million in cash and investment securities are steadily being eroded.

Yet, the Company continues to pay out over $60,000 per month to its board members, and close to $200,000 per year to its president and principal executive officer, as the Company purports to seek strategic transactions in the worst economic environment of the past half century. While outrageous, it is unfortunately not surprising that a board which owns virtually no shares and has almost zero economic interest in the fortunes of the Company would be making these payments and failing to act even remotely in the interests of shareholders.

BA Value Investors, LLC believes that it speaks for all shareholders when it says that this state of affairs must come to an immediate halt. Instead, the Company must act now to stop the waste and return the Company’s remaining assets to its shareholder owners.

First, the Company must–

o reduce the size of its board. Three directors are all that are needed for a company with no business and no strategic prospects;

o reduce director compensation. The Strategic Transaction Committee must be disbanded and payments to its members stopped at once. There is no justification for more than $15,000 in annual compensation to a director of the Company;

o change auditors. The Company does not need and should not be paying for a Big Four auditing firm;

o terminate the lease. The Company should settle with its landlord at a substantial discount to the remaining lease payments and vacate the South San Francisco property; and

o cut other costs. The Company should eliminate all expenses that are not absolutely necessary for a company whose activities are limited to returning remaining assets to shareholders and operating as a public shell.

Second, the Company must–

o make an immediate distribution of $10,000,000 in cash to shareholders;

o following termination of the lease and settlement with the landlord, distribute the remaining Company cash to shareholders, leaving only enough for the maintenance of the Company as a public shell; and

o distribute to shareholders any royalty payments received from the sale of the Company’s intellectual property.

Third, the Company should–

o explore ways to monetize the Company as a public shell, including, if possible, through utilization of the Company’s substantial NOLs.

There is no excuse or justification here for any delay. If the board is unwilling to undertake these steps, shareholders will have not choice but to reconstitute the board with directors who are representative of the shareholders and protective of their interests.

I am available to discuss these matters with members of the board on a non-confidential basis. I can be reached at 561-362-4199.

Very truly yours,

Steven N. Bronson, Managing Member

[Full Disclosure:  We have a holding in VXGN. 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.]

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MATH’s board rejects Tiberius offer; says MATH is worth $1.40 per share

Posted in Activist Investors, MathStar Inc (OTC:MATH), Stocks, tagged , , , on July 8, 2009| 2 Comments »

MathStar Inc’s (OTC:MATH) board has recommended that stockholders reject the $1.25 per share in cash tender offer from Tiberius Capital on the basis that the tender offer is less than the board’s $1.40 per share estimate of MATH’s liquidation value.

We’ve been following MATH since December last year (see our post archive here) when it was trading at $0.68. We initiated the position because MATH was trading below its net cash value and had two substantial stockholders lobbying management to liquidate. The stock is up 77.9% to close yesterday at $1.21, giving it a market capitalization of $11.1M. We last estimated MATH’s liquidation value to be around $11.7M or $1.27 per share. That value is predominantly cash and short term investments and doesn’t take into account any further value that the sale of the FPOA technology and intellectual property may yield. The board’s estimate of the company’s liquidation value is slightly higher than ours, at $1.40 per share. From the amended Recommendation Statement:

As of March 31, 2009, the Company had cash, cash equivalents and long-term investments of approximately $14,782,000. After full payment of the Company’s outstanding obligations for its leased space and its contractual obligations for design tool leases, and assuming liquidation expenses of approximately $500,000, the liquidation value per Share would be approximately $1.40.

This board’s estimate of the liquidation value also excludes revenue from any sales of the MATH’s existing inventory of field programmable object array chips or its FPOA technology.

Tiberius Capital launched its original tender offer for MATH on June 1, 2009 at $1.15 cash per share, bidding for 51% of the outstanding shares. Robert T. Sullivan, one of the principals of Tiberius said in the press release announcing the initial offer:

We are making the tender offer to enhance shareholder value. The potential strategies that we may cause MathStar to pursue include a partial repurchase of Shares, an extraordinary dividend, liquidation, selling or licensing MathStar’s technology assets, a business re-start in which MathStar would hire new personnel to improve and commercially exploit its technology assets, and/or a merger or other business combination. We will use the balance of 2009 to carefully examine whether to re-start MathStar’s business and/or to identify a suitable merger partner.

Prior to Tiberius’ offer, two activist investors, Mr. Zachary McAdoo of The Zanett Group and Mr. Salvatore Muoio of S. Muoio & Co., had been urging MATH’s board to consider liquidation rather than a merger. MATH’s board seems to agree, rejecting several unsolicited merger proposals from PureChoice, Inc, suspending the company’s operations and exploring “strategic alternatives, which could include merger, acquisition, increasing operations in another structure or liquidation.”

The latest press release from MATH is below:

MathStar Board of Directors Responds to Third Revised Tender Offer from Tiberius Capital II, LLC

Board Continues Its Recommendation That Stockholders Not Tender Their Shares to Tiberius Capital II, LLC

HILLSBORO, Ore., July 7, 2009 – MathStar, Inc. (MATH.PK) today announced that its Board of Directors continues to recommend that MathStar stockholders reject the cash tender offer from Tiberius Capital II, LLC (Tiberius). On July 6, 2009, Tiberius issued a press release and filed with the Securities and Exchange Commission an amended Tender Offer Statement announcing that it was revising for the third time its tender offer to purchase shares of MathStar, Inc. The amended terms include increasing the offer to $1.25 per share, extending the tender offer term until July 20, 2009 and decreasing to 3,000,000 the minimum amount of shares that need to be tendered in order for the “Minimum Tender Condition” to be met.

The MathStar Board of Directors continues to recommend AGAINST stockholders tendering their MathStar shares to Tiberius for several reasons, some of which include:

· the third expiration date extension, the second change to the Minimum Tender Condition (this time a reduction in the number of shares required to meet this condition), and the increase in price highlight that the tender offer continues to be inadequate (less than the estimated $1.40 per share liquidation value) and that MathStar stockholders are generally rejecting it — as of July 2, 2009, according to Tiberius, only 672,000 of the 9,181,497 shares subject to the offer have been tendered;

· Tiberius’ offer still would eliminate the use of MathStar’s $140 million net operating loss carryforwards, which could shield taxes on more than $10 in earnings per share, if MathStar attains sufficient profitable operations in the future;

· Tiberius still has not set forth any specific plans for the Company were it to acquire a controlling interest; and

· One of the conditions of Tiberius’ offer is that it is satisfied that the restrictions on business combinations with interested stockholders set forth in Section 203 of the Delaware General Corporate Law are inapplicable to the tender offer. As proposed, the acquisition by Tiberius of approximately 33% of the Company’s shares in the offer would cause Tiberius to become an “interested stockholder” under Section 203. Yet the Offer to Purchase does not include a plan for dealing with this issue.

In addition, the Board would like to remind MathStar stockholders of the following information disclosed in the Offer to Purchase, filed as Exhibit (a)(1)(A) of the Tiberius Schedule TO:

“On January 18, 2007, the Securities and Exchange Commission filed a complaint that [Mr.] Fife [the sole shareholder of Tiberius Management, Inc., itself the sole member of Tiberius] and Clarion Management, LLC (“Clarion”) engaged in a scheme in 2002 and 2003 to purchase variable annuity contracts issued by an insurance company in order to engage in market timing for the benefit of a Clarion affiliate. [Mr.] Fife and Clarion consented to the entry of the final judgment, without admitting or denying the allegation in the Commission’s complaint.

On August 9, 2007, the U.S. District Court for the Northern District of Illinois entered a final judgment against John M. Fife and Clarion that permanently restrained and enjoined them from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10(b)-5 thereunder and required them to pay disgorgement in the amount of $234,339, plus pre-judgment interest of $60,584; and additionally ordered [Mr.] Fife to pay a civil penalty of $234,399. As part of the settlement of the case, Mr. Fife consented to the entry of an Order barring him from associating with any investment advisor, with a right to re-apply after eighteen months.”

[Full Disclosure:  We do not have a holding in MATH. 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.]

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Tiberius Capital increases tender offer for MATH

Posted in Activist Investors, MathStar Inc (OTC:MATH), Stocks, tagged , , , on July 7, 2009| 2 Comments »

Tiberius Capital has announced that it is increasing its offer for MathStar Inc (OTC:MATH) common shares from $1.15 to $1.25 per share in cash.

We’ve been following MATH since December last year (see our post archive here) when it was trading at $0.68. We initiated the position because MATH was trading below its net cash value and had two substantial stockholders lobbying management to liquidate. The stock is up 79.4% to close yesterday at $1.22, giving it a market capitalization of $11.2M. We last estimated MATH’s liquidation value to be around $12.0M or $1.31 per share. Following a quick review of the last 10Q filing, we’ve slightly reduced our estimate to around $11.7M or $1.27 per share. That value is predominantly cash and short term investments and doesn’t take into account any further value that the sale of the FPOA technology and intellectual property may yield. The two activist investors, Mr. Zachary McAdoo of The Zanett Group and Mr. Salvatore Muoio of S. Muoio & Co., have been urging MATH’s board to consider liquidation rather than a merger. MATH’s board seems to agree, rejecting several unsolicited merger proposals from PureChoice, Inc, suspending the company’s operations and exploring “strategic alternatives, which could include merger, acquisition, increasing operations in another structure or liquidation.” Tiberius Capital launched its original tender offer for MATH on June 1, 2009 at $1.15 cash per share, bidding for 51% of the outstanding shares. Robert T. Sullivan, one of the principals of Tiberius said in the press release announcing the initial offer:

We are making the tender offer to enhance shareholder value. The potential strategies that we may cause MathStar to pursue include a partial repurchase of Shares, an extraordinary dividend, liquidation, selling or licensing MathStar’s technology assets, a business re-start in which MathStar would hire new personnel to improve and commercially exploit its technology assets, and/or a merger or other business combination. We will use the balance of 2009 to carefully examine whether to re-start MathStar’s business and/or to identify a suitable merger partner.

The latest press release from Tiberius is below:

TIBERIUS CAPITAL INCREASES ITS TENDER OFFER PRICE TO $1.25 PER SHARE FOR ALL MATHSTAR (OTC: MATH.PK) COMMON SHARES;

EXTENDS OFFER UNTIL 11:59 P.M., NEW YORK CITY TIME ON JULY 20, 2009

CHICAGO, Illinois, July 6, 2009—Tiberius Capital II, LLC (“Tiberius”), a value-opportunity fund located in Chicago, announced today that it is increasing the purchase price in its tender offer for all MathStar (OTC: MATH.PK) common shares from $1.15 to $1.25 net per share in cash (without interest and subject to applicable withholding taxes). Tiberius also announced that it is extending the tender offer until 11:59 P.M., New York City time, on July 20, 2009, and that it is reducing the “Minimum Tender Condition” to the tender offer from a majority of outstanding MathStar shares to 3,000,000 of such shares. As of July 2, 2009, approximately 672,000 MathStar common shares have been tendered and not withdrawn. All MathStar shareholders who have tendered will receive the higher $1.25 price.

Tiberius urges all MathStar shareholders to tender all of their shares as soon as possible prior to the Expiration Date on July 20, 2009, at 11:59 p.m., New York City Time.

[Full Disclosure:  We do not have a holding in MATH. 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.]

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SOAP announces liquidation

Posted in Activist Investors, Mithras Capital, Net Cash Stocks, Soapstone Networks Inc (NASDAQ:SOAP), Stocks, tagged , , , on June 16, 2009| 5 Comments »

Soapstone Networks Inc (NASDAQ:SOAP) has announced that it intends to liquidate and has filed its Plan of Liquidation.

We been following SOAP (see our post archive here) 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. The stock is up 65% from $2.50 when we initiated our position to close today at $4.13, giving SOAP a market capitalization of $61.0M. We last estimated the company’s net cash value to be $80.3M or $5.21 per share. The company has now announced that it proposes to liquidate. It estimates that the total distribution, including an extraordinary cash dividend of $3.75 per share, will be between $4.00 and $4.50 per share

The press release from the company is set out below:

Soapstone Networks Announces Approval of Plan of Liquidation and Dissolution by Board of Directors and Wind Down of Operations

Billerica, MA, June 15, 2009 — Soapstone Networks Inc. (NASDAQ: SOAP), today announced that its Board of Directors (the “Board”) has unanimously approved a plan of dissolution and liquidation of the Company (the “Plan of Liquidation”) and that it will file a proxy statement seeking stockholder approval of such plan.

As part of this decision, the Company has ceased the development and marketing of the Soapstone Provider Network Controller (PNC) product and has reduced its workforce by 50 to a total of 14 employees. Moreover, if the Company’s stockholders approve the Plan of Liquidation, the Company intends to file a certificate of dissolution, delist its shares from NASDAQ, sell and monetize its non-cash assets, satisfy or settle its remaining liabilities and obligations, including any contingent liabilities and claims, terminate its remaining employees throughout the wind down period, and make one or more distributions to its stockholders of cash available for distribution.

The Company also announced that its Board has unanimously approved an extraordinary cash dividend of $3.75 per share, provided that the Board may adjust such amount at a later date to ensure there is remaining cash to satisfy potential liabilities. Such dividend will be payable after the stockholder meeting at which the Plan of Liquidation is approved by the Company’s stockholders and in connection with the filing of a Certificate of Dissolution with the Delaware Secretary of State.

The Company has analyzed its liquidation value and currently estimates that the amount of subsequent distributions to stockholders will range from $0.25 to $0.75 per share, for a total distribution, including the extraordinary cash dividend, of between $4.00 and $4.50 per share. The amount of these distributions, however, may vary substantially from these estimates based on the resolution of outstanding known and contingent liabilities and the possible assertion of claims that are currently unknown to the Company. If, prior to its dissolution, the Company receives an offer for a transaction that will, in the view of the Board, provide superior value to stockholders than the value of the estimated distributions under the Plan, taking into account all factors that could affect valuation, including timing and certainty of payment or closing, credit market risks, proposed terms and other factors, the Plan of Liquidation and the dissolution could be abandoned in favor of such a transaction.

The Board made this decision after completing an exhaustive evaluation of various strategic alternatives available to the Company for enhancing stockholder value, including but not limited to, continued execution of the Company’s business plan, the payment of a cash dividend to the Company’s stockholders, 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. The Company and its external advisors, including its financial advisor Morgan Stanley & Co. Incorporated, devoted substantial time and effort in identifying potential buyers or strategic partners and entered into negotiations with several potential partners; however, that process did not yield a potential transaction which the Board viewed as reasonably likely to provide greater realizable value to its stockholders than the complete dissolution and liquidation of the Company in accordance with the Plan of Liquidation.

[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.]

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Greenbackd exits Amtech Systems Inc (NASDAQ:ASYS)

Posted in Amtech Systems Inc (NASDAQ:ASYS), Stocks, tagged , , on June 3, 2009| Leave a Comment »

We are exiting our position in Amtech Systems Inc (NASDAQ:ASYS) at its $5.65 close yesterday because the stock is trading at a substantial premium to our valuation. We opened the position at $2.78, so we’re up 103.2% on an absolute basis. The S&P500 Index closed at 712.87 on the day we opened the position and close yesterday at 944.74, which means we’re up 70.9% on a relative basis.

Post mortem

We initiated the position in ASYS at its $2.78 closing price on March 5, 2009 (see our initial post here). At $2.78, the company had a market capitalization of $25.3M. We estimated the liquidation value to be almost 60% higher at $40M or $4.40 per share. ASYS was trading at a little under two-thirds of our estimate of its value in liquidation, but, unusually, had continued to generate positive operating cash flow and earnings in a difficult operating environment. Management seemed to have recognized that the stock was too cheap, and authorized a $4M stock buy-back. Our only criticism was that the buy-back could have been bigger. A private investor, Mr. Richard L. Scott, had disclosed a 7.0% holding in July last year. Mr Scott continued to purchase stock, and, as of February 17 this year, held 9.1% of ASYS’s outstanding stock. We don’t know anything about Mr. Scott, but we liked seeing a large stockholder increasing his stake when the stock price dropped. For those reasons, we thought ASYS represented very good value at a discount to its liquidation value and that’s why we added it to the Greenbackd Portfolio.

[Full Disclosure:  We have a holding in ASYS. 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.]

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Lamassu nominates two board candidates for Ditech’s 2009 Annual Meeting

Posted in Activist Investors, Ditech Networks Inc (NASDAQ:DITC), Lamassu Holdings LLC, Stocks, tagged , , on May 27, 2009| 2 Comments »

Lamassu Holdings LLC has nominated two director candidates for election to the Ditech Networks Inc (NASDAQ:DITC) board of directors at the DITC annual meeting.

We’ve been following DITC (see our archive here) because it is trading below its net cash value with an investor, Lamassu Holdings LLC, disclosing a 9.4% holding in November last year. Lamassu has previously offered to acquire DITC for $1.25 per share in cash. Lamassu says that it “anticipates its due diligence requirement will take no more than two weeks and there is no financing contingency.” Lamassu has now nominated two candidates for election to the board “who are committed to enhancing shareholder value through a review of the Company’s business and strategic direction.” The stock is up 16.8% from $0.89 to close yesterday at $1.04, giving the company a market capitalization of $27.3M. We last estimated the net cash value to be $34.3M or $1.31 per share.

Here’s the announcement from Lamassu Holdings:

Lamassu Holdings L.L.C. Discloses Nomination of Two Highly Qualified Director Candidates for Election to the Ditech Networks Board of Directors at the 2009 Annual Meeting

NEWPORT BEACH, Calif.–(BUSINESS WIRE)–Lamassu Holdings L.L.C. (“Lamassu”) announced today that it has nominated two highly qualified director nominees for election to the Board of Directors (the “Board”) of Ditech Networks, Inc. (the “Company” or “DITC”) (Nasdaq:DITC) to replace two directors whose terms are up for election at the Company’s 2009 Annual Meeting of Stockholders (the “Annual Meeting”). Lamassu, which beneficially owns an aggregate of 2,399,845 shares, or approximately 9.1% of the outstanding shares of common stock of the Company, delivered written notice today of its nominations to the Corporate Secretary of the Company in accordance with the Company’s bylaws.

Tim Leehealey, managing member of Lamassu and one of Lamassu’s director nominees, stated, “After repeated attempts to engage in a constructive dialogue were ignored by the incumbent Board and AccessData’s interest in purchasing the Company at a significant premium was rejected without any discussions with the potential bidder, we have come to the conclusion that new leadership on the Board is needed to maximize stockholder value, which we believe has suffered significant deterioration at the hands of the current Board.”

Mr. Leehealey continued, “We believe the current regime has a strong track record of failure in allocating the Company’s capital. Whether embarking on organic product development or growth through acquisition, this Board has failed to diversify outside of its core echo cancellation product line. We believe all significant efforts to diversify, including its Titanium systems, the Packet Voice Processor platform and acquisition of Jasomi Networks, Inc., have cost the company well over $100 million in capital and, quite possibly, closer to $200 million, even as the Company generated significant cash from its core echo business. Now the Company is faced with reinventing its business and it appears the current Board, which has failed miserably in its prior attempts to do so, believes that stockholders want a course of action that includes internally pursing another high-risk product strategy as well as pursuing acquisition opportunities.”

Mr. Leehealey concluded, “We are fearful that stockholder equity will continue to erode at the Company unless substantial changes are made. To this end we are nominating two highly qualified directors who are committed to enhancing shareholder value through a review of the Company’s business and strategic direction. If elected, our nominees intend to work constructively with the remaining Board members, as well as with the Company’s management team, to determine the best course of action for stockholders. Our nominees intend to conduct a strategic review of all options for the Company, including a possible sale or liquidation, that will improve stockholder value without taking undo risk that could jeopardize the remaining value inherent in the Company’s balance sheet, something we believe this Board has failed to accomplish.”

Stockholders can refer to Lamassu’s previous SEC filings for additional information.

The Company currently has a total of seven directors. Lamassu is seeking to replace two incumbent directors whose terms of office expire at the Annual Meeting.

Lamassu’s two independent director nominees will bring substantial business leadership and corporate governance expertise to the Company’s Board. The nominees are:

* Tim Leehealey. Mr. Leehealey is the co-founder and managing member of Lamassu Holdings L.L.C., a holding company specializing in taking an active role in small technology and alternative energy investments. In addition to his position with Lamassu, Mr. Leehealey is CEO of AccessData, a Lamassu company and provider of investigative software focused in the areas of forensics, eDiscovery, and incident response. Mr. Leehealey joined AccessData in August of 2007 and under his leadership has more than doubled the size of the company and established it as one of the leading providers in its market. Prior to joining AccessData, Mr. Leehealey was with Guidance Software for four years, as the Vice President of Corporate Development, and played a key role in taking that company public in 2006. In addition to his work at Guidance Software and AccessData, Mr Leehealey spent approximately 10 years working as an equity analyst covering security and networking companies. Mr. Leehealey holds a degree in computer science and economics from Stanford University.

* Frank J. Sansone. Mr. Sansone has over 15 years of financial management and technology experience with a focus on managing all the financial elements of small fast growing public and private technology companies. Most recently Mr. Sansone served as CFO for LiveOffice, a rapidly growing SAAS email archiving software & services company with annual revenues of approximately $25 million with 96% annual bookings growth and 100+ employees. Prior to his involvement with LiveOffice Mr. Sansone served as the CFO of Guidance Software were he not only was instrumental in helping to deliver over 5 years of 40%+ growth but he also oversaw all the key financial aspects associated with taking the company public. Before joining Guidance Software Mr. Sansone accumulated approximately 10 years of financial experience including working for five years as a Audit Manager at PricewaterhouseCoopers. Mr. Sansone is a CPA in good standing with both the California Society of Certified Public Accountants as well as the American Institute of Certified Public Accountants.

[Full Disclosure:  We do not have a holding in DITC. 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.]

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NSTR shareholders approve liquidation

Posted in Activist Investors, Net Cash Stocks, Northstar Neuroscience Inc (NASDAQ:NSTR), Stocks, tagged , , on May 26, 2009| 4 Comments »

The shareholders of Northstar Neuroscience Inc (NASDAQ:NSTR) have approved the complete liquidation of NSTR at a special meeting of shareholders.

We started following NSTR because it was a net cash stock that has announced that it plans to liquidate. NSTR closed Friday at $1.97, giving it a market capitalization of $48.4M. We originally estimated the final pay out figure in the liquidation to be around $59M or $2.26 per share, which presents an upside of around 25%. The company estimates a slightly lower pay out figure of between $1.90 and $2.10 “assuming we are unable to sell our non-cash assets” and expects to make an initial distribution within approximately 45 days after the Effective Date (which is to be announced) of approximately $1.80 per share.

The company’s announcement is as follows:

On May 14, 2009, Northstar Neuroscience, Inc. (the “Company”) held a special meeting of shareholders, at which the shareholders of the Company approved the voluntary dissolution and liquidation of the Company pursuant to a Plan of Complete Liquidation and Dissolution (the “Plan”). Pursuant to the Plan, the Company intends to file articles of dissolution (the “Articles”) with the Secretary of State of the State of Washington as soon as reasonably practicable after resolution of the audit of the Company’s State of Washington tax obligations and receipt of the required revenue clearance certificate from the Department of Revenue of the State of Washington. The Company will be dissolved upon the effective date of the Articles (the “Effective Date”), which may be the date on which the Articles are filed or a later date specified in the Articles. The Company intends to make a public announcement in advance of the anticipated Effective Date and to delist its Common Stock from the Nasdaq Global Market as of the Effective Date.

Pursuant to the Plan, the Company is also authorized to dispose of its remaining non-cash assets, on such terms and at such prices as the Company’s board of directors, without further shareholder approval, may determine to be in the best interests of the Company and its shareholders, to pay or make reasonable provision to pay all claims against and obligations of the Company, to make such provisions as will be reasonably likely to be sufficient to provide compensation for any claim against the Company which is the subject of a pending action, suit or proceeding to which the Company is a party, to distribute on a pro rata basis to the shareholders of the Company the remaining assets of the Company, and, subject to statutory limitations, to take all other actions necessary to wind up and liquidate the Company’s business and affairs.

[Full Disclosure:  We do not have a holding in NSTR. 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.]

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