Dark Side of the Street (Edition #7)
$SRT Going Private?, Recent Insider Buying, Special Situation Updates and More!
Welcome to the Dark Side of the Street! Here we shed light on the dark corners of the market. If you haven’t already, sign up here for weekly updates or share with your friends and family. If you’re new to special situations, see some of my learning resources on my substack home page to learn more! Feel free to reach out with any feedback.
Thought of the Week
“Life is 10% what happens to you and 90% how you react to it”
-Charles R. Swindoll
This week’s news can generally be summed up in a couple of words, Russia and Ukraine. Many people are worried about what this means for the world and what will happen next. Investors have been asking the same questions. What does this mean for the stock market? What stocks could benefit or be hurt by the conflict?
In times of uncertainty, the stock market tends to make snap judgments and have mini panic attacks. Just look at this week's chart below for an example. I don’t believe that it pays to think in the short term and speculate how specific stocks will perform in the next year if there is a major conflict (although I may stay away from Russian companies). I’m not a macroeconomist or a political expert so I’ll stay in my lane and just evaluate companies.
Upcoming Special Situations
Risk Arbitrage/Going Private Transaction
StarTek, Inc. (SRT) announced in Dec 2021 they received an offer from CSP Management (SRT’s largest shareholder with 55% ownership) to acquire the remaining 45% of outstanding shares for $5.40/share.
"In considering this proposal, you should be aware that CSP is interested only in pursuing the Proposed Transaction and does not intend to sell CSP's stake in StarTek to any third party,"
StarTek has formed a special committee in order to evaluate the proposal.
StarTek is currently trading at $4.88/share and therefore the market is currently offering a 10.66% spread.
Recent Insider Buying
Large Micro Cap Purchases
Source: OpenInsider.com
Top News of the Week
Read exactly how Microsoft’s $68.7 billion deal for Activision Blizzard came together - By Jay Peters of The Verge
“Activision Blizzard’s SEC filing also includes the terms of the merger agreement, which shows that Microsoft would be on the hook if the merger gets blocked by government regulators — it would pay Activision Blizzard a termination fee ranging from $2 billion to $3 billion if the acquisition is axed due to an “Injunction arising from Antitrust Laws.” If Activision Blizzard’s shareholders do not vote to approve the merger, though, it might have to pay Microsoft a termination fee of $2.27 billion.”
“For Warren Buffett and Berkshire Hathaway, the big issues haven’t changed” - By Eric Rosenbaum of CNBC
“Berkshire’s last reported cash value was similar to the Apple stake, at just under $150 billion. This issue is nothing new for Berkshire and it has been aggressively buying back its own shares in recent years as an alternative to elevated asset values across industries in a market flush with liquidity and where competition for deals from private equity and sovereign wealth funds remains intense.”
“Volkswagen is considering a plan to spin off Porsche in a public offering” - By Jack Ewing of NY Times
“Volkswagen said it was considering hiving off its profitable Porsche division into a separate company with its own stock listing. The transaction would help the automaker raise money to invest in electric vehicles while also potentially returning more control of the high-performance carmaker to descendants of its founder.”
Top Micro Cap Movers this Week
Top 10 Gainers
Top 10 Losers
Special Situation Watchlist
Colfax Corp (NYSE: CFX) - Spinoff
No Update
Activision Blizzard (NASDAQ: ATVI) - Risk Arbitrage
The spread between the buyout price ($95/share) and ATVI’s current trading price is now ~16.6%.
Warner Bros. Discovery (NASDAQ: WBD) - Spinoff Merger
No Update
ZimVie Inc. (NASDAQ: ZIMV) - Spinoff
No Update
TriNet Group, Inc. (NYSE: TNET) - Odd Lot Tender Offer (Dutch Auction)
TNET is currently trading at $88.72 with the tender offer range being $97 - $83/share. The maximum gain is currently 9.33%.
*See links for the situation summary from prior editions
Let’s close this one out with my research song of the week!
See you next week!
- Dark Side of the Street