The Takeover Is Starting
I’ve written about this small little radio broadcaster a couple of times in the past month as the setup is just brilliant. The CEO recently passed away. Despite the sad nature of the passing of this executive, there is an interesting setup now for event driven investors. My thesis: this company will cease to exist over the next 12-18 months as a corporate raider comes in to maximizes shareholder value.
This company was setup with two classes of stock. The first class of stock is your Class A shares. These shares are the ones guys like me buy in the open market. We get one vote per share and all of the economic interests of the future free cash flows those shares provide. The second class of stock was the Class B shares, which were held solely by the executive who just passed away. The Class B shares gave this executive 100% of the voting power of the company. He controlled the direction of the company and how assets were allocated due to these super voting shares.
Now according to the bylaws, on the event that the CEO passes away, the super voting shares will collapse into one class of common stock. Now that this executive has passed away, there is only one class of stock and the heirs to the late executive’s estate only control around 16% of the total outstanding votes.
My high level thesis was that a corporate raider or activist investor would swoop in and asset strip the company. There is a ton of unlevered real estate. Over $55 million in cash and building quickly. A core business that spits out $20 million in free cash flow per year. The enterprise value is only around $110 million. And there is an unmonetized digital platform that a media entrepreneur worth their salt could significantly grow.
This company flies under the radar so I thought it would take some time before someone swoops in and starts making noise. But on Friday, an amended 13/D was filed. My thesis is starting to play out and we could get an asset sale or takeover anytime now.
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