I wrote up this name on December 20th, 2022. The stock price was $1.69 at the time. A nano-cap in the process of selling one of their segments. Another segment was sold earlier that year. When the sale of the second segment closes the pro forma enterprise value would have been under $10 million per my estimates. On a pro forma basis there would be one segment left. This segment is generating $22 million of revenues and $6 million of segment level EBITDA. An investment banker skilled in the art of carve-outs is hired. The last segment is for sale.

At the end of 2022 it was announced the sale of the second segment closed. There is a pro forma balance sheet showing $23 million in cash. Another $750k owed to the company via a note payable. With a share price of $1.87 we have a market cap of $39 million and an enterprise value of $15.5 million. The remaining segment is generating $6-8 million of annual EBITDA. Peers trade in the 20x EBITDA range. Even assuming a 7.5x EBITDA takeout multiple we get 75% upside. Management has indicated the banker is continuing to evaluate strategic alternatives for the remaining segment. I think the remaining segment gets sold over the next 12 months with capital returned to investors.

Let’s dig in…