RE:To Friends and Followers..meetoo1600 wrote: ... of my posts, I feel that it is only fair to tell you that after today's earnings report, conference call, etc., I no longer believe that CXR/CXRX is a good restructuring play from a common equity point of view. A number of things have influenced this change of perspective. Here they are:
1. While I still believe that the basic terms of a deal, in principle, were done long ago, they are being confounded by the fact that the company is still bleeding money and assets profusely. That they are still taking asset impairment charges in excess if $200,000,000 a quarter means that they still have a long way to go in repairing the business;
2. Oberman was clear that he expects both revenues and EBITDA to continue to fall through 2018 in a small double digit percentage. This means that there is almost certainly more impairment charges and losses to come. He did not expect a turnaround in the declining revenues and EBITDA until "future years", meaning post 2018;
3. Oberman made it clear that the equity left for common shareholders after the restructuring will be "limited". This is a euphemistic warning that common shareholders will not be happy;
4. Had this quarter shown that they were finished with asset impairments and dropping revenues and EBITDA, as one might reasonably have thought it would, there would have been a case for the common shareholders retaining at least five percent of the common equity in a structuring, maybe even ten percent, in which case, applying industry average multiples, a share would bounce back to being worth maybe two, three, or even five times what it is worth today, and in time more. But the dropping revenues and EBITDA, and the resulting impairment charges, seem nowhere near to letting up. In fact they may even get worse, and, with that, there is a strong argument that the company is not worth an amount even close to the total of just the secured debt, nevermind all that is under it. In other words, even the secured debt could be in trouble if things do not turnaround. And likely it already is.
This had to be a turnaround quarter. It wasn't. And neither will the next quarter, or any of the two after that, be a turnaround quarter. I cashed in. Maybe I will be surprised and find that I did the wrong thing, but I doubt it. And maybe if the stock drops to .10 or .20 cents, which it likely will after the restructuring, I will come back in just for fun. But based on what we now know, I can no longer recommend this stock as a restructuring play.
Thx