Big buying opportunity at these levelsBased on today's share price it does not appear that the sellers much care about what they are selling.
While certainly there was disappointment about the CEO not being able to close the buyout, I note that today's price reflects a huge margin of safety. While we await the year end report (which will be filed by September 30th) I note the following.
- Cash at March 31st was $.67 per share. At this point you can get everything else for free.
- According to the valuation report a complete liquidation of HF is worth $1.94 if it stopped operating now.
- The Special Committee is in negotiations with a potential acquirer the outcome of which has not been disclosed. A takeover is still very possible.
- The current price is below the most pessimistic target as recently set out by Canaccord at $.90
- The company has no direct bank debt. All debt is in the relatively small joint venture and is guaranteed by the assets of the JV. Thus, there are no bankers after HF.
- Their position in the Chinese market will considerably strengthen once the law concerning SCR standards comes into force on December 1, 2013.
Given the above, the most logical approach is to buy, which I have done today.
In my opinion, whether a buyout happens or not, the probability of making money on this position is extremely high.
GLTA