180 Degree Capital Corp. Announces the Initiation of Repurchases under Its $2.5 Million Stock Buyback Program, a 1-for-3 Reve...
December 21 2020 - 9:00AM
180 Degree Capital Corp. (NASDAQ:TURN) (“180” and the “Company”),
today announced that it plans to begin share repurchases under its
$2.5 million stock buyback program, that it will be initiating a
1-for-3 reverse stock split effective on January 4, 2021, and
provided additional Q4 2020 updates. Each of these topics are
discussed in more detail below in the following letter to
shareholders.
Fellow 180 Shareholders,
I now know what it is like to live the life of a
dog; in that every dog year lived is equivalent to seven years
lived for human beings. 2020 has definitely felt like more than one
year; it has actually felt like a decade. This year has been a
trying one for many as a global pandemic claimed over 320,000 lives
in the United States. To put that into horrific perspective, that
is the equivalent of having a 9/11 terrorist attack, where over
3,000 lives were lost, every day for 107 straight days. I
sympathize with anyone, who, because of the pandemic, has had to
endure a loss of a loved one. I equally sympathize with those that
suffered from economic hardship as a result of the fallout from the
events of this year. For those that have sought to minimize the
effects of the pandemic, I question their sanity, their belief in
facts and science, and their overall motives. Thankfully, vaccines
are here and are being distributed. We are now near the end of what
has been a year to forget as far as I’m concerned. Over the years,
I have had so many wonderful conversations with 180 shareholders
and I truly hope all of our shareholders are safe and well.As we
exit the year, we are going to be instituting two actions for 180
shareholders. First, effective January 4, 2021, we will be
initiating a 1-for-3 reverse stock split. Second, we will begin
share repurchases under our $2.5 million stock buyback program,
particularly in the event that our share price responds in the
opposite way to what is intended by this announcement of the
reverse stock split. I think almost everyone who has followed us
over the last four years knows that we are fully transparent with
all that we are doing in our effort to create value for our
shareholders. As such, we wanted to discuss each of these steps in
more detail with you.
First things first, the reverse stock split. By
definition, a stock price split has no inherent effect on a
company's enterprise value. The market capitalization of 180 after
the split should have exactly the same value as it does before the
split. If I was cooking and the recipe called for a stick of
butter, would it make a difference if I added a whole stick or two
halves? No. You would have exactly the same amount of butter. But
in the three-dimensional psychological analysis world of stock
splits, to some, reverse stock splits are perceived to be a “bad”
thing, while the popular 2-for-1 (or whatever the ratio is) stock
splits are perceived to be a “good” thing. It is true that some
reverse stock splits are enacted from low quality companies whose
price per share is below $1. These companies face delisting from
stock exchanges that have minimum share price rules. Well, that’s
obviously not 180. As of the close of business December 18, 2020,
we have grown our cash and securities of publicly traded companies
to nearly $58 million or $1.86/share. That is up from $17 million
net of outstanding debt, or $0.55/share, in mid-2016. Over our
history we have carved out a name for ourselves for our unique
strategy in the asset class we invest in. 180 has a remade balance
sheet, a healthy business model, and hopefully you agree, both a
short and long term shareholder friendly view of value creation. We
have heard from a number of shareholders that a higher priced stock
would attract more attention from both the institutional and retail
world of investors. Many institutions require a company’s stock
price to be above $3/share, or even $5/share before they even
consider investing in the company. Many of our shareholders have
asked us to do the reverse stock split to make us more attractive
to a more diverse set of shareholders. That is it. There is nothing
more complicated about why we sought and obtained shareholder
approval for the reverse stock split at our 2020 Annual Meeting of
Shareholders. There is no bad news here and there is no ulterior
motive! As a matter of fact, while there are still a couple weeks
left in the year, we currently believe we will grow our net asset
value per share (“NAV”) once again in Q4 2020. Now, for those that
maintain some sort of negative view on a reverse stock split, while
I will never agree with your view based on math, I do not live
under a rock as it relates to understanding the perception issue
related to them. Should unexpected weaknesses arise, we will use
the opportunity to repurchase our stock under our Board-authorized
$2.5 million share repurchase program. Since our shareholder call
in November, we have continued to grow our net asset value through
our public investment strategy. While there are still a couple
weeks left in 2020, we currently estimate that our NAV will be back
above $3.00 by December 31, 2020. Within this estimated NAV, cash
and securities of publicly traded companies account for
approximately $1.86/share, or approximately $58 million, as of
December 18, 2020. This amount of cash and securities of publicly
traded companies does not include the carried interest on our
separately managed account that we currently estimate will be more
than $2 million. Our closing stock price as of December 18, 2020,
was $1.91, which suggests investors are ascribing virtually zero
value to our private portfolio holdings. To be blunt, I find our
public market valuation to be absurd. I have consistently stated
that over the last year as our management team has personally
reached into our pockets and bought TURN in the open market.
Today’s accretive share repurchase is the next step towards the
goal of creating value for our shareholders.
This repurchase says nothing about our belief in
our ability to create value from our strategy. This has everything
to do with our own stock price. This management team has bought
over 5% of the Company with its own after-tax dollars in the last
four years. We have completely transformed our business with
competitive public market stock picking performance. We have grown
our cash and securities of publicly traded companies by over $40
million since I joined 180’s Board. Our NAV is currently expected
to climb to above $3.00 by year end. And for all that, the market
believes our business is worth $1.91? We do not. As such, we will
be aggressive in our share repurchases.
If anyone wants to discuss any of these
announcements, you know where to find us and I will look forward to
that call. On behalf of all of 180, I hope everyone has a happy
holiday season, and we look forward to talking to you in 2021.
Best Regards,
Kevin M. RendinoChairman and Chief Executive
Officer
About 180 Degree Capital
Corp.
180 Degree Capital Corp. is a publicly traded
registered closed-end fund focused on investing in and providing
value-added assistance through constructive activism to what we
believe are substantially undervalued small, publicly traded
companies that have potential for significant turnarounds. Our goal
is that the result of our constructive activism leads to a reversal
in direction for the share price of these investee companies, i.e.,
a 180-degree turn. Detailed information about 180 and its holdings
can be found on its website at www.180degreecapital.com.
Press Contact:Daniel B. Wolfe180 Degree Capital
Corp.973-746-4500
Forward-Looking Statements
This press release may contain statements of a
forward-looking nature relating to future events. These
forward-looking statements are subject to the inherent
uncertainties in predicting future results and conditions. These
statements reflect the Company's current beliefs, and a number of
important factors could cause actual results to differ materially
from those expressed in this press release. Please see the
Company's securities filings filed with the Securities and Exchange
Commission for a more detailed discussion of the risks and
uncertainties associated with the Company's business and other
significant factors that could affect the Company's actual results.
Except as otherwise required by Federal securities laws, the
Company undertakes no obligation to update or revise these
forward-looking statements to reflect new events or uncertainties.
The reference and link to the website www.180degreecapital.com
has been provided as a convenience, and the information contained
on such website is not incorporated by reference into this press
release. 180 is not responsible for the contents of third-party
websites.
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