Investments

ClubCorp Holdings is a highly levered golf-course roll-up facing three profound challenges: a secularly declining end market, weak unit-level profitability, and no economies of scale. Founded in 1957 as a single country club in Dallas, ClubCorp now bills itself as “The World Leader in Private Clubs®,” with a portfolio of 206 locations (including two in Mexico and one in China). But as ClubCorp has grown, golf has shrunken…

Sage Therapeutics is a pre-commercial pharma firm whose market value stems almost entirely from a single drug – a member of a class of naturally occurring compounds called neurosteroids – in a single indication, a condition called super-refractory status epilepticus (SRSE). SRSE is characterized by repeated or protracted seizures that defy multiple lines of treatment. Thanks to superficially strong results from a small Phase 1/2 trial that lacked…

Zafgen is a biopharmaceutical company on the brink of extinction. From its founding in 2005, Zafgen’s “big idea,” in the words of one piece of early press coverage, was to “fight fat by cutting off its blood supply.” After licensing a drug called beloranib that was originally designed to inhibit angiogenesis (the development of new blood vessels) in order to treat cancer, Zafgen ultimately focused its development efforts on Prader–Willi syndrome (PWS), a rare genetic disorder in which a specific group of genes is missing or unexpressed, leading to an array of problems, including obesity and hyperphagia (extreme over-eating and food-seeking)…

As we discussed a year ago in our original report on Globalstar, the stock market has a sad history of gullibly buying into grandiose narratives about spectrum value. In Straight Path (NYSE MKT: STRP), the latest and, in some ways, most egregious example of this phenomenon, the market has found an unlikely object for its enthusiasm: a company with only seven employees and $426,000 of annual core revenue headed by a 29-year-old whose…

Allied Minds (LSE:ALM) is a London-listed, US-based firm that operates like a specialized venture capitalist, investing in early-stage technologies created by academic researchers and attempting to bring them to market. Trading at 7x book value and 3x net asset value – using the company’s own valuations of its subsidiaries, which we believe are baselessly optimistic – Allied Minds enjoys tremendous benefit of the doubt on the part of…

Bavarian Nordic A/S (OMX: BAVA, OTC: BVNRY) is a $1.3B Danish vaccine-maker whose stock price has recently surged (up 63% YTD) thanks to excitement over its putative prostate-cancer treatment, Prostvac-VF, a therapeutic vaccine currently undergoing a Phase III clinical trial. Bavarian Nordic touts its earlier Phase II study of Prostvac as showing the “most pronounced survival to date in prostate cancer,” with an 8.5-month…

We are long shares of Webster Financial (WBS). Our full 44-page report is available here.

We also issued a letter to the company this morning encouraging management and the board of directors to explore strategic options to highlight the value of HSA Bank, including a potential spin-off of the asset.

Additionally, we will host in-person meetings on March 5th and 6th in New York to discuss our views with interested investors. Please contact myself and Theresa Callahan at tcallahan@kerrisdalecap.com if you would be interested in attending these meetings…

We are short shares of Globalstar, Inc. (GSAT). We believe its shares are worth zero.

Our slide presentation is available here and our report is available here.

Sahm Adrangi, Chief Investment Officer of Kerrisdale Capital, will make a live presentation on the company at the AXA Event & Production Center at 787 7th Ave. between 51st/52nd Streets (*please note venue location change*) in New York City today at 11:30am ET. Please arrive 15 minutes in advance to sign in.

A webcast of the presentation can also be accessed here.

We have also set up a website at www.factsaboutglobalstar.com with our report and slides.

Globalstar’s proposed Terrestrial Low Power Service (“TLPS”) will never be commercially viable and its spectrum is worthless under any other use case. The company is heavily indebted, with a more than 20x debt-to-ebitda ratio, and is likely to violate financial covenants in the near future.

Our slide presentation explaining our short thesis on Cardtronics, Inc. is available here and our 41-page report is available here.

We are short shares of Cardtronics (CATM), the largest non-bank owner and operator of ATMs, primarily in the US and UK. CATM’s core business is installing ATMs inside brick-and-mortar retailers like 7-Eleven and CVS, where high foot traffic generates withdrawals that in turn generate surcharge fees (paid by consumers) and interchange fees (paid by card-issuing banks). In addition, banks sometimes pay CATM to put their brands on its devices or to offer surcharge-free withdrawals to their customers…

Our slide presentation explaining our short thesis on BofI Holding, Inc. is available here and our 35-page full report is available here.

We are short shares of BofI Holding, Inc. (BOFI), a bank holding company that owns several online-only banking brands, including Bank of Internet USA and Bank X. At almost 3.5x tangible book value, BOFI is significantly overvalued, pricing in not only a long-term continuation of its rapid balance-sheet growth but also an extraordinarily strong net interest margin (NIM) and return on equity (ROE) in perpetuity. But BOFI’s margins have been inflated in recent years by well-timed purchases of distressed securities, aggressive expansion in long-duration lending, and a drastic shift toward short-term deposits…

Our 42-page report explaining our long thesis for JGWPT Holdings (JGW) is available here.

We are long shares of JGWPT Holdings (NYSE:JGW), which, via its J.G. Wentworth and Peachtree brands, is the number-one player in an attractive consumer-finance market niche. JGW provides liquidity to personal-injury plaintiffs, lottery winners, and others who are entitled to long-term payment streams but have near-term financial needs. Despite its 60-70% market share, attractive organic growth rate, and ability to compound capital through acquisitions and platform expansion, JGW trades at a consensus P/E ratio of 7x, an EV/EBITDA multiple of 8x, and at nearly half of our estimate of intrinsic value…

We believe that shares of Unilife (UNIS) are more than 75% overvalued as investors have once again over-reacted to deal announcements heavy on lofty potentials but light on detail. In a sequence reminiscent of the 2003 and 2009 episodic pops in Unilife’s price, shares climbed by over 50% following the announcement of a new supply agreement with Hikma. The stock appreciated a further 17% on December 3^rd after Unilife reported a nebulous supply arrangement with Novartis. While the Novartis arrangement offers nothing in guaranteed revenue, the Hikma agreement promises $5m of upfront cash. Unilife is also eligible for a $15m payment in 2014, assuming certain milestones are met, and another $20m from Hikma in 2015. At a discount rate of 10%, the present value of these payments is just $35m. This is just one-sixth of the $210m market capitalization gain Unilife has realized in the days following the announcement…