Friday, May 20, 2011

Activism At Syms?

From the NY Post, in regards to the sale of the Rockville property:

"Over a long period of time such a strategy will leave shareholders with a highly leveraged company and no assets," the letter continued, demanding that Syms "refine the business model to prevent further erosion of shareholder value."

A better strategy, according to Capstone, would be to spin off certain Syms real estate to fund a share buyback, or even take the retailer private. A sale of the company's downtown flagship at 42 Trinity Place could fund a buyback of as much as 30 percent of Syms' stock, according to Capstone.

The real-estate firm added that it "would be interested in making a minority investment to help privatize Syms in a management-led (leveraged buyout) as well as assisting Syms in the financing of such a transaction."

Read more here.

One of the previous complaints that many people had with Syms, is the "lack of a catalyst". While the stock price has appreciated nicely since my initial writeup (despite a 10K that probably looks a lot more gloomy than it really is), the story is far from over. Sometimes, a stock simply being cheap is enough of a reason to buy it. While this is certainly to early to call this a catalyst, sometimes, waiting for a catalyst is the thing to do, as in this case, it certainly wasn't priced into the stock. Other times, when a company is so cheap, larger institutions will come in and try to monetize the assets. I love the idea of the company doing a management led LBO (at a fair price). I don't know what Marcy Syms would think about the debt involved in doing so (in her book she seemed to have a bad taste for it), but, think that a transaction of that nature could do wonders for all shareholders, the company, and even it's employees. Presently, it looks like we will be able to read the letter on May 31st.

Additionally, it is nice to know that more and more people are thinking like I am. This company is crazily undervalued, and they seem to be pushing the company in the right direction of monetizing it's real estate that is drastically understated on the books. This coming shareholder meeting may well be one of the more interesting that I have attended; and that says a lot, since I was at the MOT meeting, the first time that Carl Icahn tried to take control of the board.

Disclosure: I am long shares of SYMS. This is not advice of any kind. Always do a ton of your own research in regards to anything that I say, do, write, or so much as even think about.

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