We just published Issue 32 of the Oddball Stocks Newsletter. If you are
a subscriber, it should be in your inbox right now. If not, you can sign up right here.
Remember that we have made some back Issues of the Newsletter available à la
carte, so you can try those before you sign up for a subscription: Issues 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, and 31.
We also published a Highlights Issue in February. The Highlights Issue is available here for purchase as a single Issue.
If you have been curious about the Newsletter, the Highlights Issue is the perfect
opportunity to try about two Issues worth of content (much of which is
still topical and interesting) at a low cost.
Looking for value in the overlooked margins of the market.
Pages
▼
Just Published: Issue 32 of the Oddball Stocks Newsletter!
Tower Properties Announces Massive Special Dividend ($TPRP)
This was announced last week:
On November 19, 2020, The Board of Directors of Tower Properties Company (“Company”) declared a dividend of $5,000.00 per share on each of the 4,423 shares of issued and outstanding common stock of the Company, totaling in the aggregate $22,115,000.00, payable to the holders of record of issued and outstanding shares of the common stock of the Company as of 5:00 p.m. CDT on November 30, 2020 (the “Record Date”), payable on December 17, 2020 (the “Payment Date”).Nate wrote up TPRP in Issue 13 of the Oddball Stocks Newsletter when shares were trading for $12,500.
Report from Scheid Vineyards ($SVIN) Annual Meeting
[Low Tide Investments is a free newsletter that mainly focuses on forced selling and dividend value investment ideas. They provide monthly updates on investments they have written about in their "Monthly Roundup". Be sure to subscribe for free and follow them on twitter @lowtideinvest.]
Our friend at Low Tide Investments writes in about the Scheid Annual Meeting held (virtually) this week.
Our friend at Low Tide Investments writes in about the Scheid Annual Meeting held (virtually) this week.
Scheid held their annual meeting via Zoom on November 17th. They confirmed and went further into many important aspects that were mentioned in their Q3 press release.See our previous discussion of Scheid: A wine company at 53% of BV and 4.6x earnings, Do the Disappointing Scheid Vineyards Results Show a Bad Business in Decline?, Interpreting the Scheid Vineyard 2019 Results, and Scheid Vineyards ($SVIN) Releases Quarterly Earnings.
Bulk Wine demand has gone “through the roof” due to the fires and COVID-19. Scheid’s bulk wine sales hit a 6 year low in 2019. This article confirms that the supply of bulk wine across all grape varietals has declined significantly from earlier this year, and that prices for some categories have nearly doubled. Scheid’s bulk wine sales saw a 44% decline from their peak in 2017 to 2019. In the 3 months ending on August 31st, bulk wine sales are up 222% in 2020 versus the same period in 2019.
Regarding the harvest and smoke taint, Scheid reported that they have harvested 100% of their grapes. They mentioned that their micro-fermentations have not had any serious effect from smoke taint thus far, but are not yet finished. Harvest yields look to be down ~20% across the board in California, and Scheid says they are in a good position today as it relates to the growing season and harvest.
They also are being recognized more. Heidi Scheid was awarded person of the year from Wine Enthusiast Magazine and will be featured in the January issue. They have also been able to get in front of more distributors more via virtual meetings. Significant issues with travel related cased wine sales for cruise lines & airlines were more than made up for by grocery store sales. Pent up travel demand could be a tailwind for Scheid looking past the pandemic. They are also expanding their exclusive wine brands with partners such as Whole Foods, World Market, and Food Lion. Sunny With a Chance of Flowers has been successful and will be accepted into Kroger at the national level in March of 2021. There has been an explosion in the less competitive “better for you” category. They recently purchased a new bottling line that will expand their bottling efforts by 50%. Additionally, Al Scheid (Chairman) seemed eager to share the YTD case wine sales, but of course was not allowed to do so.
MVB Financial Corp. ($MVBF) Commences Modified Dutch Auction Tender Offer to Repurchase up to $45.0 Million of its Common Stock
We did a bunch of posts [1,2,3,4] on small banks last month. In our post, "Small Bank Share Cannibals," we mentioned MVB Financial (MVBF) as a share repurchaser.
Just this morning, MVBF announced a giant share repurchase:
a modified “Dutch auction” tender offer (the “Tender Offer”) to purchase, for cash, up to $45.0 million of its common stock (the “Common Stock”) at a price per share not less than $18.00 and not greater than $20.25, less any applicable withholding taxes and without interest. The Company intends to purchase the shares using available cash on hand and proceeds from an anticipated private placement of subordinated notes to certain institutional accredited investors. On November 16, 2020, the closing price of the Common Stock was $18.50 per share. The Tender Offer will expire at 5:00 p.m., New York City time, at the end of the day on December 18, 2020, unless extended or terminated. If the Tender Offer is fully subscribed, the Company will purchase between 2,222,222 shares and 2,500,000 shares, or between 18.8% and 21.2%, respectively, of the outstanding Common Stock as of November 5, 2020The top end of this tender price range is 107% of September 30, 2020 tangible book value.
Shareholder Letter to Vulcan International Corp (VULC) Board of Directors
We posted yesterday about the latest word - that Vulcan is supposedly making a liquidating distribution to shareholders next month, although possibly in a very clumsy way. One shareholder sent us the letter that he sent to Vulcan's board expressing dissatisfaction with the move:
Daniel F. Raider
818 Laurelwood Drive
San Mateo, California 94403
November 13, 2020
Board of Directors, Vulcan International Corporation (“Vulcan”)
By Fax to (513) 241-8199
Lady and Gentlemen:
Thank you for the belated but welcome news, conveyed to me yesterday by Tom Gettler, that Vulcan expects to make a substantial liquidating distribution next month.
I was sorry to learn from Mr. Gettler that Vulcan has experienced difficulty with its transfer agent, Computershare, and therefore does not plan to use Computershare in connection with Vulcan’s liquidating distributions. As described by Mr. Gettler, the expected method of distribution would be direct distributions by check to both individual registered shareholders and individual street name shareholders.
The latter group is diverse. It includes both NOBO’s and OBO’s, some of whom hold shares in currently taxable form and some of whom hold shares in tax-deferred or tax-exempt accounts. I tried to convey to Mr. Gettler my concern that direct distributions to these shareholders will create massive problems. These problems include the following:Before adopting this radical (and, in my experience, unprecedented) method of distribution, I urge you to consult with individuals, e.g., representatives of transfer agents and/or broker/dealers, who are knowledgeable about back office operations.
- An inability to identify OBO’s and make distributions;
- Lack of TIN’s, incorrect TIN’s, and/or W-9 problems for NOBO’s;
- Difficulty and potential errors by NOBO’s and/or their custodians in directing payments to the correct brokerage accounts without creating tax problems;
- Tax compliance difficulties and expense for street name shareholders with respect to Vulcan shares held in Traditional IRA accounts and Roth IRA accounts; and
- Errors and inconsistencies in payments because of trades in Vulcan stock which post-date any records Vulcan maintains concerning stock ownership.
Vulcan may wish to retain AmStock, Continental, or some other transfer agent. If Vulcan decides to manage the distribution process by itself, I strongly suggest making direct payments by check to most registered shareholders, and making payments by wire to Cede and any other nominee holders. The nominee holders far are better able to make problem-free distributions to beneficial owners than is Vulcan.
See the CoBF thread on VULC for more conversation about this. Also, Vulcan's 2018 annual meeting results announcement shows who the board of directors were as of that time. An old Section 13D filing from when Vulcan was public sheds light on the family/insider ownership:
The name of the person filing this statement is the Gettler Family Special 1997 Trust. The Trust was formed on December 17, 1997 in Hamilton County, Ohio. Its address is: 9200 Old Indian Hill Rd., Cincinnati, OH 45243-3438. The Trustee is Deliaan Gettler at the same address. It is a Trust set up by Benjamin Gettler, the husband of Deliaan Gettler for the benefit of members of the Gettler family.Check out Deliaan Gettler's political campaign contribution history. Let us know in the comments if you have thoughts about the Vulcan liquidation.
Update on Vulcan International Corp ($VULC) Liquidation
A reader writes in with a comment on the (slow-going) liquidation of Vulcan International Corp (VULC):
Great news, Vulcan plans on making a large liquidation distribution between December 10th and December 20th 2020. Unfortunately, they do not plan on using a transfer agent, so they currently plan on making these payments directly to shareholders who own their shares in street-name as well as registered shareholders. They are also making no distinction between shares held in retirement accounts and non-retirement accounts.Previously on Vulcan:
Shareholders who own VULC in IRA's have been told by Tom Gettler that they can endorse those checks to their brokerage firms with suitable instructions for “rollovers” to the correct retirement accounts. Liquidations are not done this way and it's not difficult seeing a host of problems. The board hasn't made a final decision, so now is the time to contact Vulcan if you have any issues with such an arrangement.
Shareholders always received their regular dividend with no issues when handled by their transfer agent, so it's difficult to see why they are changing things now.
Tom Gettler claims he has had 'issues' with his transfer agent. Shareholders don't know what the issues are, but there are other transfer agents if unhappy with the current one for any reason. Throwing out the baby with the bathwater makes no sense.
Gettler has asked shareholders to spell out what they own. There is no way he will hear from all street-held shareholders. Even if he was working off an official master list such as NOBO, it's very possible some shareholders are not on that list. Also stock ownership can change, as the shares are still trading.
If any shares are short, how will they be handled? Transfer agents handle "due bills", but what is going to happen if a buyer or seller gets a liquidating dividend they were not supposed to get? Good luck trying to get those funds back in any reasonable time or at all. Once the money is distributed, any improper distribution may be difficult to claw back. There is potential for real fraud in the way the company currently plans on doing this.
In the US, we are allowed to do one IRA Rollover per calendar year (Vulcan has foreign shareholders who will have their own issues). If Vulcan directly sends out a check in December, it could very well be considered a second IRA Rollover for 2020 for those who have already done one and they may not be allowed to put those funds back into their IRA's. You can do countless direct transfers (trustee to trustee), but only one Rollover annually. I could see shareholders seeking legal recourse in those cases.
A lawyer wouldn't defend himself in a court case, so a lawyer should not play transfer agent. It will be far cheaper hiring an expert to get this done right versus putting out dozens of fires years later. Vulcan should retain a transfer agent that is capable of handling liquidating distributions in the same manner that they have seen them handle hundreds of such corporate liquidations. Normal “Wall Street” methods, i.e., payment by wire through Cede and payment by check to other registered holders, are time-tested and universally accepted.
"NorthEast Community Bancorp, Inc. Announces Adoption of Plan of Conversion and Reorganization" $NECB
More small bank news. This was announced yesterday:
As of the last 10-Q that was filed before NECB deregistered (November 2015), there were 12,223,802 shares of common stock outstanding. However, an important adjustment needs to be made which is "NorthEast Community Bancorp MHC held 7,273,750 shares, or 59.5%, of the Company’s issued and outstanding common stock, and the minority public shareholders held 40.5% of outstanding stock, at September 30, 2015."
NorthEast Community Bancorp, Inc. (OTC: NECB) (the “Company”), a majority owned subsidiary of NorthEast Community Bancorp, MHC (the “MHC”), and the parent holding company of NorthEast Community Bank (the “Bank”) announced today that its Board of Directors, together with the Boards of Directors of MHC and the Bank, have unanimously adopted a Plan of Conversion and Reorganization (the “Plan of Conversion”).This one was a Stilwell activist play. The share price has increased from $10.75 to about $12.50 on the news.
Pursuant to the Plan of Conversion, the MHC will sell its majority ownership in the Company to the public and the Company, which is currently in the mutual holding company structure, will reorganize to a fully public stock holding company in a transaction commonly referred to as a “second step” conversion.
As part of the second step conversion, the Bank will become a wholly owned subsidiary of a new holding company to be formed in connection with the transaction. Shares of common stock of the Company held by persons other than the MHC (whose shares will be canceled) will be converted into shares of common stock of the new holding company pursuant to an exchange ratio intended to preserve the percentage ownership interests of such persons.
As of the last 10-Q that was filed before NECB deregistered (November 2015), there were 12,223,802 shares of common stock outstanding. However, an important adjustment needs to be made which is "NorthEast Community Bancorp MHC held 7,273,750 shares, or 59.5%, of the Company’s issued and outstanding common stock, and the minority public shareholders held 40.5% of outstanding stock, at September 30, 2015."
However, according to the proxy statement for this year's annual meeting, "as of the close of business on March 25, 2020, a
total of 12,194,611 shares of NorthEast Community Bancorp common stock were outstanding". So, only 4,920,861 shares are actually "owned" by anyone besides the mutual holding company.
As of June 30, 2020, total shareholder equity was $147.48 million. The end of year balance sheet showed no goodwill or intangibles.
As of June 30, 2020, total shareholder equity was $147.48 million. The end of year balance sheet showed no goodwill or intangibles.
If you assume that the remaining 7.27 million shares are sold for $12.50 (the current trading price), then they will bring in $91 million and shareholder equity will increase to $238 million. Meanwhile, the total denominator will be 12.19 million shares outstanding. That would make the book value per share $19.52 after the second step.
Since shares are currently trading for $12.50, the price to book post-conversion would be 64%.
The price the remaining shares will be sold for is the big unknown, though. If they are sold for only $10, it would reduce the sales proceeds, post-conversion book value, and raise the price to book ratio to more like 70%.