Atlantic Coast Entertainment Holdings
ACEH (a bulletin board stock), ceased operations and sold its operating subsidiary and Sands Casino in Atlantic City back in late 2006. The cash proceeds from the deal amount to some $21/share, around the current book value of the company. This cash remains in an escrow account accruing interest and should be released as unrestricted to the company in 10 months if all goes smoothly, which I predict it will.
Since the company has no operations and no intentions to revamp any going concern business, this $21 in cash will likely be distributed as a liquidating dividend within the next year or so. The stock, though, trades for a mere $16.45, which effectively offers a cool 25% profit. Given the tax treatment of liquidating dividends as capital gains, the after tax profit still represents a very respectable annualized gain by my estimates.
There is a time-value risk that the funds sit in escrow for a while longer than expected, as well as a risk the firm runs into liabilities that it must cover with the escrowed cash. Someone with more legal expertise than I could probably better size up these risks by checking the escrow and acquisition agreements.
Michael said,
July 26, 2007 @ 9:56pm
Hey, found your blog and this post from a link in the world beta blog. I hold ACEH and I likewise like it. The lawsuit against Carl Ichan, ACEH, and related parties (re: the bankruptcy of ACEH’s predecessor company) looks to be completely over. ACEH isn’t spending much money so there is little cash burn.
Is it certain that ACEH is being liquidated, though? I thought there was a possibility that it would be used for more RE investments, considering it is 90% owned by Ichan’s company ACP.
If you like this you may like CLHI.pk which is another liquidation situation. Although it is too late to get in on it, I also recently got in on a similar situation, but with preferred stock (QNTAP) that is getting bought back.
Disclosure: I hold ACEH, CLHI, and QNTAP
JoeCit: Intelligent Investing - Computer Horizons Corp.: Liquidating Dividend on the Horizon said,
October 3, 2007 @ 11:32am
[…] October 3, 2007 at 11:32am · Filed under General Computer Horizons (CHRZ.PK) distributed an initial liquidating dividend of $4 in March, and expects to make another one between $0.68-$0.82 before closing shop permanently. Shares are at $0.525 right now. This is a rough guess at best, but I estimate it should take no longer than a year to make the last of dividend payments, if not sooner. Shares have languished as the purchaser of one of their subsidiaries is suing for fraud, which the company believes is entirely unfounded (of course). But regardless, the maximum liability to the company is limited to $8mil, or $0.23/share, which, after taking a look at the book value they can reasonably extract and subtracting from this the maximum liability of the claim, still leaves the likely future dividend at $.56-$0.60. Assuming a 365 time frame, this would give an annualized return upwards of 7%. If the suit is without merit, the dividend can be upwards of $0.80, and the annualized yield would be a fat 45%+. If it’s somewhere in between, we’re looking at 15-25%-ish. Like Atlantic Coast Entertainment, a company I wrote about here, this seems a low risk, but uncertainty, situation with the potential for big arbitrage rewards if all goes well. […]