Description
Warning: this is for PA or small funds. super small/illiquid.
Nu Ride is effectively a SPAC with $2.5+/shr of cash & $1.0bn of NOLs. It is the post-reorg version of Lordstown. You can only buy 700k shares due to NOL restrictions.
Lordstown exited BK. Its emerging as Nu Ride (“NRDE”). PF for the exit the company has the following:
- $2.9 per share of net cash.
- $2.0/shr of perpetual preferred that Foxconn holds
- Real litigation actions against Foxconn
- Litigation actions against former executives
- 16mm shares outstanding
- $1bn of NOLs which shields $200mm of taxes undiscounted
- Solid board to allocate capital
- No real FCF burn
How will this play out?
I suspect that Foxconn settles litigation in return for tearing up the preferred at a minimum. there is a real probability of some cash settlement.
Former Lordstown executives will likely settle for some unclear amount
If the company picks up $32mm of value in litigation and the preferred is torn up, then NRDE has $4.5/shr of net cash. Tearing up the pfd will trigger $7mm pay-out to equity litigants which lowers cash from $2.9 to $2.5.
The perpetual pfd is the most useless piece of paper ever. Foxconn will never see a dime from it. It’s an optical obstacle to value creation and the board shouldn't attribute much value to having it torn up.
Interesting factoid:
Esopus Creek just lifted 542k shares FAST. This took them to their max position of 700k at $2.28/shr. This appears to include purchases as high as $2.75/shr.
Esopus Creek's principal sat on the equity committee and is a lawyer.
I believe he will be a board member and may have had a short window to execute his purchases.
Clearly, Esopus Creek isn’t restricted. However, as an equity committee member, he may have some sense for the strength of the litigation and the size of a potential settlement.
I doubt EC would rush to buy this many shares at this price if they expected PF cash to be $2.5/shr.
I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.
Catalyst
settlement with foxconn
settlement with former executives
capital allocation plans