Description

SYCRF was most recently written by sanborn. 

Despite its depth, the write up over-estimated the real-estate value, underestimated liquidation/disposal costs, and ignored the NOLs.

To be fair, sanborn´s writeup preceded SYCRF´s report showing (a) its real estate is worth  ~$5 million before liquidation costs and (b) the huge, unexpected $7 million jump in liquidation costs from Sept 30 2020. 

The federal NOLs are $281 million, implying a tax asset of ~$60 million.¹ 

As SYCRF is in liquidation, why value the NOLs?

Because the liquidation can be stopped and several players can monetize them.

Icahn Capital recently increased its stake in ENZN to ~50% (see Appendix below for details), a similar liquidation whose only asset (aside from cash) is $38 million in tax assets. 

ENZN trades at a ~$50 million EV.² 

$50 million on 87 million SYCRF shares would add over $0.50 to SYCRF. 

Another player is PIOE ( https://www.p10alts.com). In the last 3 years, with a $75 million tax asset, PIOE rose from $0.2³ to $7 (93 million shares out). I suggest reading their 2020 annual letter, https://ir.p10alts.com/static-files/f492fd6a-e0d2-4c6d-94dc-662a488324a6 or presentation to understand the runway they see for businesses to merge with PIOE or other shells. Note that the largest shareholders of PIOE were also the largest in CRSS, another tax asset rich shell written by Chuplin. 

Yet another player is SPLP, which has a long history with NOL shells including IGOI, DGTC, ADPT, COSN, and STCN (all written on VIC). 

 ¹See p. 19 of http://scafg.gcs-web.com/static-files/7e4ea653-204d-495a-b293-6331dac27508

² $48 million in cash minus $41 million in pref stock implies $7 million in net cash

³ Per Item 5(c) on SEC Filing | P10 (p10alts.com)

Appendix: 

From ENZN´s S-1:

Why are we conducting the Rights Offering?

The purpose of the offering is to position us as a public company acquisition vehicle, where we can become an acquisition platform and more fully utilize our net operating loss carryforwards and enhance stockholder value. 

Why is Icahn Capital LP acting as backstop for the Rights Offering?

Our objective is to raise $43.6 million in gross proceeds from our Rights Offering. In the event that holders do not exercise all of the Subscription Rights, we would fall short of that objective. We have therefore entered into the Investment Agreement with Icahn Capital LP, which, together with its affiliates, is one of our largest stockholders, to ensure we will receive $43.6 million in gross proceeds from this Rights Offering; provided, that the gross proceeds from the Rights Offering and investment commitment will not exceed the amount of $43.6 million in the aggregate. Additionally, we do not believe that Icahn Capital LP’s increase in our stock ownership should impair our ability to potentially use our net operating loss carryforwards even if no stockholders other than Icahn Capital LP participate in the Rights Offering. Accordingly, having Icahn Capital LP provide the investment commitment should not affect the potential impact of the Rights Offering on our net operating loss carryforwards.

source:

https://www.sec.gov/Archives/edgar/data/727510/000110465920105076/tm2029968d2_s1a.htm

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