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LD Micro Highlights Remarkable Level of Microcap Activity Noticed in the Last Week of June

From Chris Lahiji, here is a summary of the LD Micro newsletter covering the remarkable level of microcap activity seen in the last week in June. According to the newsletter, the week was “nothing short of amazing”, calling it perhaps “the busiest five days of trading we have ever experienced”. This of course is especially striking since summer is traditionally slow for markets. The newsletter recaps some of the important announcements and developments that made the week so unusual, which we’re summarizing for you here. (Note: This only covers half of the week’s activity, the rest to be covered later.)

  • Xerium (XRM) – Just three months after announcing strategic alternatives, this LDMi Index component gets acquired by Andritz AG for $13.50 per share. All cash, with nearly 150% premium to where the stock previously closed.
  • TSR (TSRI) – A major stockholder (and former executive) of the company has decided that he wants to see the company sold. TSR received a letter from James Hughes on behalf of Joseph F. Hughes and Winifred M. Hughes, in which Joseph F. Hughes and Winifred M. Hughes requested that the Company’s Board of Directors pursue a sale of the Company. Joseph F. Hughes is the former Chairman and Chief Executive Officer of the Company, and he and Mrs. Hughes together own a total of 819,000 shares of the Company’s common stock, which represents approximately 41.8% of the Company’s issued and outstanding common stock.
  • InfuSystem Holdings (INFU) – Meson Capital and Argonne Capital Group has decided to make an offer to buy all of InfuSystem Holdings for $3.75 per share, all cash. Meson already owns 9.8% of the company that they have purchased at a lower valuation, and Argonne is a big player that has already deployed close to $800 million in equity. A couple of weeks ago, both Meson and Argonne went to the company with the $3.75 cash offer, and told that the company was “not for sale.” In turn, both firms have also requested that the company elect a slate of new and capable board meetings for the next annual shareholder meeting that is coming up. I think that it would be prudent to get your drinks and popcorn before the “show,” as it is about to begin. (Disclosure: InfuSystem is one of LD Micro’s largest personal holdings, and has paid to attend their conferences over the years.)
  • Differentiated Brands (DFBG) announced “one of the biggest deals I have ever witnessed in the space”:

Differential Brands Group (DFBG) a portfolio of global consumer brands comprised of Hudson, Robert Graham and SWIMS, today announced that it has entered into a definitive purchase agreement with Global Brands Group Holding Limited, a Hong Kong listed company, to acquire a significant part of GBG’s North American licensing business (the “GBG Business”), comprised of licensed brands such as Disney, Star Wars, Calvin Klein, Under Armour, Tommy Hilfiger, BCBG, bebe, Joe’s, Buffalo David Bitton, Frye, Michael Kors, Cole Haan and Kenneth Cole, for a purchase price of $1.38 billion, subject to adjustment. It is anticipated that upon closing, DFBG will have in excess of $2.3 billion in pro forma annual revenue comprised of branded men’s, women’s, and kid’s apparel, along with accessories that will be distributed to a diversified base of consumers across all retail and digital channels. The acquisition is expected to close in the third quarter of 2018.

(Disclosure: the company has compensated LD Micro in the past to attend events and is a current sponsor of the conferences.)

  • Adesto Technologies (IOTS) decided to acquire Echelon Corporation (ELON) for $8.50 per share, close to 100% premium.
    (Disclosure: The CEO of Adesto, Mr. Narbeh Derhacobian, paid to attend last year’s Main Event.)
  • Lovesac (LOVE) went public, raising $55 million in their IPO.
    (Disclosure, the company has paid LD Micro to attend in years past.)

Also included in the newsletter is a new section – Highlighting Anomalies Amongst the Biggest Gainers:

Google has been pioneering Smart Cities through their recent acquisition of SideWalk Labs (please note recent Politico article on Toronto, the first chosen site.)  The idea is to integrate IoT into our everyday lives even more.  To the point that we as citizens turn into pure data to inform a wave of new services and products that will transform our next generation communities.

Investing in IoT infrastructure is starting to become a pattern.  Echelon (ELON) was the second buyout in the space. Silver Spring Networks (SSNI) was bought by Itron (ITRI) to prepare for this near term future in September.  The Smart City infrastructure is being built out now. Investors are being shown a roadmap to how.  From SSNI to ELON, pure play Smart City ideas just started to deliver high alpha.

  • The Importance of Zafgan’s (ZFGN) Inclusion into the Russell 3000 – Allowed the Company to Raise a Year of Cash.

On June 25th Zafgen (ZFGN) announced inclusion into the Russell 3000.  Sending the stock from $7 to $9 over the weekend. Enough to enlist bankers into issuing a flash secondary that was completed at $7.50 (link).

But, rather than stabilizing at the deal price, Zafgen went straight up again.  In this case, the secondary was rewarded because it gave the company an entire year of cash so investors could look forward instead of wondering about the next raise.  A feat that would have been impossible without being added into the Russell 3000.

…we believe that our cash, cash equivalents and marketable securities will enable us to fund our operating expenses, debt service obligations and capital expenditures through the second quarter of 2019. [LINK]

And here are some of the newsletter’s links to key announcements:

ACQUISITION: Differential Brands Group ($DFBG) to Acquire Majority of North American Division of Global Brands Group for $1.38 Billion – the stock was up over 500% at the open on Wednesday

ACQUISITION: Three Months After Announcing Strategic Alternatives, LD Micro Index Component Xerium Technologies ($XRM) Get Acquired by Andritz AG for $13.50, All-Cash, 146% Premium from previous close

ACQUISITION: Adesto ($IOTS) Announces Agreement to Acquire Echelon ($ELON) – approx $45m

Major Stockholder Requests TSR ($TSRI, +29%) to Pursue Sale of Company

Meson Capital and Argonne Capital Group offer $3.75 per share for InfuSystem ($INFU)

Pacific Energy Development ($PED) Closes Strategic Investment – Successful Restructuring of Balance Sheet

Gemphire ($GEMP) was up 77% last week: Gemcabene Meets Primary Endpoint in INDIGO-1 Study of Severe Hypertriglyceridemia (SHTG) Patients

There were a lot of IPOs last week, including HyreCar

The Lovesac Company Announced Pricing of Initial Public Offering – public offering price of $16.00/share – closed the week over $20/share

The FDA Just Approved a Marijuana-Based CBD Drug for Epilepsy

One Stop Systems ($OSS) Multi-Year Military Design Win for Rugged All-Flash Arrays Ramps Up with $3.2 Million Purchase Order

Blockchain Industries ($BCII) Forms OTC Desk To Facilitate Bitcoin Block Trading

Baylin ($BYL.TO) Announces Strategic Acquisition of Alga Microwave Inc. and $35 Million Bought Deal Offering – $27m total consideration

Reis & Irvy’s ($VEND), Robot-Staffed Frozen Yogurt Chain, Inks $21 Million Master Franchise Agreement in Atlanta

Cinedigm ($CIDM, +7%) Announces Fourth Quarter and Full Year Fiscal 2018 Financial Results – Full Fiscal Year Total OTT Revenue Increased 23% Driven Mainly by OTT Channel Revenue that Increased 36%

Jerash ($JRSH) Reports Double-Digit Increases in Revenue Growth and Pre-Tax Profit in Fiscal 2018

Patriot One ($PAT.V) Finalizes International Threat Detection Testing Plans with University of North Dakota

Marathon Patent Group ($MARA) Merger Deadline with Global Bit Ventures Expires; Not to Be Extended

Summer Infant ($SUMR, +5%) Closes on New $77.5 Million Financing to Fuel Growth Initiatives

Someone has to do better than this? Only 340m? – MARKETING FIRM EXACTIS LEAKED A PERSONAL INFO DATABASE WITH 340 MILLION RECORDS

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