No. of Recommendations: 8
Is it possible to find a contemporary example of a company selling below liquidating value and do an analysis?

If you value your sanity, you'll slap on a pair of latex gloves before you even considering venturing into net-net land in today's environment. Most net-net screens will land you in a morbid graveyard littered with would be B2B exchanges, technology consulting/staffing firms, next generation internet hardware powerhouses and anyone and everyone whose major customers were telecommunications companies.

You'll find companies like Network Engines, with $75 million in cash, no debt and $39 million equity cap (after a recent double), which is optimistic it can improve quarterly revenues to $2 million under its completely new business model after experiencing a slight year over year revenue dip of 91%.

Or you might run into an old favorite, like Network Appliance, now Tipping Point Industries, and its debt free $48 million vs. a $25 million market cap, which has completely abandoned its internet appliance businesses in favor of "developing a business plan" to enable premium broadband services. Cash burn for the first 9 mos. of 01 was down to only $20mm, which might be a little more positive if revenues were greater than, say, zero. and its $39 million in cash, which apparently abandoned its the fixed NYC wireless spectrum that it shelled out millions for, can be had for a cheap $17mm, and as a bonus you get its new 50% joint venture in a medical technology business. Don't be turned off by the fact that these guys are apparently also toying some short selling in their spare time and on their shareholders' dimes.

I won't even mentioned the aviation B2B turning nurse staffing hub, or the e-commerce B2B giant turned B2G procurement exchange.

It's absolutely amazing how much of Graham's (b) there is out there in the post bubble economy, with managements feeling free to use shareholder capital as their personal venture funds, despite the market's reminder that their prospective efforts are viewed as value destroying. If you have some time out there and can stand the stench, there is almost always the opporutnity to turn over a lot of rocks and find a live body or two, but hold your nose if you're sensitive to the smell of overflowing waste. It's a good reminder that every resource conversion requires a catalyst if you're an outside passive minority investor with interests that are in some ways opposed to an entrenched control group.
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