A bad company/good company setup - led by new management

Buying an improving business at a cyclical low

I am back with the last write-up for 2024. This is a typical bad company/ good company setup. Well to be honest, horrible company/decent company would probably be the better adjectives, but that just doesn't sound as good!

Anyway, here are the quirks:

• The company has two operating segments, and there is good reason to believe that the bad segment will be sold.

• If this segment were sold, I believe it would be worth at least 59% of the current market cap. While the remaining/good business is worth roughly current market cap alone.

• Despite industry-wide headwinds in both segments, the new management team has increased gross margins from 5% in Q1 2024 to 15% in Q3 2024.

And the best news for people concerned about liquidity. The stock trades on the Nasdaq and has an average daily trading volume of roughly $700k (yes, for me that’s liquid), making this a great idea for small value funds in my opinion.

Despite that, there is only one old write-up on ValueInvestorsClub and an old write-up on MicroCapClub, but no recent write up covering this new situation.