Use access key #2 to skip to page content.

shamapant (83.04)

A quick $792 max gain, 36% profit--Going Private

Recs

12

December 01, 2011 – Comments (18)


For anyone looking for a quick $792, i can deliver that on a maximum investment of $2200 in this wonderful arbitrage opportunity. If you intend on investing less, at current prices you are looking at a 36% gain.  The stock going private is AssuranceAmerica Corp(Pink:ASAM), which currently trades at $.22. At some point after Dec. 8th, ASAM will go private to reduce its shareholder count to below 300-eliminating its need to report to the SEC and reducing its SEC registration related expenses. Going Private, ASAM will convert its stock into the right to recieve $0.30 in cash(which is where i get my 36% profit).  ASAM has already filed an amendment to its SC13E-3 Filing and should be expected to complete the transaction Dec. 8th or a few market days afterwards. Thats the essence of the trade: below for those interested are some copy/paste with a bit(very tiny bit) of editing that I got from the SEC Filings that give insight into why this is a great opportunity:(skip if you just trust me :P )

“The primary purpose of the going private transaction is to reduce the number of record holders of the Company’s common stock, par value $0.01 per share (the “Common Stock”), to fewer than 300, thereby allowing the Company to terminate the registration of the Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and suspend its reporting obligations under Section 15(d) of the Exchange Act.

To accomplish this reduction in the number of record holders of the Common Stock, the Company will effect a reverse stock split of the Common Stock, whereby each 10,000 shares of Common Stock outstanding as of the effective date of the reverse stock split will be converted into one whole share of Common Stock (the “Reverse Stock Split”).

 In lieu of issuing any fractional shares to stockholders owning fewer than 10,000 pre-Reverse Stock Split shares, the Company will make a cash payment equal to $0.30 per pre-Reverse Stock Split share to such stockholders. 

Accordingly, stockholders owning fewer than 10,000 pre-Reverse Stock Split shares, after the Reverse Stock Split, will have no further interest in the Company, no longer be stockholders of the Company and will be entitled to receive only a cash payment equal to $0.30 multiplied by the number of pre-Reverse Stock Split shares owned by them. 

The stockholders who will be cashed out as a result of the Reverse Stock Split own, in the aggregate, less than 10% of the Common Stock outstanding immediately before the Reverse Stock Split[perhaps explaining why the exchange rate is 1:10,000 instead of higher rates that hedge funds could latch on too]. The Reverse Stock Split will also provide for a corresponding decrease in the number of authorized shares of Common Stock from 120,000,000 shares to 12,000 shares.   Timing: The Company intends to effect the Transaction as soon as practicable after all filing requirements have been satisfied. In general, the Company may not consummate the Reverse Stock Split until 20 days after the date on which it first mails this Disclosure Statement to its stockholders.[that was Nov. 18th, so the split could be expected to take place on or shortly after Dec. 8th] 

Reasons for the Transaction

Although we have been a public reporting company since August 1999, we believe we have derived only minimal benefits from being a public reporting company. Benefits of being a public reporting company (“Public Company Benefits”) typically include: access to the public markets for liquidity purposes for our stockholders; access to the public markets for purposes of raising capital through the sale of securities; and the ability to make acquisitions using securities as consideration.

Our common stock has failed to attract significant interest from institutional investors or market analysts. This has resulted in a relatively low trading volume and market capitalization, which has limited the liquidity benefit to our stockholders. In addition, the legal requirements of public reporting companies create large administrative and financial costs for us. As a small company with limited managerial resources, we believe that these financial resources and this time could more effectively be devoted to other purposes.

Our Board of Directors believes that consummating a going private transaction is a necessary step to reduce corporate overhead costs by eliminating the costs associated with being a public reporting company, including with respect to filing reports with the SEC, complying with certain of the rules and regulations under the Sarbanes-Oxley Act of 2002, and complying with applicable corporate governance requirements. Furthermore, our Board of Directors has determined that the costs of being a public reporting company currently outweigh the Public Company Benefits and, thus, that it is no longer in the best interests of the Company or its stockholders, creditors, or other stakeholders, including unaffiliated stockholders, for the Company to remain a public reporting company, for the reasons described below. The primary purpose of the Transaction is to reduce the number of record holders of our common stock to fewer than 300 to enable us to elect to deregistered our common stock under the Exchange Act and suspend our duty to file periodic reports and other information with the SEC thereunder. The Board believes that the Transaction provides the most certainty for the Company to achieve this purpose.

Exchange Act Reporting Costs. The Company incurs significant direct and indirect costs in complying with its periodic reporting and other obligations under the Exchange Act (collectively, the “Public Company Costs”), including: the legal, accounting, printing, mailing, public relations, compliance and administrative costs of preparing, reviewing, filing, printing and distributing the reports and other filings required under the Exchange Act; the broker and transfer agent charges for forwarding materials to beneficial holders of our common stock; management’s time and attention expended in preparing and reviewing such reports and other filings; and the substantially higher premiums for directors’ and officers’ insurance policies payable by public reporting companies. The Company’s direct, out-of-pocket costs comprising the Public Company Costs were approximately $750,000 during 2010.[With previous year’s total income before tax totaling 1.93 million, SEC registration took 38% of  pre-tax net income.]

While we presently have no specific plans to do so, we may, periodically, send stockholders financial and/or other information. We anticipate that our consolidated financial statements will be subject to audit only to the extent required by applicable law and covenants in any credit or financing agreement which we may enter. We expect that, in connection with any pending litigation, contractual, regulatory and general business issues, we will, from time to time, engage and confer with outside counsel, as needed.

In addition, the Company believes that the Transaction and subsequent deregistration of our common stock and the suspension of our duty to file periodic reports and other information with the SEC, will allow our management and employees to devote more time and effort to improving our operations.

Liquidity for Small Stockholders. Our Board of Directors believes that holders of fewer than 10,000 shares of our common stock may be deterred from selling their shares because of the lack of an active trading market and because of disproportionately high brokerage costs. The trading volume in our common stock has been, and continues to be, limited. Our common stock does not trade every day. The average daily trading volume of our common stock over the twelve-month, six-month and three-month periods ended September 30, 2011 was approximately 1,725, 1,290 and 400 shares, respectively. Our Board of Directors believes that the Transaction would give stockholders who are cashed out an opportunity to receive a fair price in cash for their shares without having to pay disproportionately high brokerage commissions. The Cash-Out Price of $0.30 per share of our common stock held prior to the Reverse Stock Split represents a premium of 88% over the average closing price of our common stock over the 90-trading day period ended October 5, 2011.

Lack of Capital from Public Markets. In addition to the Public Company Costs, the Company is not able to, and does not presently intend to exploit, many of the Public Company Benefits. The price of our common stock has significantly declined over the last decade, from a high bid quotation of $7.50 during the quarter ended June 30, 2001 to a high bid quotation of $0.17 on October 5, 2011. The current trading price of our common stock would make using it as a vehicle to raise capital or to provide acquisition consideration extremely dilutive to our stockholders. As a result, the Company is not receiving any of the traditional Public Company Benefits, yet, the Public Company Costs continue to increase, substantially depleting the limited resources of the Company. The increase in costs arises, among other things, because of an increase in securities regulation. Our Board of Directors believes that the Public Company Costs, if continued, would be detrimental to the financial condition of the Company.

 

18 Comments – Post Your Own

#1) On December 02, 2011 at 10:25 AM, Teacherman1 (46.42) wrote:

You know, for a "youngin", you are getting very sophisticated in your investing style.

Good luck on this move.

Good find, and good blog.

One point, is there enough float for anyone to buy enough to be worthwhile? It seems to me that the current shareholders would just hold onto their share to get the $0.30.

It is "kind" of you to share this information, but it might have been in your own best interest to just do this before you made it "public".

Have a great day shamapant.

Report this comment
#2) On December 02, 2011 at 11:44 AM, ianjh8 (73.68) wrote:

Where in the filing does it list a transaction date?

Report this comment
#3) On December 02, 2011 at 12:33 PM, Mega (99.96) wrote:

ianjh8, it does not specifically list a date.

The Reverse Stock Split and the Forward Stock Split will be conducted upon the terms and subject to the conditions set forth in the Company's disclosure statement, which is attached as Exhibit (a) to the Schedule 13E-3 (the "Disclosure Statement"). The Company intends on effecting the transactions discussed herein as soon as practicable after all SEC filing requirements have been satisfied. In general, the Company may not consummate the Reverse Stock Split until 20 days after the date on which it first mails the Disclosure Statement to its stockholders.

http://biz.yahoo.com/e/111107/asam.pk8-k.html

Thanks for the heads up shamapant.  How did you find this opportunity?

Report this comment
#4) On December 02, 2011 at 1:50 PM, TSIF (99.96) wrote:

Thanks shamapants. 

As Teacherman1 replied, buying 9,999 shares would be a bit impossible at this point, but I do appreciate info on arbitrage plays. Apparently those who didn't want to wait and who didn't want to deal with the "magic" in their brokerage account sold out at $0.24 to $0.28 from Nov 8th to Nov 25th, so some folks did get a chance to make the arbitrage trade for a possible $200-$500 gain and other holders got out at what might have been a decent gain for them if they were part of $0.10 crowd this "thing" drifted to.

Keep up the great work.  Arbitrage is a tough business. It takes money to make money and most of us are too skeptical to "play" while the option is still on the table!!  ;)

TSIF 

 

Report this comment
#5) On December 02, 2011 at 2:41 PM, Mega (99.96) wrote:

"buying 9,999 shares would be a bit impossible at this point"

Not really. Nearly 100K shares traded in the last 2 days between $0.22 and $0.23.

Report this comment
#6) On December 02, 2011 at 3:19 PM, TSIF (99.96) wrote:

Yes, but it's off substantially from the last two weeks.  It looks like 9,900 is the most common bid increment, but I can't figure out why some are in even 10,000 increments.  This would equate to one full share of a non trading entity, not to $0.30 per share.

You might get in the que, but you're at the bottom of it. You might also get stuck with a partial fill unless you're willing to pay a penny or so more than $0.23.  At least it's a US based company, minimizing some of the risk and tax headaches.

Good luck.

Report this comment
#7) On December 02, 2011 at 3:41 PM, TSIF (99.96) wrote:

Apparently I also mistakenly looked at hte ASAM.OB instead of the ASAM.PK.  It showed ZERO shares traded for today, but does link to the total daily volume and masked my mistake.  

My mistake, thank you for the correction megashort.  Thin, but possible if someone isn't trying to shave a penny and missing the bid/ask.

TSIF

Report this comment
#8) On December 02, 2011 at 7:24 PM, Mega (99.96) wrote:

Is this how you found it:

http://www.investorscopes.com/AdvancedSearch.aspx?Home=1
Search for "going private" 

I'd never seen that website before, looks like a great resource. 

Report this comment
#9) On December 02, 2011 at 11:55 PM, shamapant (83.04) wrote:

Nope, I actually found it by using marketbrief.com(used to be secwatch), which I actually found via a fool article a while ago. I watch the sec filings for SCE13-3s and a few others haha. Also, i don't know if that was cleared up in the above but any shareholders w/ above 9999 shares get to hold an illiquid company that doesn't report to the SEC, and doesn't get a share in the 30% rise. Thats why the profit is limited to $792, and why I hope that even by revealing this opportunity, the profit margin won't close.

 Shamapant 

Report this comment
#10) On December 02, 2011 at 11:57 PM, shamapant (83.04) wrote:

Also to see the actual filing just go to sec.gov and search for filings by assuranceamerica corp. its the first option

Report this comment
#11) On December 03, 2011 at 9:39 AM, mhy729 (29.65) wrote:

You can goto http://otcbb.com/asp/Info_Center.asp and enter ASAM, then lookup "Depth/LII" to see the trades on this one.  I see one trade for 9,999 shares, but also a couple for 10,000 (even one for more than 10k) interestingly enough.

Report this comment
#12) On December 16, 2011 at 6:46 PM, ianjh8 (73.68) wrote:

When will they finalize buyout?

Report this comment
#13) On December 19, 2011 at 1:50 PM, TheLastYetti21 (30.14) wrote:

Can initiate the reverse split 20 days after filling all the proper disclosures, which they did on 11/18. Assuming, business days the company CAN act tomorrow, 12/20.

I am long this trade and I would begin to worry if there is no annoucement this week.

Any other thoughts?

The Last Yetti

Report this comment
#14) On December 19, 2011 at 4:21 PM, ianjh8 (73.68) wrote:

Somebody just got screwed, and I suspect it was me. I was able to buy in at $.23/share two weeks ago.  Being new to this type of trade, I put in a stop loss of $.19/share to avoid getting screwed in case this company for some reason changed its mind. Well, at closing bell today, either you all got screwed and this will go down further or I got screwed, because the stop loss triggered (why in the hell would it drop if it's about to be bought out at $.30???). Not all the shares sold at once, most sold at $0.19, the rest at $.12. F ME. Repeat. F ME. Congrats to the buyer at $.12 if this does in fact go private at $0.30. If this POS does in fact go private on 12/20 for $0.30, I will have screwed myself unintentionally. Guess I will stick to value investing, which so far hasn't resulted in my screwing myself royally. Thx.

Report this comment
#15) On January 03, 2012 at 1:21 PM, Bobes915 (52.98) wrote:

Anyone else who is still long on this have any thoughts on when it might be completed?  I was expecting it by the end of the year and I'm trying to re-evaluate this as an investment.  Would love to hear your thoughts. 

Report this comment
#16) On January 09, 2012 at 12:29 AM, MajorBob04 (99.59) wrote:

The company just announced that they postponed going private.  There are too many stockholders with fewer than 10,000 shares, thus it would cost more than $500,000 for the company to buy them out.  That was stipulated in the SEC documents that they had the option to postpone if it would cost too much.  The stock price has since dropped significantly. 

Report this comment
#17) On January 09, 2012 at 12:52 PM, ianjh8 (73.68) wrote:

Though I lost $, I'm glad I got out at $0.16/share. This was my first and last foray into risk arbitrage. Thx. 

Report this comment
#18) On June 23, 2012 at 5:33 PM, axiaoheye (< 20) wrote:

Megashort and Shamapant shared the userful resource to get certain sec filing information, I would like to share secdatabase.com with everyone:

www.secdatabase.com/Filing/Search/0

 This one can do powerful full-text search against all the SEC filings. try it and post your comments.

 

 

Report this comment

Featured Broker Partners


Advertisement