metoo105 (31.28)

Selectica (SLTC)

February 06, 2011 – Comments (0) | RELATED TICKERS: SLTC

Selectica is a $13.8 milliion market cap company that trades on the Nasdaq. Significantly the company has around $15 million in cash and a current enterprise value of around $1 million. What this analysis neglects is an asset worth approximately ten times that. As a company that IPOd at the peak of the dot com bubble in enterprise software, it has lost a lot of investor money over the years. The company has staunched the bleeding since then, but still is quite optimistically a break even enterprise. Lloyd Miller and Steel Partners and others have jumped into this company as balance sheet play with the intent of selling it to a big, profitable company. The analysis of how another company can acquire this tax asset is quite complicated, but I refer anyone who might be interested to search Selectica v. Versata which will pull up the two court cases in the Delaware Chancery and Supreme Courts analyzing the use of a poison pill to ward off a takeover and preserve the asset. More importantly, now that the Supreme Court has rendered its decision a couple of months ago, you can bet that the company is being shopped around.

Given my reading of that case, I gather that there are buyers who value the enterprise software business at around double its current price of around $4.50. That's say, $9. Then there's the cash on the books which is about another $5 per share. Finally, there is a tax asset with an actual value of something on the order of $50 per share. I assume it will sell for around $25, but this is just a guess.

That is, this company might end up netting around $40 per share! I highly recommend that you look at it.