December 2023 Position Updates
Hello OpTrackers,
With the month of December and calendar 2023 wrapped-up, I wanted to provide an update looking at how we’ve done so far… and we’re looking pretty good!
Here’s a quick summary of where we (illustratively) stand numbers-wise:
I am very pleased with where this stands. If we can maintain a 90%+ batting average net of borrow costs, that would be absolutely insane. I do not expect this to continue, but I will give it my best effort. So far, these are encouraging results and I hope you’re getting value out of following along. Speaking of which, if you can think of anyone else who would get value out of following along with these ideas it would mean the world to us if you could share it with them by clicking the button below.
December Position Commentary/Updates
-
NVAC: The company announced on December 28th they extended the deadline for their initial business combination from 12/31/23 to 3/24/24. Your guess is as good as ours as to where this lands but I still think this is a great alpha short in the interim.
-
PCT:
-
After close on the first day of the month the company announced the CFO resigned after two years AND a RIF of 22 employees that they put a positive spin on.
-
We don’t think it’s a good sign when the CFO leaves abruptly with the stock down 60% from recent highs because of fears about tripping debt covenants
-
-
On December 18th the company announced more problems with their Ironton facility after ending the latest shutdown. The company no longer expects to hit the milestones required by 12/31 to stay out of default on their bonds and will instead have to use the 90 day cure period to do so.
-
-
LICY:
-
LICY acknowledged it is in conversations with Glencore about strategic and financial alternatives. Glencore owns a series of $200mm+ convertible notes that convert at $10/share (so they’re regular debt now) and are PIKing at ~11% based on current SOFR. Based on the circumstances, my best guess is any financial alternatives explored by the company will either bury the common equity under even more senior securities in the capital structure and/or will be dilutive to common equity holders.
-
There is a risk that Glencore just decides to acquire the whole company at a premium, but that’s a risk I am willing to take.
-
-
Following the engagement with Glencore it was reported in a 13D by Koch that they invested $100mm of the company’s convertible notes and are also engaged in these conversations
-
-
PRST: The company terminated their (very expensive) Interim CFO and battlefield promoted their CAO to Interim CFO
-
FSR:
-
The company released a business update on December 29th, including:
-
They barely beat their (newly lowered) production guidance of 10,000 units
-
Deliveries grew 300% QoQ off a low base
-
The company is generally optimistic and looking to continue to ramp production and deliveries
-
-
We think this is a nothingburger of an update relative to the problems in front of the company and this is still a management team we wouldn’t bet on succeeding
-
For the other names on the list, I either have nothing to add and/or the positions were written up so recently there really couldn’t be anything to add. Any major developments I will update intra-month, otherwise I will do another monthly update at the end of January.
Again, if you know anyone who might be interested in a new source of substantial alpha on the both the long and short side, please smash the share button below 🙂 We are still early days and every incremental subscriber means the world to us.
Until next time!
Please Note: I track these as a theoretical exercise and anything written on this blog should not be used as investment advice. Please consult a financial advisor before investing a dime of your own money. Additionally, these returns don’t perfectly capture borrow costs (or capture other potential offsets to returns at all) and realized returns may differ materially from the results shown here.
