12 months Finish 2024 Portfolio Assessment

• CKX Lands (CKX) is an illiquid microcap that owns land in Louisiana that it primarily monetizes by way of oil and gasoline royalties.  About 500 days in the past, the corporate introduced a evaluate of strategic alternate options and this previous spring up to date CKX had obtained curiosity from a number of events, however that was near 9 months in the past now.  A commenter posted on 12/4, an e mail from Grey Stream (Chairman & President, who’s engaged on an expired contract) confirming that CKX Lands just isn’t concerned within the Mission Cypress sequestration effort, but in addition that strategic alternate options “efforts and discussions are nonetheless ongoing in earnest.  We hope to have a fabric replace quickly.”  I do fear {that a} no deal announcement will considerably damage the inventory, it trades little or no each day, is semi-popular in small cap worth circles and a no-deal would sign a lifeless cash inventory for years to come back.  If it would not get offered after this lengthy course of, when will it?  Let’s hope one thing is within the works and introduced quickly.  My greatest guess remains to be one thing will get carried out, however my expectations are for a decrease premium, one thing within the $15-17/share vary.
• Howard Hughes Holdings (HHH) is now a pure-play grasp deliberate neighborhood actual property developer following the spinoff of Seaport Leisure Group (SEG).  Every week after the spinoff, Invoice Ackman’s Pershing Sq. Holdings (37.5% proprietor) up to date their 13D to state their curiosity in taking the corporate personal.  It is 5 months later, we do not have a lot of an replace, Invoice is busy discussing politics and his investments in Fannie and Freddie on Twitter, which is a bit regarding.  I believed one thing can be carried out by now (had some December name choices that sadly expired nugatory, nonetheless have just a few January calls which can be out of cash), there’s not going to be one other bidder for the corporate that may pay a full value, administration can be greatest to take a good deal from Pershing Sq. versus persevering with to commerce at a reduction into eternity.  My present greatest guess, they arrive to a deal for $90-95/share someday in January.
• Limoneira (LMNR) is a lemon grower and packager that’s more and more transferring acreage to avocados, however that will probably be a a number of yr transition.  Limoneira additionally has an actual property improvement arm which has a JV creating homesites from their former agricultural land.  13 months in the past, the corporate introduced they had been pursuing strategic alternate options, we’ve not seen an excessive amount of of an replace, aside from mentions of “vital curiosity”.  In August, the corporate added a brand new incentive settlement with senior administration to supply bonuses for a transaction over $28/share (“Base Share Value”) with escalators as much as $40/share (“Goal Share Value”), after which even larger escalators above that.  Shares commerce right this moment under $25/share after the inventory dipped a bit following 2025 steerage disenchanted a bit, however the long run story appears in place.  I am nonetheless anticipating a deal above $28/share, my solely considerations is it might be an advanced deal (leading to a horny headline premium, however the market valuing it at a reduction), administration has talked about exploring OpCo/PropCo constructions as a part of this course of.

• Enhabit Inc (EHAB) is a mid-2022 spinoff of Embody Well being (EHC), like many spins, Enhabit was spun with an excessive amount of debt and a administration staff that did not seem prepared for all times as a public firm.  They stumbled proper out of the gate and attracted activist traders who pushed for a sale.  No sale seems on the horizon close to time period (insurers like UHC had been beforehand patrons, however they’re twisted up in different points proper now), however at ~8.5x EBITDA (when related comps have been offered for mid-teens multiples or greater) it appears comparatively low cost.  The house well being and hospice sector ought to have related tailwinds to senior housing with the growing old inhabitants, however dwelling well being has the additional benefit of being less expensive and retaining seniors of their houses.  Enhabit has a whole lot of leverage, 4.8x EBITDA, wish to see that come all the way down to extra tolerable ranges for public markets, this is not my highest conviction thought, however does seem to be an inexpensive setup to outperform from the preliminary spin disappointment.
• Inhibrx Biosciences (INBX) is the spinoff of Inhibrx Inc, principally a restart of the event engine after promoting INBRX-101 to Sanofi.  New INBX has two ongoing trials, the additional alongside one, a registration-enabling section trial for INBXR-109 ought to have an information readout in mid-2025.  I am simply alongside for the experience, no ideas on the pipeline, simply letting the spin play out over 1-2 years submit Sanofi transaction.
• Seaport Leisure Group (SEG) is the Howard Hughes spin, they did full their rights providing and now we stay up for their first earnings name in March which will probably be their administration’s first probability to inform their story to the market.  There’s a whole lot of wooden to cut right here, sure, SEG owns a full Manhattan block, however its extraordinarily underutilized (seen loads of photos on Twitter of it close to empty).  I do just like the administration staff that was introduced in to run SEG, but in addition cautious on the pace of change, my greatest guess is a combined use tower at 250 Water within the Seaport District is the primary improvement venture undertaken.  With two mega resorts opening this yr and a brand new on line casino/stadium complicated being constructed on the former Las Vegas Tropicana web site, assigning any worth to the Style Present air rights appears a methods away.

• On 11/8/24, AlloVir (ALVR) introduced a reverse merger settlement with privately held Kalaris Therapeutics, this proposed merger contains no oversubscribed PIPE, particular dividend or CVR to present AlloVir shareholders that are options of offers which have not too long ago gotten a submit announcement pop.  As a substitute, AlloVir will probably be deliver primarily the entire proforma money ($100MM) to closing and obtain 25% of the corporate, placing a reasonably lofty valuation on Kalaris, which solely simply commenced enrollment in a Section 1 trial.  $100MM money on 115.5 million ALVR shares is roughly $0.86/share, regardless of that, shares presently commerce for $0.42/share.  ALVR shareholders proudly owning 29.4% have already pledged their help for the merger, the deal is anticipated to shut in Q1, voting this one down is perhaps tough, nevertheless it appears too low cost to promote now.  There is perhaps some tax loss promoting taking place and as soon as the deal closes, possibly we get some uplift from continued shareholder rotation because the story will get out.  However now very low conviction.
• On 10/31/24, Aerovate Therapeutics (AVTE) introduced a reverse merger settlement with privately held Jade Biosciences, not like AlloVir, this merger features a particular dividend of nearly all of AVTE’s remaining money at shut (estimated at $65MM or $2.25/share, however that is perhaps conservative) and a big $300MM oversubscribed PIPE.  Submit closing, AVTE shareholders will solely personal 1.6% of the mixed firm.  This can be a liquidation that is structured as a reverse merger, the perfect type of end result.  The plan is to carry via the particular dividend / merger after which exit shortly after as people who did not get their full allocation within the PIPE may bid up the shares.
• ESSA Pharma (EPIX) not too long ago introduced the termination of their License Settlement, additional solidifying their pursuit of a liquidation or reverse merger.  Apart from that, nothing has actually modified since my write-up in early November, the unfold between my estimated liquidation worth of ~$2.15/share is about 20% above the place the $1.79/share it trades right this moment.  Tang Capital and BML Capital are each slightly below 10% holders right here, the money pile here’s a wholesome $100+MM, that is most likely my present favourite within the basket.
• Ikena Oncology (IKNA) snuck in a reverse merger transaction earlier than yr finish, asserting on 12/23 a cope with Inmagene Biopharmaceuticals that features a CVR plus an oversubscribed $75MM PIPE from each present IKNA traders and new names.  This reverse merger hasn’t been nicely obtained by the market, I am a bit shocked by that given the PIPE, however there will probably be restricted return of capital right here (possibly a token particular dividend if the money at shut is above $100MM) in comparison with AVTE.  The PIPE values IKNA at roughly $120MM or $2.40+/share, regardless of that, shares presently commerce at $1.64/share.  The deal is focused to shut in mid-2025, I might anticipate the worth will rally a bit from right here into the shut because the shareholder registry turns over.
• Nothing has actually modified at Athira Pharma (ATHA) since my early November write-up, shares are down mid-single digits since, it is perhaps a bit extra enticing now as we look ahead to a possible cope with 14% holder Perceptive Advisors.  This one is a bit more dangerous, moderately than waiving the white flag following a failed medical trial, Athira has said they’re doubling down on their improvement pipeline.  Shares commerce at $0.59/share, a large low cost to my estimated liquidation worth of $0.86/share.
• HilleVax (HLVX) reported a failed medical trial in July together with a imprecise intention to “discover the potential for continued improvement” of their pre-clinical belongings, however on 12/5, we obtained additional validation this example is a regular-way damaged biotech in search of strategic alternate options with the announcement HLVX was doing a 70% discount in power, together with three government officers.  There’s nonetheless work to do earlier than it is a clear shell, money burn is greater than I anticipated as R&D bills did not come down a lot in Q3 regardless of halting the trial in early July,  HLVX additionally nonetheless has but to terminate their vital working lease.  Shares nonetheless commerce at a reduction to my up to date liquidation worth of roughly ~$2.50/share.

• Enzo Biochem Inc (ENZ) is a two-step liquidation, after promoting their medical lab division to Labcorp in mid-2023, they’re left with a subscale unprofitable life sciences division.  The market appears to be dropping in religion that ENZ will really be capable of monetize their remaining division and return money to shareholders, in mid-December, ENZ launched their fiscal Q1 outcomes disclosing a 20% income decline as a result of “basic continued headwinds within the life sciences instruments house” with out a lot different element on the continuing strategic course of, which wasn’t confidence inspiring.  On the optimistic aspect, ENZ did appoint Jon Couchman to the Board, he has earlier liquidation expertise.  Following my expertise with PSFW, an identical two-step liquidation that took a very long time to completely play out, I am keen to provide this one some house too.
• HomeStreet (HMST) is a zombie financial institution, their steadiness sheet is the wrong way up on account of the Fed taking charges as much as fight inflation.  HomeStreet had a cope with FirstSun Capital Bancorp (FSUN) to be offered in a stock-for-stock deal that valued HMST at roughly $15/share, however regulators balked on the deal, particularly as FSUN discussion board shopped their regulatory/constitution construction from the OCC to a Texas state constitution.  The first concern of Texas regulators was HMST’s industrial actual property publicity (they’ve a big slug of Class B/C multifamily loans within the LA space, regulators have been spooked on that market since NYCB had their struggles this previous spring).  The FirstSun deal broke, HMST has responded by promoting $990MM of their industrial actual property portfolio (about 20% of the CRE publicity) to Financial institution of America for 92 cents on the greenback, which is 4 cents decrease than the place they’ve marked the truthful worth of their total loans held for funding on their steadiness sheet.  The longer HMST stays standalone, the more serious, hopefully they get pushed into the arms of a brand new merger dance associate right here quickly at an identical ~$15/share valuation.  Many are predicting 2025 because the yr of regional financial institution mergers, hopefully HMST is without doubt one of the first taken out.

Legacy Positions:

• Whereas vital holdings for me, Inexperienced Brick Companions (GRBK), Mereo BioPharma Group PLC (MREO) and to a lesser extent Par Pacific Holdings (PARR), these legacy positions should not actually energetic actionable concepts in my thoughts.  Completely happy to talk with others fellow traders, however for now I am simply letting these investments play out and defer capital features taxes.

Efficiency Attribution:

Present Watchlist:

As all the time, concerned about listening to new concepts, please submit within the feedback, within the spirit of sharing, this is my present watchlist with just a few notes on every.  The blue are the busted up biotechs that I have been , however did not make it into the portfolio but for one purpose or one other.

Present Portfolio:

Moreover, I personal a 15 or so CVRs and non-tradeable liquidation stubs, most of those are marked at zero.  I withdrew funds from this account within the second half of the yr to reallocate elsewhere in my private steadiness sheet.  Regardless of the powerful yr, nonetheless love markets and discussing funding concepts with others.  Thanks as all the time for studying and completely happy new yr.