Buy Below Cash Value

Suleman discusses an activist investing opportunity targeting companies trading below their cash value, specifically using Wish as an example. The strategy involves acquiring controlling interest in undervalued public companies and pushing for cash distribution to shareholders.

Key Points:

• Target Company Example - Wish:

  • Has $700M in cash
  • Market cap only $286M
  • Trading below cash value

• Strategy:

  • Buy enough stock to gain controlling interest (51%)
  • Convince management to distribute the cash
  • Shut down the company
  • Profit from difference between purchase price and cash distribution

• Execution Challenges:

  • Stock is thinly traded
  • Buying large positions would drive up the price
  • Would need to pay $700-800M market cap to own 51%
  • Makes the arbitrage opportunity less attractive

• Similar to Activist Investor Approach:

  • References Carl Icahn and Bill Ackman's methods
  • They typically buy 5% positions
  • Use position to pressure management
  • Exit after achieving 10-20% stock price increase