12 months Finish 2024 Portfolio Evaluate

• CKX Lands (CKX) is an illiquid microcap that owns land in Louisiana that it primarily monetizes by way of oil and fuel royalties.  About 500 days in the past, the corporate introduced a evaluate of strategic 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 electronic mail from Grey Stream (Chairman & President, who’s engaged on an expired contract) confirming that CKX Lands is just not concerned within the Mission Cypress sequestration effort, but in addition that strategic options “efforts and discussions are nonetheless ongoing in earnest.  We hope to have a cloth 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 useless 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 completed, 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).  Per 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 could be completed by now (had some December name choices that sadly expired nugatory, nonetheless have a couple of January calls which are out of cash), there’s not going to be one other bidder for the corporate that may pay a full value, administration could 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 shifting acreage to avocados, however that shall be a a number of 12 months 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 options, we’ve not seen an excessive amount of of an replace, apart from mentions of “important 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 Worth”) with escalators as much as $40/share (“Goal Share Worth”), after which even better escalators above that.  Shares commerce immediately beneath $25/share after the inventory dipped a bit following 2025 steering disillusioned a bit, however the long run story appears in place.  I am nonetheless anticipating a deal above $28/share, my solely issues is it may very well 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 group that did not seem prepared for all times as a public firm.  They stumbled proper out of the gate and attracted activist buyers who pushed for a sale.  No sale seems on the horizon close to time period (insurers like UHC had been beforehand consumers, 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 getting older inhabitants, however house well being has the additional advantage of being more economical and retaining seniors of their properties.  Enhabit has plenty of leverage, 4.8x EBITDA, want to see that come right down to extra tolerable ranges for public markets, this is not my highest conviction concept, however does appear to be an inexpensive setup to outperform from the preliminary spin disappointment.
• Inhibrx Biosciences (INBX) is the spinoff of Inhibrx Inc, mainly 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 a knowledge readout in mid-2025.  I am simply alongside for the journey, 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 sit up for their first earnings name in March which shall be their administration’s first probability to inform their story to the market.  There’s plenty of wooden to cut right here, sure, SEG owns a full Manhattan block, however its extraordinarily underutilized (seen loads of footage on Twitter of it close to empty).  I do just like the administration group that was introduced in to run SEG, but in addition cautious on the pace of change, my greatest guess is a blended use tower at 250 Water within the Seaport District is the primary improvement undertaking undertaken.  With two mega resorts opening this 12 months and a brand new on line casino/stadium advanced being constructed on the former Las Vegas Tropicana website, assigning any worth to the Trend 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 consists of no oversubscribed PIPE, particular dividend or CVR to present AlloVir shareholders that are options of offers which have just lately gotten a submit announcement pop.  As an alternative, AlloVir shall 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 at the moment commerce for $0.42/share.  ALVR shareholders proudly owning 29.4% have already pledged their assist for the merger, the deal is predicted to shut in Q1, voting this one down could be troublesome, however it appears too low cost to promote now.  There could be some tax loss promoting occurring and as soon as the deal closes, perhaps 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 just about all of AVTE’s remaining money at shut (estimated at $65MM or $2.25/share, however that could be conservative) and a big $300MM oversubscribed PIPE.  Put up closing, AVTE shareholders will solely personal 1.6% of the mixed firm.  It is a liquidation that is structured as a reverse merger, the very best type of final result.  The plan is to carry by way of 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) just lately introduced the termination of their License Settlement, additional solidifying their pursuit of a liquidation or reverse merger.  Aside 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 immediately.  Tang Capital and BML Capital are each just below 10% holders right here, the money pile here’s a wholesome $100+MM, that is in all probability my present favourite within the basket.
• Ikena Oncology (IKNA) snuck in a reverse merger transaction earlier than 12 months finish, saying on 12/23 a cope with Inmagene Biopharmaceuticals that features a CVR plus an oversubscribed $75MM PIPE from each present IKNA buyers and new names.  This reverse merger hasn’t been nicely obtained by the market, I am a bit stunned by that given the PIPE, however there shall be restricted return of capital right here (perhaps 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 at the moment commerce at $1.64/share.  The deal is focused to shut in mid-2025, I’d 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 could be a bit extra engaging now as we look forward to a possible cope with 14% holder Perceptive Advisors.  This one is a bit more dangerous, somewhat than waiving the white flag following a failed scientific trial, Athira has acknowledged 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 scientific trial in July together with a imprecise intention to “discover the potential for continued improvement” of their pre-clinical property, however on 12/5, we obtained additional validation this example is a regular-way damaged biotech searching for strategic options with the announcement HLVX was doing a 70% discount in drive, together with three govt officers.  There’s nonetheless work to do earlier than this can be 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 important 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 scientific 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 truly have the ability to monetize their remaining division and return money to shareholders, in mid-December, ENZ launched their fiscal Q1 outcomes disclosing a 20% income decline because of “normal continued headwinds within the life sciences instruments area” with out a lot different element on the continuing strategic course of, which wasn’t confidence inspiring.  On the constructive aspect, ENZ did appoint Jon Couchman to the Board, he has earlier liquidation expertise.  Following my expertise with PSFW, an analogous two-step liquidation that took a very long time to completely play out, I am keen to provide this one some area 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 business 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 business 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 severe, hopefully they get pushed into the arms of a brand new merger dance associate right here quickly at an analogous ~$15/share valuation.  Many are predicting 2025 because the 12 months of regional financial institution mergers, hopefully HMST is without doubt one of the first taken out.

Legacy Positions:

• Whereas important holdings for me, Inexperienced Brick Companions (GRBK), Mereo BioPharma Group PLC (MREO) and to a lesser extent Par Pacific Holdings (PARR), these legacy positions usually are not actually energetic actionable concepts in my thoughts.  Completely satisfied to talk with others fellow buyers, however for now I am simply letting these investments play out and defer capital beneficial properties 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 a couple of 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 12 months to reallocate elsewhere in my private steadiness sheet.  Regardless of the powerful 12 months, nonetheless love markets and discussing funding concepts with others.  Thanks as all the time for studying and completely satisfied new 12 months.