What’s going on with Soupman Inc. (OTCMKTS:SOUPQ)? This is the big question that the market is trying to answer nowadays.
Nothing new could be found on the OTC Markets website. Furthermore, obviously nothing could also be found in the news feed of Yahoo Finance that drove the market participants of the Yahoo Finance community crazy.
We had to conduct more research to find a hidden press release, not distributed to the media, wherein we could read that the Soupman emerged from bankruptcy on September 8, 2017.
Have a look at the extraordinary returns obtained by those who were able to read this press release before the market had access to it:
Our readers will remember well that we noted in our previous article that SOUPQ had filed for bankruptcy in June. Additionally, we explained that an opportunistic market participant called WealthColony had acquired a big stake in the company, consequently the demand for the stock of the company had increased. We noted that an increase in the demand could make the share price increase as well.
We also clarified that WealthColony had not proved to have 51% of the total outstanding shares, thus it did not take over the company. Furthermore, we noted that the battle for SOUPQ’s assets has commenced, so we need to be alert. New announcements would make the share price spike again.
As we expected, SOUPQ was acquired by Gallant Brands, Inc. and not by WealthColony. This is what we could read in the press release that some people in the market could read on September 28, 2017. Additionally, it was noted that the company emerged from bankruptcy with a “clean balance sheet and a new management team committed to living up to the brand’s value.”
The most significant item noted in the press release was the elimination of over $11 million in debt and trade liabilities. This is, what, we believe, caused the spike on September 28, 2017.
Additionally, in our opinion, it was very significant that the new management noted that the operations will continue. We believe that we need to include the following words of Joseph Hagan, president of GBI, in the article. They show how positive is the management about the company’s future:
“We are selling great soup, and we’re going to sell a lot more. A new regime is poised to finally capitalize on this brand’s colossal value.” Source
The fact that operations will continue is obviously very good for the share price. It means that cash flows will keep coming. Thus, the company’s intrinsic valuation increased.
Financials – What happens now?
The state of the balance sheet before the chapter 11 was as follows:
|Current Assets (last three years) – All numbers in thousands|
|Cash And Cash Equivalents||1,424.544||611.354||14.179|
|Short Term Investments||–||–||–|
|Other Current Assets||108.693||47.506||39.769|
|Total Current Assets||2,141.388||1,198.56||879.902|
|Long Term Investments||52.951||16.273||139.018|
|Property Plant and Equipment||4.423||8.438||13.486|
|Deferred Long Term Asset Charges||–||–||–|
|Short/Current Long Term Debt||5,434.256||4,618.908||6,289.653|
|Other Current Liabilities||157.513||204.249||122.75|
|Total Current Liabilities||9,582.075||9,254.355||11,483.102|
|Long Term Debt||1,896.167||–||–|
|Deferred Long Term Liability Charges||–||–||–|
Hence, the liabilities were larger than the total assets and the book value per share was negative. But, if we take into account the elimination of $11 million in liabilities announced, the book value per share is positive.
We still need to know the amount of shares outstanding, but the financial situation seems very clean now. Thus, we believe that the market reaction after the announcement was justified.
Currently trading with a market cap of $9.4 million, SOUPQ seems to be a horrible story of bankruptcy that turned into a hidden gem situation. We need to note for those coming to the party a little late that we still need a lot of information about the state of the balance sheet after the bankruptcy.
Additionally, the amount of shares outstanding and whether the debt holders have received new shares were not confirmed. Hence, we encourage readers to wait until we receive more details. Sometimes, people make tons of money in bankruptcy processes, but other times equity holders get wiped out. To sum up, follow the new announcements and make informed decisions!
We will be updating our subscribers as soon as we know more. For the latest updates on SOUPQ, sign up below!
Image courtesy of Elliot Johnson via Flickr
Disclosure: We have no position in SOUPQ and have not been compensated for this article.