Today, we need to talk about TERRAVIA HOLDINGS (OTCMKTS:TVIAQ), because it seems to be in play after the company filed for chapter 11 in August and received a $20 million bid from CORBION N.V (OTCMKTS:CSNVY).
You can see in the following stock chart that the share price collapsed after the announcement of bankruptcy. From $0.25, the share price collapsed to close to $0.01 in a few sessions. It commenced to trade at a price equal to the offer received by CORBION N.V (OTCMKTS:CSNVY).
We believe that the offer was quite opportunistic.
How could the share price be worth more than $1 a few months ago and go down to $0.01 so fast?
Have a look at the stock chart:
Some months later, it seems that the market is again pushing up the share price. From trading below $0.01, the share went up to touch the $0.02 share price level. Those who recognized that the company could be worth much more have profited from this last move.
Additionally, we need to note that the volume registered by the exchange was large. We believe that this fact shows that the market is recovering the interest in the stock. More than 10 million shares changed hands in a few days.
Check the following stoch chart and form your own opinion:
TVIAQ was created in Delaware in 2003. Its business objective is the production of food, nutrition, and specialty ingredients from algae. The company owns a proprietary technology to produce high-value triglyceride oils, proteins, fibers, micronutrients, and other ingredients.
The company owns 50.1% of Solazyme Bunge Renewable Oils Cooperatief U.A., which runs a commercial production facility in Brazil.
Have a look at the following video, wherein the former CEO, Jonathan Wolfson, explains the business model:
Recent Developments – The company is divesting
The company seemed to react in the year 2016. It commenced to divest non-core business divisions. This is what companies try to do to enhance shareholder value when restructuring is needed.
On August 16, 2016, the Algenist skincare business was sold in exchange of $20.2 million in cash, 19.9% of the fully diluted equity of Algenist Holdings, Inc., and the assumption of the debt of the division. This cash was surely appreciated by the market.
Despite the cash received, the company continued looking for cash to finance its operations. We cannot say that it did not do everything possible. On February 24, 2017, financial advisor Rothschild Inc. was retained to raise additional capital and refinance the debt.
Have a look at the following balance sheet situation for the period ended March 31, 2017:
- Cash and Cash Equivalents: $44 million
- Long Term Investments: $46 million
- Total Assets: $118 million
- Short Term and Current Long Term Debt: $167 million
- Total Liabilities: $184 million
Finally, on August 2, 2017, the company filed for chapter 11. Exactly on the same day, Corbion N.V. made an offer to acquire some assets of the company.
Additionally, the company was delisted from the NASDAQ and began trading on the OTC Markets on August 3, 2017. The ticker symbol changed from “TVIA” to “TVIAQ.”
We believe that the decision made some market participants sell big stakes, which pushed down the share price. You know how it works; some market participants are not allowed to trade in the OTC and have to sell creating opportunities for those who can and buy the dip.
On September 15, 2017, the United States Bankruptcy Court approved the sale of some assets to Corbion N.V., and the sale of Company’s 19.9% equity interest in Algenist Holdings, Inc. to TCP Algenist LLC. Both transactions were completed at the end of September.
What happened in November?
The company did not release any information about the bankruptcy or the state of the company’s financial situation. Thus, it is difficult to explain why the share price spiked in November.
We found out that the amount of short sellers inside the firm was very large and they have been closing positions. Have a look:
|Date||Short Interest||% Change||Avg. Daily Share Volume||Days to Cover||Split||New Issue|
|Oct 13, 2017||520,836||-4.71||1,912,200||1.00||No||No|
|Sept 29, 2017||546,600||6.61||4,136,805||1.00||No||No|
|Sept 15, 2017||512,704||-36.83||4,264,870||1.00||No||No|
|Aug 31, 2017||811,618||-76.52||6,975,298||1.00||No||No|
|Aug 15, 2017||3,457,325||-72.95||22,026,223||1.00||No||No|
In October, there were still quite a bit of short sellers inside the company. So, their short covering could have pushed up the share price.
Currently trading with a market cap of $1.2 million, TVIAQ is a stock to study if you appreciate checking short seller market activity. It is going to be interesting to see how they close short positions.
Regarding the bankruptcy process, anything can happen. Usually, shareholders get wiped out and debt holders get everything, but not always. In order to act fully informed, we encourage readers to wait until the company publish its new financial statements.
To sum up, opportunities can arise when there are price inefficiencies in the market.
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Image courtesy of Ioan Sameli via Flickr
Disclosure: We have no position in TVIAQ and have not been compensated for this article.