Theme of the Week
Going to America – Index Changes
Let’s start with why we are tracking US listing changes. NYSE to Nasdaq transfers are usually cosmetic and not directly tradeable. One recent exception is Gold.com, formerly A-Mark Precious Metals. The move to the NYSE and ticker change to GOLD neatly lined up with a rerating that operating performance does not begin to explain.
OTC moves matter far more. A downlisting to OTCQX, OTCQB, or Pink Sheets often triggers forced selling since most institutions cannot own OTC paper. The usual culprit is failing listing standards such as timely filings or minimum market cap thresholds.
Uplistings can be juicier and easier to play for long-only investors. A NYSE or Nasdaq listing opens up a stock to a much larger investor base, often resulting in a material rerating. Talen Energy is a good case study.
After emerging from bankruptcy in June 2023, it traded OTC until a July 2024 Nasdaq uplisting. The stock did not rally solely on the listing. It was a stack of catalysts hitting at once: a clean balance sheet, a new CEO, asset sales, a friendlier nuclear backdrop, and surging power demand.
Now let’s move over to cross-border listing changes, which in most cases means companies that decide to move their listing from a non-US exchange to either the NYSE or Nasdaq.
Often lured by higher trading multiples enjoyed by their US peers, it’s become a more frequent occurrence for non-US companies with significant US operations to leave their home market behind in pursuit of the American Dream.
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Kliff Note of the Week
Spin-off Monitor: We’re starting work on Leon’s Furniture (LNF CN). The stock looks cheap now at roughly ~12x forward earnings.
The market seems to be ignoring a few large hidden assets: owned retail/industrial real estate carried at decades‑old cost but likely worth much more, as well as a 40‑acre Toronto site recently rezoned for a 4,000‑unit mixed‑use development.
Both combined could be worth the company’s enterprise value. Management has been preparing a REIT spin-off to unlock this value. Classic SOTP case where we could easily see a double on today’s price, if unlocked. Needless to say, it’s on the watchlist.
Buyback Monitor: Commercial printing company Cimpress (CMPR) authorized a $200m buyback, ~11% of its market cap. Cimpress is a neat company.
Often still viewed as a ‘good-old-days’ model, but steadily shifting the mix from commoditized items (e.g., business cards) to higher value categories like signage, apparel, and packaging, targeting the SME online segment.
This means steady MSD revenue growth, some nice operating leverage, EBITDA expansion, and improving FCF conversion. There’s a good chance the market will start viewing this as a stable compounder; in that case, 7x EV/EBITDA is clearly not the right multiple.
13D Monitor: We might finally see some action at Tecan Group (TECN SW). Spectrum Entrepreneurial Ownership disclosed a stake (3.4%) in the company, calling it undervalued.
Tecan did not have the best time over the past few years due to weak performance and increasing investor skepticism about the strategy. Management is working on a turnaround plan to restore profitable growth, but SEO might increase the pressure.
SEO has a track record of pushing strategic change at Swiss companies. ~10x EV/EBITDA, while this company has even seen 30x in the past.
13D Monitor: Aurinia Pharma (AUPH) popped up before when we discussed Kezar (KZR), but this one has its own action. Major shareholder Tang (9.2%) has been successful in cleaning up the board, joining as the new CEO and appointing a new CFO, COO, and CSO.
You know that when Tang is involved, there’s going to be action. Interestingly, Tang has opted not to receive any salary, bonuses, equity awards, or other compensation. So, what does he get out of it (wink, wink)? Aurinia’s earnings are booming on new drugs coming to market.
Strategic Alternatives Monitor: Pacific Lime and Cement (PLA AU) launched a strategic review for its 100%-owned Star Mountains ‑gold project after receiving ‘inbound interest’.
Interesting as the project is a genuinely large‑scale system: 450Mt at ~0.5% CuEq with strong gold leverage, near‑surface higher‑grade zones, and historical drilling that includes standout intercepts like 596m at 0.61% Cu and 0.85 g/t Au.
In other words, at current copper and gold prices, this project could be worth billions. Pre-rev still of course, but interesting nonetheless.
CVR Monitor: Eli Lilly is acquiring Centessa (CNTA) for $38 p/s in cash and a CVR potentially worth up to $9 p/s if certain drug approval milestones are met. The CVR is tied to regulatory approvals of Centessa’s orexin drug programs across different sleep‑related indications over the next few years.
KEDM Event Driven Monitor scans over 20 corporate events for market moving information and distills them into our propietary “Kliff Notes.” One profitable trade should more than cover an annual subscription and access to the Event Driven chatroom!