Value Ideas with Risk for the day ending 01/10/16 (Great Elm Capital (GEC) and Harte-Hanks (HHS))

Great Elm Capital Group (GEC) was a patent licensing business as of 06/30/16 that has recently shifted to leveraging their NOL assets and cash into a asset management company to focus on return on investment and long term value creation.

Net cash per share is $2.31 and $3.19 for net current assets for the quarterly period ending 09/30/16 versus the current price of $3.55 on 01/10/17. The new asset management business is virtually free.

Material insider buying over the past 10 days.

Taken from the company website published 09/30/16

Future additional capital raises is likely through the sale of equity or debt to fund growth activities.

"Great Elm’s first investment vehicle is Great Elm Capital Corp. (“GECC”), a business development company.
Partnering with thoughtful investors, Great Elm will structure bespoke investment products to create compelling after-tax returns for both Great Elm and its partners.
Building on our team’s experience in long-term investing, Great Elm intends to leverage its core competencies in M&A and leveraged finance to buy, grow and hold high quality businesses in attractive industries. Great Elm intends to build a portfolio of control investments with a view toward owning these companies for the long-term. Great Elm will then seek to grow these portfolio companies both organically and through M&A."

Long GEC  

Harte-Hanks (HHS)is a multi-channel marketing company. The Company develops integrated solutions that get people to act, click, buy, stay loyal. Connect brands by creating innovations that extend in powerful ways.

A commoditized industry(marketing)company with recent (12/2016) division sale (Trillium Software) for 112M that will be used to pay off debt.

Note that the proceed of the sale on 12/16 were not included in the numbers below given it occurred after 09/30/16 quarter end.


Even before the sale of Trillium Software the financial results are positive when compared to the stock's price.

note the following financial metrics;
Gross margin improvements, debt and share count reductions, short as % of float dropping,average GM% from 2010 to 2013 was 68.40% versus 74% for the TTM.Debt per share for 2010 = 3.03 versus TTM = .93
full diluted shares outstanding for 2010 = 64.139M versus TTM = 61.543, 70% drop in the enterprise value from a 2013 balance of 498.70M to the MRQ of 147.30M.
The sale of Trillium Software on 12/23/16 for 112M is not included in the MRQ (09/30/16) enterprise value of 147.30M or 2.31 EV per share. The proceed will be used to retire its outstanding debt including a 53M pension liability.

Annual revenues dropped 15% from a 2013 balance of 559.60M to TTM 473M. But CFFO has been positive. EV/revenue improved from .90 for 2013 to .30 for the TTM. EV/CFFO 8.37 for 2013 to 4.99 for the TTM.

Insider buying with no sales for 2016. CEO purchased 37,100 shares at $1.48 on 12/15/16, Director 30,000 on 06/14/16 for $1.72 and COO 14,233 shares for $1.60 on 06/10/16.

Long HHS