Yellow Media
Post CBCA – Yellow Media is trading at a Price to Free Cash Flow ratio of 1 and is underleveraged.
Click below to download the .xls that I am referencing when I make my claims.
Yellow Media Financial Spreadsheet
Yellow Media stock has settled in around $6, which is laughable considering that they will likely be debt free inside of 3 years and will have over $200M per year of FCF and you can have all of this at a present market capitalization of around $200M (fully diluted). I would argue that they went from reasonably leveraged to underleveraged but obviously the market has its own opinion and forced the company to default on its equity obligations.
Basically, even though I have been buying Yellow Media at higher prices for the past year or so, I am going to continue to keep buying for as long as the price can stay low as it is my understanding that the stock market will eventually come to its senses or I will begin collecting the current stock price in dividend income in 3 years and 100% reinvesting my dividends.
It helps that the company is marginable. I am now on margin, but to a very small extent because I think that this could drop in price and lose that status. The prevailing notion on my end is simply to not underestimate the predictability of stupidity. Even though this is outrageous, who is to say that it cannot become more outrageous?
Dex Media – SuperMedia & Dex One
The post merger Dex Media per their creditor projections will be trading at a present equity valuation of around $100M and they will be successfully paying down their debt across the coming years. Kyle Bass says that their debt will trade at par:
http://www.marketfolly.com/2012/11/kyle-bass-on-supermedia-debt-japan.html
Not only that but on top of debt he has established an equity stake in both companies (pro merger if you ask me):
http://www.valuewalk.com/2012/12/kyle-bass-purchases-ten-percent-of-two-companies/
Their creditors are on board with a pre-packaged Chapter 11, which is pretty straight forward and is non-dilutive.
