An Update On Pendrell from Steven Kiel of Arquitos Capital

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I mentioned Pendrell (PCOA) in the video and want to provide a brief update and further explanation. The company sponsored a SPAC, Holicity, that recently made an acquisition. This caused the stock price of Holicity to jump to around $20 from around $10.30 before the acquisition. This means the current NAV for Pendrell is about $450,000 per share including their Holicity investment, cash, and other investments.

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Q4 2020 hedge fund letters, conferences and more

Pendrell's Valuation

Pendrell trades on the Pink Sheets but is illiquid given the share price. Because of that illiquidity, we get a third-party valuation opinion in order to set the price. The last valuation opinion we got, about a year ago, valued each share at $159,562. We will be getting the Q4 financials from the company in the next few days. At that point, we will send this over to the outside valuation experts and they will provide us an updated opinion sometime in early March. That new price will be effective March 1. This opinion will include the value of the Holicity shares.

The bottom line is that this updated price will likely be significantly higher than the current price. Pendrell is about 10% of the portfolio.

After my most recent update, Pendrell provided even more good news. They announced that they have sponsored another SPAC, this one named Colicity. If Colicity makes an acquisition, then the economics are the same to Pendrell as Holicity. This could mean another $200,000 per share in value to Pendrell.

If you want to follow along, my friend Tim Eriksen gave a good marker. “Every $1 per share increase in Holicity is worth $15,000 per share in Pendrell. The same will be true for Colicity.”

As you can see, it’s nice to be on the side of the SPAC sponsor.

Nam Tai Property

The other update is our position in Nam Tai Property (NTP). The activist-initiated trial is going on in the British Virgin Islands right now, and it is going well for the activist investors. Shares trade around $9 right now, up from $5.85 on December 31. No matter the outcome of the trial, when it is over I think shares trade higher than today simply based on more certainty. The company had a great Q4 and their development projects have moved along nicely.

If the activists win, this stock gets very interesting. The upside is several multiples of the current price. The company itself said that the company was worth $40 per share several years ago. That was pre-revenue for these development projects, so the value is higher today.

We own both stock and options at about 10% of the current portfolio (7% stock, 3% options). When the outcome is asymmetric like here, investors should own some options as well as the risk/reward profile tips more heavily in our favor. Most of our options holdings are currently in the money. In terms of current exposure, if NTP shares go to $20, the entire Arquitos portfolio would increase by about 35%. We are expecting the trial results in the next three weeks.