This week I established a new position in the portfolio, purchasing stock in ADPT Corporation (ADPT) at $2.88 a share.
The ADPT "story" has been floating around a while, but I never bit because the shares were trading higher whenever I looked at it.
ADPT used to be known as Adaptec, a data company. It's now bascially a cash shell controlled by Steel Partners, an activist outfit with something of a value bent. Steel Partners owns 32.36% of ADPT stock.
I had a good experience investing in a company Steel was involved in about 10 years or so ago (a company called LiquidAudio). Some others I respect have had good experiences with companies controlled by Steel Partners.
ADPT has a market capitalization of more than $310 million, with 108,822,000 million shares outstanding at year end 2010.
Book value is $3.18, with cash, cash equivalent and marketable securities at $3.04 per share after subtracting all debt. The company also has net operationg losses (NOLs), though it is a question whether or not they'll ever be able to make use of them, or how much.
Steel Partners is looking to "redeploy" the cash. It could buy operating businesses. It has been buying back some of the stock. Simply put, I've bought cash at a discount, and that cash is controlled by some people who I'm betting will put it to good use.
What are the risks?
Well, there's some cash burn so management doesn't have an endless time horizon. What's more, no one has a perfect record in this business, so there's always the possibility that Steel Partners won't do well with ADPT.
But since they own about 1/3 of the stock, their interest are clearly aligned with shareholders.
Anyone thinking about this company should remember that it is a small cap stock, and it trades on the pinks sheets. So be careful in placing orders with your broker.