Inphonic Not Getting Supersonic and SPACdown

I probably spend too much time pilfering the SEC Form 13Fs. I don’t have a huge research staff and budget (read: myself), so I like to let the top hedge funds do some of the initial legwork for me. (James Altucher’s is a very user friendly site that lets you sift through some of the best funds out there.) I have blogged in the past about forming a best ideas value hedge FOF, and here is an example of a stock that a number of top funds have been building positions in.

Inphonic (INPC) is an online seller of wireless services, and trading at a recent $2.75, has seen its stock cut by 75% for a market cap of only $100M. It seems to have been slowly building a base near these 52-week lows. The fundamentals have been terrible, and this has to be a turnaround investment theme at this point. The founder got booted as CEO today, and the current president takes over the reigns. Some big guns think that it is a good buy, including (% of company owned):

Galleon 7.68%
Vardon 7.66%
Trafelet 7.25%
Tiger Global 4.7%
Potomac Capital 4.62%

These five hedge funds alone own 32% of the company. Regardless, I can’t help singing this old 80’s hip hop song when taking a look at this stock Inphonic (INPC).

Supersonic is a word when people start to listen
Especially bigger people, they pay close attention
You might not believe it, you might not even buy it
But when it comes to our lady (Beat Box), you might even try it


I introduced my own lyrics below:

Inphonic is at $3 and people start to listen
Especially bigger funds, they pay close attention
You might not believe it, you might not even buy it
But when it comes to the stock, you should just try it


Chart courtesy
Disclosure: Don’t own any but might buy some.

Don’t know what a SPAC is? From the Wikipedia entry for SPACs:

Special Purpose Acquisition Companies (SPACs) are investment vehicles that allow public investors to invest in areas sought by private equity firms. SPACs are shell or blank-check companies that have no operations but that go public with the intention of merging with or acquiring a company with the proceeds of an initial public offering (IPO).

By market convention, 85% to 100% of the proceeds raised in the IPO for the SPAC are held in trust to be used at a later date for the merger or acquisition. The SPAC must sign a letter of intent for a merger or an acquisition within 12-18 months of the IPO. Otherwise it will be forced to dissolve and return the assets held in the trust to the public stockholders.

According to SPAC Analytics, 2007 has seen 41 SPACs with almost $6 billion raised. Here is a daily SPAC market update from Morgan Joseph. More on SPACs below.

The Cheap Stocks blog updates a list of stocks trading below their net current assets every so often. I usually sift through it and see if there is anything of interest. One of my favorite ways to screen for stocks is to look for companies trading at or below cash. Usually they are trading that low for a reason (crappy business, hemmoraging money, etc), but every so often there are some decent situations. The cash level can often provide a good floor for the stock. A couple I am looking into from the list include (leave comments if you have any value added info):


Columbus Acquisition Corp(BUS)
Mkt Cap: 88
Price: $7.49

Owners include value hedge funds Fir Tree (6.44% of the company), Baupost (Seth Klarman) (6.3% ), and Highbridge (5.89%).

Transforma Acquisition Corp(TAQ)
Mkt Cap: 80
Price: $7.5

SPAC formed for the “purpose of acquiring one or more assets or control of one or more operating businesses in the technology, media or telecommunications industries through a merger, capital stock exchange, stock purchase, asset acquisition or other similar business combination.” Owners include value hedge funds Fir Tree (9.88% of the company), Jana (6.4%), JMG (4.04%), Steel (4%), and Harvard (3.05%).

And a biotech:

Mkt Cap: 94
NCAV: 96
Price: $8.1

Has a number of drugs in clinical trials for various conditions. However, is burning about $20 million a quarter on these trials. Will likely have to tap the markets by the end of the year. Typically, a good rule of thumb is that a company with decent PII results can trade at a market cap of $300-$600 million.

Disclosure: Don’t own any.