180 Degree Capital Corp. Notes Average Discount of Net Asset Value Per Share to Stock Price for Sixth Month of Initial Measurement Period of Its Discount Management Program

Rhea-AI Summary

180 Degree Capital Corp. (NASDAQ: TURN) reported an average discount of 16% and 19% between its net asset value per share (NAV) and closing stock price for June 2024 and year-to-date, respectively. On June 28, 2024, the discount was 16%. The Board of Directors set measurement periods from January 1, 2024, to December 31, 2024, and January 1, 2025, to June 30, 2025. If TURN's stock trades at an average daily discount to NAV greater than 12% during these periods, options such as expanding the stock buyback program or cash distributions will be considered. CEO Kevin M. Rendino noted the challenging market for micro-cap stocks and expressed confidence in the upside potential of their NAV. The company highlighted Synchronoss Technologies (SNCR) as a key portfolio holding with significant cost savings and potential catalysts, including a $28 million tax refund expected in late Q3 or early Q4 2024. 180 Degree Capital also emphasized its role in constructive activism to drive value creation in its portfolio companies.

Positive

• Average discount to NAV at 16% in June 2024, down from year-to-date average of 19%.
• Potential for significant upside in NAV as observed by management.
• Successful value-creating actions in portfolio holding Synchronoss Technologies (SNCR), leading to an 18% stock price increase.
• Potential $28 million tax refund expected for SNCR in late Q3 or early Q4 2024.

Negative

• Persistent discount to NAV exceeding 12%, triggering consideration of remedial measures.
• Overall tough market conditions for micro-cap stocks, impacting performance.

Insights

Financial Analyst

The average discount between the net asset value (NAV) and the stock price of 180 Degree Capital Corp. provides insights into how the stock is valued in the market compared to its actual worth. A 16% discount is notable and indicates the market perceives some risk or uncertainty in the company's future.

For retail investors, it's essential to understand that such a discount could present a potential buying opportunity if the NAV is a reliable estimate of the company's value. However, the enduring discount also signals persistent skepticism.

The mention of a possible expansion of the stock buyback program and other capital returns suggests the management is willing to take steps to bridge this gap. Stock buybacks can reduce the number of shares outstanding, potentially increasing the earnings per share and the stock price.

Market Research Analyst

Market conditions significantly influence microcapitalization stocks, which often show higher volatility compared to large-cap peers. The CEO's reference to historical events like the dot-com bubble provides context; however, investors should be cautious about drawing direct parallels. Each market cycle has unique characteristics.

The CEO's confidence in catalysts such as the recent Synchronoss Technologies event highlights the importance of specific triggers that can unlock value. It's important for investors to monitor these catalysts and assess whether they are occurring as expected. The $28 million tax refund expected for SNCR is a tangible event that could provide a short-term boost.

Evaluating how constructive activism is being employed by 180 Degree Capital can offer insights into their strategic approach. Being involved at the board level of portfolio companies can sometimes accelerate positive changes, but it also carries risks if the strategies do not yield the anticipated results.

Corporate Governance Expert

The active involvement of 180 Degree Capital in its portfolio companies, exemplified through board memberships and strategic interventions, is a double-edged sword. While this hands-on approach can drive positive outcomes, it requires a high level of expertise and can strain resources.

For retail investors, understanding the nuances of constructive activism is vital. It means the firm is not just passive but is actively trying to influence management decisions to unlock value. This approach can be beneficial when successful but also introduces additional risks if these interventions fail or meet resistance.

Additionally, the potential for broader market participation, as suggested by the CEO's comments, depends on many external factors beyond the firm's control. Investors should maintain a balanced view, recognizing both the strategic efforts of 180 Degree Capital and the inherent uncertainties in market dynamics.

MONTCLAIR, N.J., July 01, 2024 (GLOBE NEWSWIRE) -- 180 Degree Capital Corp. (“180 Degree Capital”) (NASDAQ: TURN), noted today that the average discount between its estimated daily net asset value per share (“NAV”) and its daily closing stock price during June 2024 and year-to-date through the end of June 2024, were approximately 16% and 19%, respectively.¹ This discount was approximately 16% on June 28, 2024, last trading date in the month.

As previously disclosed in a press release on November 13, 2023, 180 Degree Capital’s Board of Directors has set two measurement periods of 1) January 1, 2024 to December 31, 2024, and 2) January 1, 2025 to June 30, 2025, in which it will evaluate the average discount between TURN’s estimated daily NAV and its closing stock price pursuant to a Discount Management Program. Should TURN’s common stock trade at an average daily discount to NAV of more than 12% during either of these measurement periods, 180 Degree Capital’s Board will consider all available options at the end of each measurement period including, but not limited to, a significant expansion of 180 Degree Capital’s current stock buyback program of up to $5 million, cash distributions reflecting a return of capital to shareholders, or a tender offer.

“June 2024 and the second quarter of 2024 overall continued to be tough for microcapitalization stocks and the majority of 180 Degree Capital’s holdings,” said Kevin M. Rendino, Chief Executive Officer of 180 Degree Capital. “The market is dominated by just a few mega cap holdings and this period reminds me very much of the dot.com bubble of 1999 and 2000. Along that line, our friends at 22V Research recently noted, ‘Relative to the S&P the drawdown in the Russell is now a 0.3rd %tile event at -42.7%. The only drawdown worse occurred in 1999. And it wasn’t worse by much.’ I know that at some point, just like then, the market will broaden out which we believe will allow many of our companies to generate significant upside in value. You will note the continued purchase of our stock by our management team during the quarter. We wouldn’t do that if we didn’t believe our NAV had significant upside in the not too distant future.”

“We are encouraged by the prospects for many of our portfolio holdings in the second half of 2024 based on what we believe are meaningful potential catalysts that could drive significant appreciation in value for our holdings,” continued Mr. Rendino. “We saw the first of these catalysts with our portfolio holding Synchronoss Technologies, Inc. (SNCR), that announced on Friday, June 28, 2024, the retirement of its outstanding preferred stock and a portion of its outstanding debt, both at discounts to full value. This deleveraging coupled with a reduction in the interest rate for its remaining debt will provide meaningful cost savings for SNCR. This development was well received by public market investors and SNCR closed up over 18% for the day. We believe there are additional value-creating catalysts for SNCR, including, but not limited to, the receipt of a $28 million tax refund currently expected in late Q3 2024 or early Q4 2024. We have identified similar types of catalysts for all of our holdings that serve as the basis for our investment thesis in each. While it often takes longer than we would like for these catalysts to occur, our permanent capital affords the ability to remain invested if we believe such catalysts will occur.”

“SNCR is also a perfect example of how we use constructive activism to help companies achieve value-creating catalysts,” continued Daniel B. Wolfe, President of 180 Degree Capital. “We are on SNCR’s Board of Directors and are an active member of its committee tasked with opportunistically retiring its preferred stock. With comScore, Inc. (SCOR), we nominated and successfully negotiated the addition of Matthew McLaughlin to SCOR’s Board of Directors. We are currently working on other efforts of constructive activism with some of our other holdings that could lead to the nomination of directors and/or driving strategic alternatives processes. In short, we do not and will not sit back hoping that catalysts occur that could drive appreciation in value. We are actively working with management teams and boards of directors to make them happen. We historically said this would be a major focus of our efforts in 2024, and that remains where we are spending significant time and attention.”

About 180 Degree Capital Corp.

180 Degree Capital Corp. is a publicly traded registered closed-end fund focused on investing in and providing value-added assistance through constructive activism to what we believe are substantially undervalued small, publicly traded companies that have potential for significant turnarounds. Our goal is that the result of our constructive activism leads to a reversal in direction for the share price of these investee companies, i.e., a 180-degree turn. Detailed information about 180 and its holdings can be found on its website at www.180degreecapital.com.

Press Contact:
Daniel B. Wolfe
Robert E. Bigelow
180 Degree Capital Corp.
973-746-4500
ir@180degreecapital.com

Mo Shafroth
RF Binder
Morrison.shafroth@rfbinder.com

Forward-Looking Statements

This press release may contain statements of a forward-looking nature relating to future events. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect the Company's current beliefs, and a number of important factors could cause actual results to differ materially from those expressed in this press release. Please see the Company's securities filings filed with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties associated with the Company's business and other significant factors that could affect the Company's actual results. Except as otherwise required by Federal securities laws, the Company undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. The reference and link to the website www.180degreecapital.com has been provided as a convenience, and the information contained on such website is not incorporated by reference into this press release. 180 is not responsible for the contents of third-party websites.

1. Daily estimated NAVs used for the discount calculation outside of quarter-end dates are determined as prescribed in 180’s Valuation Procedures for Level 3 assets. Non-investment-related assets and liabilities used to determine estimated daily NAV are those reported as of the end of the prior quarter.

FAQ

What was the average discount between 180 Degree Capital's NAV and stock price in June 2024?

The average discount between 180 Degree Capital's NAV and stock price in June 2024 was approximately 16%.

What will 180 Degree Capital do if TURN's stock trades at a discount greater than 12%?

If TURN's stock trades at an average daily discount to NAV greater than 12%, 180 Degree Capital's Board will consider options such as expanding the stock buyback program or cash distributions.

When is the next measurement period for 180 Degree Capital's Discount Management Program?

The next measurement period for the Discount Management Program is from January 1, 2024, to December 31, 2024.

What catalyst events are expected for Synchronoss Technologies in 2024?

Significant catalyst events for Synchronoss Technologies include a $28 million tax refund expected in late Q3 or early Q4 2024.