On my regular foray through low price to book value stocks, I found CCUR at $8,550. It was immediately familiar to me since I participated in CCUR’s reverse split earlier this year, picking up a small return for a very brief holding period that annualized at a very high rate.
But I never really dug into it’s financials deeply and so did so today. Boy, CCUR is a very odd duck. It’s the stub of a computing company sold years ago and is now working to invest the proceeds while taking advantage of a large amount of NOLs (around $100M) remaining. It did the reverse split to go entirely “off the grid”, no more onerous SEC filing requirements, lowering admin expenses and providing more investment flexibility.
So what is it’s worth? It’s earnings & cash flow the last few years have been extremely lumpy, so let’s start with it’s a shockingly impressive $20,500 per share, which gives us an investment company trading at 41% of book value, with at least a decade of earnings shielded by NOLs. Not so fast. Book value includes intangibles, removing them and reverse split costs gives a tangible book value of $18,500. Fine, 46% of tangible book is still super cheap. Well, it was. On January 26th they took a write-down of $13,761,000 for likely losses on aircraft deposit loans leaving roughly $13,500 a share in tangible net asset value.
Ok, trading at 63% of tangible book with a decade plus of NOLs would still be very cheap as long as we can trust management to invest those assets wisely. So the question is, can they?
Reading their financials I found two examples I found illuminating.
The aircraft deposit loans write-down was from lending to Wright Brothers Aircraft Title, run by a woman named Debbie Mercer-Erwin. She was arrested December 17th for allegedly running a ponzi scheme that also helped drug traffickers get clean title to their aircraft. Worse, CCUR didn’t find out until they tried to collect a payment of $8,500,000 nearly a month later, and at that point for some odd reason, she was no longer answering their calls. Maybe the jail didn’t let her keep her cell phone?
This seems like it should not have been a huge surprise, given that two years ago another of Debbie’s aircraft trust companies was publicly investigated over registering 1,000 aircraft in a Texas town with no airport. There reporters found worrisome cases of drug smugglers using planes titled by her business.
Separately in summer 2020 CCUR took a $4.5M write-down on an 80% owned subsidiary called LMCS. LMCS was created through the $4.5M acquisition of LuxeMark Capital in 2019 to get into merchant factoring, ie making loans against retail receipts. Now barely over a year later at peak COVID, the factoring market has apparently been crushed so it looks like CCUR gave it back to the sellers for free, in forlorn hopes LMCS can repay a $10M loan CCUR gave it for operating capital.
So no, I don’t own any CCUR.