It’s hard to say what will happen to struggling Body Central Corp. but one thing is clear: a lot of firms are investing in the Jacksonville-based fashion retailer at discount prices, hoping to capitalize if the company turns around.
They are not only investing in the company but also getting a say in running the business, with three firms appointing their own officials to Body Central’s board of directors last week.
After Body Central’s stock fell to about the $1 level in March, several investment firms began buying up shares of the stock and four of those had to make Securities and Exchange Commission filings indicating they now own more than 5 percent of the shares.
Last week, Body Central announced the sale of $18 million in notes that could eventually be converted into shares of common stock and 13 different investors participated in that private placement, according to documents filed with the SEC.
The investors in the private placement include three of the firms that acquired more than 5 percent of Body Central’s stock, as well as Body Central CEO Brian Woolf, who bought $400,000 in notes.
One of the investment firms that seems very interested in Body Central is Lane Five Capital Management LP, which started buying up additional shares in March and owned 1.4 million shares, or 8.4 percent of Body Central’s shares outstanding, before the private placement.
Lane Five bought $2.7 million in notes that could be converted into 7.7 million new shares of Body Central, according to an SEC filing by Lane Five last week.
The private placement agreement also gave a seat on Body Central’s board of directors to a Lane Five representative, Erica Niemann.
Blackwood Capital Management, which already owned 900,000 Body Central shares and bought $1 million in the notes, also put a representative on the board, Justin Evans.
The third firm to get a seat on the board was the largest investor in the notes at $4.5 million, 683 Capital Partners LP. The firm has not indicated owning any shares of Body Central before the private placement but a 683 Capital official, Ari Zweiman, joined the Body Central board.
Along with the private placement announcement, Body Central announced in SEC filings last week that board Chairman Donna Ecton resigned along with three other directors and one of its top executives, Chief Operating Officer and Chief Financial Officer Tom Stoltz also resigned.
So whatever happens to Body Central, its future will be decided by a whole new group of people.
No big gains in local stocks at midyear
Not surprisingly, Body Central was the biggest loser among local stocks in the first half of this year, dropping 77 percent. It actually didn’t move all that much last Monday when the company announced it was delisting from Nasdaq, falling only 11 cents to 89 cents.
Another company making headlines recently was the second-biggest loser among Jacksonville-based companies at midyear, ParkerVision Inc.
ParkerVision dropped 67 percent in the first half of the year, with all of the decline basically coming two weeks ago after a federal judge ruled against the company in its patent infringement lawsuit against Qualcomm Inc. ParkerVision has appealed.
Other than that, stocks of Jacksonville-based companies produced a mixed bag of results in the first half of the year. Nine of the 16 stocks that had been trading for the full six-month period rose, while seven declined.
The only really big percentage gain came from International Baler Corp., which rose 77 percent, but that represented an increase of just $1.01 from its 2013 closing price of $1.31.
Among higher-priced stocks, the best gain came from Regency Centers Corp. which rose 20 percent. When you add in Regency’s two quarterly dividends paid out so far this year, the total return for shareholders was 22 percent.
It hasn’t really been an exciting year for the broader stock market, despite the major market indices trading at or near record highs. The reality is, there hasn’t been much movement since the beginning of the year.
As the market hit the midyear point last week, the Standard & Poor’s 500 index was up 6.1 percent, the Nasdaq Composite index was up by 5.5 percent and the Dow Jones industrial average edged higher by just 1.5 percent.
At least uninspiring gains in the market are better than attention-grabbing losses.
More stocks join local list
Body Central and ParkerVision will continue to be in the news, but perhaps the most interesting local stock story so far this year has been the addition of several new stocks to the list.
Two Jacksonville-based businesses merged with existing public companies and began trading within the past few weeks. The better-known of the two is Latitude 360 Inc., which operates dining and entertainment venues in Jacksonville, Pittsburgh and Indianapolis and is planning a fourth location in Albany, N.Y.
The other is Drone Aviation Holding Corp., which owns a Jacksonville company called Lighter Than Air Systems Inc. that produces tethered drones and aerostats for military and commercial applications.
Meanwhile, two of Jacksonville’s biggest companies completed their plans last week to split up into two stocks.
Fidelity National Financial Inc. divided its common stock into two tracking stocks that began trading Tuesday. One is FNF Group, which represents its core title insurance business and other real estate-related operations.
The other is FNFV Group, which represents the company’s various investments in other businesses.
Fidelity stockholders received three shares of FNF and one share of FNFV for every three Fidelity shares they owned.
Fidelity’s stock closed at $32.76 last Monday before the split took effect. When trading in the two tracking stocks began Tuesday morning on the New York Stock Exchange, FNF opened at $27.54 and FNFV opened at $17, which translates into a combined value of $33.21 for the former Fidelity shares.
Analysts downgrade Rayonier after split
The other Jacksonville company splitting up last week was Rayonier Inc., which spun off its performance fibers division into a separate company called Rayonier Advanced Materials Inc.
Rayonier Inc. shareholders received one share of Rayonier Advanced Materials for every three shares of Rayonier Inc. they owned, and the two companies began trading separately on the New York Stock Exchange last Monday.
Rayonier closed at $48.53 the previous Friday. When trading opened Monday, Rayonier Inc., which still includes its forest resources and real estate businesses, opened at $35.05. Rayonier Advanced Materials opened at $36.80. That combined value translated into $47.32 for the pre-split Rayonier shares.
Two analysts downgraded Rayonier Inc.’s stock Monday after the split, basically based on its price.
Paul Quinn of RBC Capital Markets downgraded the stock from “outperform” to “sector perform,” pointing out in his research note that Rayonier’s stock had already risen 16.1 percent since its announcement of the spinoff plan in January. He sees “limited upside” in the near term.
“We continue to like the long-term outlook for Rayonier’s remaining timberland business, which is well positioned to benefit from the ongoing US housing recovery, and Asian demand for North American and New Zealand logs,” Quinn said.
Steven Chercover of D.A. Davidson downgraded the stock from “buy” to “neutral,” essentially the same ratings as Quinn.
Chercover said in his research note that stock is trading at about a 10 percent discount to his estimated value of the company of $39 a share, and he said the stock would “begin to look attractive” at 20 percent below his estimated value.
Both Quinn and Chercover also became the first analysts to initiate coverage on Rayonier Advanced Materials, Quinn with an “outperform” rating and Chercover with a “buy.”
“Rayonier Advanced Materials is the largest producer of specialty dissolving pulp (cellulose specialties) with a 38 percent global market share,” Quinn wrote.
Quinn has a $46 price target for the performance fibers company.
“We like Rayonier’s move to spin off the specialty chem business and expect a market re-rating of standalone Rayonier Advanced Materials closer to chemical companies, given Rayonier Advanced Materials’ strong, sustainable EBITDA (earnings before interest, taxes, depreciation and amortization) margins and leading market position in cellulose specialties,” he said.
Chercover has an even higher price target, at $53.
“We believe Rayonier Advanced Materials is undervalued because it is currently trading on 2014 ‘trough earnings,’ which were impacted by accelerated maintenance, startup expenses, and the Polar Vortex,” he said.
Chercover also likes the company’s market position.
“The industry is highly consolidated with significant barriers to entry, good returns, and growing markets,” he said.
Quinn said Rayonier Advanced Materials could be a takeover candidate a few years down the road, but for now he expects it look at acquisition opportunities.
“We expect Rayonier Advanced Materials to pursue specialty chemical acquisitions aggressively in complementary markets where it can bring its specialized manufacturing process knowledge to the table,” he said.
No news on Bi-Lo Winn-Dixie IPO
One local stock story we were looking for in the first half of 2014 didn’t happen and seems to be in limbo: the initial public offering of Bi-Lo Holdings LLC.
The parent company of the Winn-Dixie and Bi-Lo supermarket chains filed plans for an IPO last September with the Securities and Exchange Commission under the name Southeastern Grocers Inc. It last filed an update with the SEC in November.
Southeastern Grocers has made no more filings or said anything about the IPO since.
Bi-Lo Holdings spokesman Brian Wright said by email last week that the company doesn’t comment on these matters.
The IPO market is hot right now. IPO research firm Renaissance Capital in Greenwich, Conn., said last week that the second quarter was the most active IPO quarter in 14 years with 83 companies going public, raising a total of $20.8 billion.
Renaissance Capital also said there were 117 new IPO filings in the second quarter, the most since 2004.
So the IPO market is crowded, if Southeastern Grocers decides to jump back in.