180 Degree Capital Corp (TURN) 2021 Q3 法說會逐字稿

Good morning, and welcome to 180 Degree Capital Corp's Third Quarter 2021 Financial Results Update Call. This is Daniel Wolfe, President and Portfolio Manager of 180 Degree Capital. Kevin Rendino, our Chief Executive Officer and Portfolio Manager, and I would like to welcome you to our call this morning. (Operator Instructions)

I would like to remind all participants that this call is being recorded, and that we will be referring to slide deck that we have posted on our Investor Relations website at ir.180degreecapital.com under Financial Results.

Please turn to Slide 1 that contains our safe harbor statement. This presentation may contain statements of a forward-looking nature relating to future events. Statements contained in this presentation that are forward-looking statements are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 herein. Please see the company's filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties associated with the company's business that could affect the company's actual results.

Except as otherwise required by federal securities laws, 180 Degree Capital Corp. undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. I would now like to turn the call over to Kevin.

Thanks, Daniel, and good morning, everyone. Let's start on Slide 2. We had a bit of an opposite quarter. Most quarters we have had since 180 came into existence, showed great public performance and sluggish private holdings performance. This quarter, our public performance was down by $5.2 million or 6.6% return while we had a markup on our private holdings of $2.9 million. On the public side, we had weakness in Synchronoss, Maven, Quantum, Armstrong Flooring and Potbelly. Good performance came from our sponsored SPAC Parabellum, PFSWeb and Lantronix. On the private side, we had markups in D-Wave and Nanosys and decreases in HALE and Seaport. All in all, our NAV declined by 2.9%, less than the drawdown in the Russell Microcap Index, but not our best quarter by any stretch of the imagination.

As I stare at a $7.15 share price, I want to point out that as of the close last night, we had nearly $80 million of cash and liquid securities given our strong start to the fourth quarter. That equates to $7.63 per share. We also have carry from our SMAs that, if this was the end of the year, we have close to $8 a share in cash and liquid securities. At the end, we'll show our sum of the parts scenario later in the presentation, but we have now entered the theater of the absurd, in my opinion, as our share price is now $0.50 less than our liquid portfolio, not taking into consideration the fact that we have over $3 a share in private marks. And while we don't have a monetization to share with you today, we do remain optimistic that we are closer to news from our portfolio than at any time this year. That isn't a promise, it's our best read on what is taking place with some of our holdings.

On the next slide, we show the before and after of our NAV over the period of time that Harris & Harris ceased to exist and 180 was born. Despite the slight decline this quarter, our focus on public market equities, and the subsequent performance that we have generated from our microcaps, have allowed us to grow our NAV after years and years of decay in our book value.

On the next slide, we highlight the trajectory we have seen from our cash and liquid securities. We saw a decline this quarter from $78.7 million to $74 million. But as you can see, given the start to this quarter, the number is now close to $80 million, which would be a record high. Perhaps the chart on the next slide will never change until our private portfolio has gone completely. But I would note that the discount to our current NAV is literally the same as it was when we arrived and when the proper portfolio represented nearly 75% of our balance sheet assets. I think most of you know, I'm fairly realistic and honest in my evaluation of the prospects for the companies we own. When we start researching a company, we start by saying, "Whatever the company is trading at today is the world's determination of what that business is worth." It is our job to research the business, find information and catalysts that the market is not paying attention to and then have those catalysts play out. If that happens, hopefully, the price will change to the upside.

We always assume the market is right as a starting point to any of our work. In the case of turn, in my humble opinion, I don't think the market could be any more wrong with valuing our business. As I said, we're now trading at nearly a 10% discount to our cash and liquid securities. That seems ridiculous.

On the next page, we show our normal sources of change in assets for Q3. Starting with a book value of $10.68, as I said, we had an opposite quarter. We actually showed a $0.28 gain from our private holdings, but a $0.50 decline from our public holdings. We had $0.09 of expenses, which includes a bonus accrual for our persistent year-to-date performance for 2021. We end the quarter with a $10.37 book value.

On the next slide shows our year-to-date sources of change in our NAV. For 2021, we've generated $1.51 of gains from our public portfolio, $0.05 of losses from our privates, and after deducting expenses, we show a $1.09 increase in our book value from the start of the year.

On the next slide, we show our performance since we started. We've generated almost $6 a share in gains from our public market stock picking. That's the result from the performance we've generated from our strategy of investing in public equities with a Microcap activism focus.

The next slide shows our quarterly performance for each of our individual holdings. As I said, we hit a rough patch this past quarter and had a decline of 6.6% on a gross basis. In some cases, like Quantum and Armstrong Flooring, supply chain issues were clear headwinds and real causes for weak fundamentals and share price declines. For others, namely Synchronoss and Potbelly, there was no real news causing the share prices to decline. As always is the case with us, if our thesis remains intact, we will always look to add on weakness. In the case of Synchronoss and Potbelly, we have done just that. To get more specific about our holdings, some of our holdings were down for real reasons, as I said, but others were simply just down. So let's review.

On Synchronoss, the stock declined 33% this quarter. During this quarter, and following a successful reshaping of its balance sheet that we've helped the company guide towards in Q2, the company reported earnings that were better than expected and reiterated guidance for the full year. 85% of the revenues of Synchronoss are recurring cloud and digital revenues. We bought another 563,000 shares in the quarter at $2.33. You will see the company just reported this week and had Q3, which showed another great quarter, and the company raised their guidance for the year. This was an example in our opinion of the stock trading off for no good reason, and we took advantage of that.

Maven declined in the quarter. The company is now current on its filings. They aren't uplisted yet, and that has been a painful process to watch from the sidelines. It will happen. It's just a matter of time. Jim Cramer has left the Maven. While Jim's business used to be the majority of the street business, Maven is roughly a $200 million to $220 million expected business in 2022 from a revenue perspective, and his revenues are just 10% of the Maven's. Everyone is replaceable. If you didn't want to be at the Maven and so be it. The company always needed to diversify away from Creamer anyway, and we expect the CEO, Ross Levinson, will bring in talent from the outside to replace Jim. Despite Jim's departure, our hope is that the subscription decay from this business will be far less than the compensation high as it was, will be far less than the compensation paid to Jim. To that end, it's possible the income statement today is better off.

Quantum was down 25% in the quarter. The company's Q2 results continue to reflect supply chain issues with tape drives and the company provided guidance below expectations. Management did indicate during the call that they expect the supply chain issue to abate coming out of Q3 and be back to normal levels by the end of 2021. While this was a real short-term headwind, our longer-term thesis hasn't changed 1 bit. We understand why the stock sold off, but we view it as temporary. We purchased 353,000 shares at an average price of $5.47. You see last week, the company reported better-than-expected earnings, gave better guidance and the stock is now over $7 per share.

On the other hand, Armstrong Flooring declined 49%. Like Quantum, they also have supply chain issues. However, unlike Quantum, we are less convinced this management team was prepared to manage through it. And as a result, we sold half of our position last quarter at $5.50. The company just reported last week, and I must say, reported some of the worst results I have ever seen from a public company. They reported over $160 million in revenue and had an $18 million EBITDA loss. While we understand the environment the company is facing, they have grossly mismanaged their business attempting to navigate their way through, which is why we have not added to the name despite the steep drop. We are currently trying to figure out if we want to ramp up our activism at this stage.

While some of our holdings, Quantum, Potbelly, Synchronoss, are greater than 10% of our assets, it should be noted that Armstrong Flooring is just a 1.65% position, but what a terrible job that management team has done.

Potbelly, lastly, declined 14%. What happened this quarter? The reported Q2 results that showed continued improvement in the business, and last week, they reported a Q3 that highlighted the same progress. Perhaps the Delta variant scare caused the stock price to decline in Q3, but judging from Potbelly's results, it did absolutely nothing to hinder the business. We think, over time, this stock will double again and show 10% EBITDA margins. We are 100% committed to remaining shareholders and believe the management team will continue to execute. It's a rock star management team. Again, we believe the stock is down for no reason and the result we've been buying.

On the positive side of the ledger, Parabellum is the SPAC we anchored run by the former team at Adesto. They completed an IPO in September, raising $140 million. We own 729,000 shares of Class A stock and $2.5 million warrants for the purchase of Class B common stock of Parabellum at $11.45 (sic) [11.50].

The SPAC has 18 months to complete an acquisition, and as members of the Board, we are actively engaged in the search process for a merger candidate.

PFSweb increased 75% this quarter on the back of the sale of its Live Area subsidiary for $250 million, which was well above the price that exceeded our estimated multiple of revenues of 1.8 to 2.5x. We did sell 368,000 shares at an average prices of $12 post the sale. We closed our position in Sonim. Sometimes you get them right, and other times, you're wrong. I've said this a million times, but if you're successful in the investment business, you'll be right 2 out of 3 times, just make sure that 1 time you're wrong doesn't outweigh the 2x that you're right. In Sonim's case, the long story -- the long-term story changed, we completely lost conviction and we sold it.

Slides 13 and 14 show our performance for each and every name we have owned since we started. On Slide 13, you'll see, despite a 6.6% decline this quarter, we are up 27% on a gross basis, or 29.3% if you include the carried interest from the RSMA. As of last night, our performance was plus 35% and plus 38% given the close of prices last night.

Slide 14 shows a 373% gross return since we started, or nearly a 45% IRR from our stock picking in the microcap world. The next 2 slides depict not only our batting average for each and every name that we've owned, but our slugging percentage. The first slide shows the percentage gain or loss, and Slide 16 shows the dollar amount. As you can see, we've had many more winners than losers, and more importantly, the returns from our winners have been far greater and outsized versus the negative returns we have taken from our losers. As an example, while Sonim felt like the worst decision that we've ever made, we lost $1.3 million on an investment of $4.5 million. That pales in comparison to the gains we've achieved in names like Adesto, Quantum, the Street and Potbelly.

The next slide is a composite of our public market stock picking versus the indices. What you'll see here was a weak quarter in Q3, a pretty good year and great 3- and 5-year returns. Slide 18 shows the remaking of our business since we started, whereas 73% of our balance sheet was in private when we started, it's just 33% today. The goal, as we have stated from day 1, is to take our privates from wherever weight they are today to a 0 weight, and have 100% of our cash and liquid securities coming from the publics. And as I've always stated, we will monetize any portion of our private portfolio if the time is right and if the price is right. We have had people bid on the portfolio, and we have simply told them to go away, that the bids were simply insufficient. Simply put, we do not have to sell a thing and we will not, unless it makes economic sense for the 180 shareholders. But one day, we will have 100% of our balance sheet in cash and liquid securities. Daniel?

Thanks, Kevin. Please turn to Slide 19. I'll give you a little bit more detail on Parabellum. As we mentioned last quarter, 180 was pursuing SPAC sponsorship opportunities with Hub, we believe are value-added partners or management teams that have demonstrated a core competency in sourcing merger candidates. The first of these efforts is Parabellum Acquisition Corp., which trades under the symbol PRBM. We are thrilled the company had a successful IPO this past quarter and raising $143.75 million. 180 was the lead investor and the sponsor, and I serve on the PRBM's Board of Directors for 180. We are excited to be working on this effort with the founders of PRBM, Narbeh Derhacobian and Ron Shelton, the former CEO and CFO of Adesto Technologies Corporation.

With the IPO behind us, Parabellum is now on the hunt for target companies that have unique technologies and business models enabled by, or are actively engaged in the Internet of Things transformation. 180's holdings of Parabellum are currently owned through the sponsor, Parabellum Acquisition Holdings LLC. And the fair value of these holdings, as of the end of the quarter, was $6.3 million on a cost basis of $2.7 million. In addition to Parabellum, we continue to work with another partner in connection with exploring a SPAC sponsored group investment opportunity. Although we cannot assure you when or if such investment will ultimately be consummated. We look forward to being able to discuss these continuing efforts in more detail in the future.

Please turn to Slide 20. For the quarter, our private portfolio led by D-Wave Systems and Nanosys, increased in value by $2.9 million or $0.28 per share. The largest decreases in value occurred in HALE and Seaport Diagnostics, both due to financing risk. The sale of assets held by Black Silicon Holdings yielded distribution to 180 of approximately $1.1 million that was received in the quarter. In almost every shareholder letter, as Kevin just mentioned, we stated that while we desire to shepherd our existing private portfolio to exits or explore opportunities to sell our positions, we have the luxury of not being forced to sell at any time. Just because you haven't seen a monetization in the quarter, it doesn't mean we haven't been actively working on it. And also, as Kevin said in remaking our balance sheet over the past 4 years, we don't have to sell anything. And today, we only have 16 privately held positions, but really only 7 that matter. And those 7 private holdings comprise 91% of all the private assets. Our hope is that the SPAC market has made the opportunities for further monetizations more likely than at any time since the start of 180 in 2017.

Please turn to Slide 21. As we have noted in previous letters, we have -- in previous calls, we have dramatically reduced our cost structure and our new strategy. Just to refresh, as we always do, in 2016, before we changed our investment focused management team, our operating expenses, excluding stock-based compensation and interest on outstanding debt, averaged approximately $1.3 million. For Q3 2021, our operating expenses equaled approximately $800,000. Given our persistent and outsized performance for the full year -- for the year-to-date through 2021, the Compensation Committee approved an additional accrual of approximately $200,000 for the expected bonus pool at the year-end of 2021. This pool will fluctuate based on the total performance that is determined at the end of the year. We will maintain a lean cost structure and focus our expenses on the activities solely designed to enhance our investment performance or to increase our revenues from managing outside capital.

Please turn to Slide 22 and 23. We continue to anticipate the reductions in our operating expenses as a percentage of net assets, will be based on growth in our net assets rather than further reductions in our operating expenses. We remain committed to treating every dollar of shareholder money with the utmost care and consideration. As we always say, and we'll continue to repeat, it is much easier for us to grow NAV when the expense hurdle rate is where it is today. I'll now turn the call back to Kevin.

Thanks, Daniel. Finally, we've done this chart for you since we started, and for the first time since we started the market, let alone recently ascribing a will full value to our private portfolio, given the amount of capital we have in our liquid portfolio, we now have a situation where the private value is actually being valued at a negative $0.35 per share, or a negative 10% relative to our book value. If anyone on this call thinks it makes any sense that given our results over the last few years we should trade at a nearly 10% discount to our cash and liquid securities, I encourage you to let us know so we can have that debate.

As you've seen, this management team and Board invest in term with after-tax dollars, and there's no reason to think that won't happen again unless the valuation reflects what we think is a much better representation of our business. A stock price of $7.20 with cash and liquid securities close to $8, with $3-plus of book in privates with ultimately some good news soon in the privates, is a value that I will run to and I'll run through pretty quickly once this quarter ends, and we're freed up again. So that's that. I don't like to be overly promotional. But as you know, we're value investors and I can pick up no netter value that I'm staring at right now then turn stock. Thanks. Let's open this up now for questions, Daniel.

(Operator Instructions) Adam, please go ahead.

I wonder if we can start at a high level. Obviously, you guys continue to be putting your money for your mouth is in terms of good shareholder alignment purchasing the stock in the open market, the valuation discount is as wide or wider than it's been at any point in time since the liquid portion of the liquid securities portion of the NAV has gotten to this level other than maybe March, April of 2020. Are you guys contemplating with the pandemic effects on business we're seeing? Are you contemplating a more proactive Investor Relations posture as we go into 2022? And if so, what components are you considering there?

So we've recently signed an agreement with a third-party distributor that not only allows for a new party to help us raise capital, but they've also been a consultant to us. So the early parts of our relationship has been them trying to understand us, learn about us and figuring out ways where we can go to market with thought pieces, white papers, videos, refreshed marketing presentations and decks. So those are, Adam, things that we are working on currently, and we expect you'll see more from us rather than less going forward.

We don't -- look, I do this some of the parts exercise for everybody every quarter. I'm not a promotional person, but I like to state facts. And I'm pretty transparent about our business. And I don't -- I'll never understand how our stock price trades below our cash and liquid securities now. It makes no sense to me. And I'm going to tell everyone that because I think our share price represents wonderful value. So we're going to -- we are working hard. Rob Bigelow is engaged on this topic. He's our Head of Funds. He does all the marketing stuff for us. And we're actively engaged towards making sure that we've got -- that we're out there more than we've been, let's put it that way. Again, I'm not a promotional person nor is Daniel, and we'd rather let our performance speak for itself. And we think we've done that over the course of the last 4.5 years. But I don't want to have our head in the sand and think that the stock price doesn't matter because it does. And so with us being out there and being more proactive and having more thought pieces, those are things that we will be doing. You can count on us for doing that.

Would more proactively out there, Kevin, also include virtual conferences, virtual non-deal road shows or even live conferences as those start to normalize more as we go through 2022?

Yes. I mean, Adam, the problem is, is that the people that we talk to every single day, institutional buy side folks, they don't -- Fidelity's don't buying return, institutions don't buy closed-end funds. Retail investors buy closed-end funds. So it's very different. We can go to the B. Riley conference, and if you have somebody there from Alliance or [Janice], they're not going to be buying turn with the funds. It would be -- the portfolio managers might by turn. So it's a very different process and a very different shareholder base. And quite frankly, we've got to figure out how -- and maybe part of the problem is our distribution. We've talked about that endlessly on this call. And our Board is flexible and the conversations are fluid at the Board meeting. Should we have a dividend yield? Are we supposed to be buying back stock? We've talked about all these things. We're getting some girth now in our balance sheet. We started with, what, $12 million in cash, and now we've got $80 million. So we'll have some flexibility here over the next 4 years to potentially have -- to potentially put ourselves in a situation where we can have some distributions also. So it's all being contemplated. If you have any specific ideas of what you think we should be doing, let us know. Maybe we'll have a Twitter account, and we can talk about the markets the way other microcap investors do and do it in a more institutional way than simply promoting what you're owning, or promoting your own stock. I don't want to do that. And you guys know that's not -- it's not who we are as a management team. We just want to -- we want to go out and do our thing and have the results speak for themselves. But we'll do more, as I said.

No, I appreciate that detail. If you'll permit me a couple of quick questions on the private portfolio?

Sure.

So with respect to Petra, obviously, you're carrying at the end of the September quarter at more or less cost and the cost -- or the carrying value is about 10%-ish of the potential nominal value of the payments you could receive over time. So do you -- is the underlying situation such that we might expect a markup in the carrying value here into the year-end? And what visibility do you have on potential milestone payments to you all over the next 6 to 12 months?

So just to be clear, so the way that the accounting works is that it shows cost, but that's just the value that was of the distribution on the date of when we receive the potential rights to those payments upon the sale of Petra. The valuation is derived looking through all of those milestone payments and assessing probabilities and potential time frames and things like that. What I'll say is, it's -- as is always the case with these potential future milestone payments, be it Petra, be it -- we still have some from BioVex and BioVex was acquired back in 2011. The time frames of these are highly uncertain. And in terms of when and if they occur, they're within big companies that we have very limited visibility to. That said, do we think that there's favorable potential for at least seeing something from that? Yes, time frame, I think, is uncertain.

Okay.

So the first milestone -- the first milestone, Adam, is set up that they just have to get the drug to Phase I testing. They don't have to even have it approved. They just have to start to test, start the trial, Phase I trial. So we tried dealing with a big pharma company on a product that, for them, isn't a COVID vaccine in terms of its size. It's very hard getting information out of these companies. It really is. We try our hardest, but some of them are -- some of these drugs are buried in their Qs and Ks because they're so small. But we would expect, at the very least -- I don't know why they would have bought the business if they didn't anticipate starting a Phase I trial, and there's a milestone payment attached to that in and of itself. So...

Okay. And then on AgBiome, obviously, you're sitting on -- based on the September quarter, Mark, you continue to sit on over [4 Bangar] there. And they've raised the Series C round in the late summer. I think it was $116 million. Obviously, you're probably not going to comment on this, but it's really surprising they're not pursuing the IPO or SPAC market at this point given the products they have in market and the pipeline they have. But do you have a sense for what the kind of growth plan looks like there for the next couple of years around which they raised the series that you can comment on?

It's tough. We really can't comment on specifics. But what I would say is they have their first product. It's in the market, Howler. It's gaining traction. And they have a number of other products that are there and are being -- in the pipeline being commercialized. I think that AgBiome is a big story and a big idea, not just with the initial products, it's how these scale, it's how they work with partners. They have a big partnership with Genective, that's -- and a number of other ones that have been publicly announced. And so it's a big story, but these things do take time to play out. It's not a couple of year type of thing. It's over a longer period of time, but they're making progress along that path.

Yes. So have we seen slide decks and investment decks, and aware of their growth? Yes. Are we allowed to discuss that in a forum like this? No. The goal here is not to go to jail. So -- and it's a growth business. The other thing I'd say is -- and Daniel is right. First of all, many of our companies have been around forever and have been around for a long time. So many of them are getting to the point where they're at least mature and seasoned. The SPAC market is the SPAC market, and you've seen SPACs like is it [IMQ] merge with artificial intelligence companies at staggering valuations. And we know that their business is -- in the particular case of IMQ , their business in some of the companies that we own from a valuation perspective. So just because AgBiome is itn't $1 billion business tomorrow, doesn't mean that it can't be $1 billion SPAC tomorrow. And so there's a reason why I've been more adamant in saying that we think we're getting closer to some news in our private portfolio than at any time since I've been here. And it's because of the amount of capital that's been raised in the SPAC market. It's knowing that many of our companies, hopefully, will want to take advantage of that, and we'll see how that plays out.

It's frustrating for me to get a question like this, Adam, from you, and not being able to answer your question, just I can't do it. And it pains me to not being able to answer any questions. And it's just the reality situation is we just can't. So...

No, I totally understand.

Yes, I know you do.

I don't want you guys going to jail. So...

Yes. We -- from time to time, it's funny because we'll be sitting at our desks, and all of a sudden, some secondary firm that buys private portfolios will reach out and call us. And we're like, where did that one come from? And then you realize the reason why their -- this is what they do for a living, and they realize that maybe 1 of our holdings is in the news for -- and they think there's going to be news on it or something like that. And so they reach out, and they're like maybe we could steal business from 180 or something like that. So I just think if any of our holdings are not exploring the opportunities to IPO and SPAC in this market, then they're doing a terrible disservice to their shareholder base. And we would be really disappointed. And I don't really think that's the case. So we'll see how it all plays out.

AgBiome is a very large component of our private portfolio. It's roughly 40% of the total. And so we want that one to work out as obviously everybody knows.

Well, look, I mean, you have a rock star Executive Chairman there, former CEO, buyer. You have blue-chip venture investors, Fidelity Ventures Timco, T.Rowe, among the others in there. And presumably, those folks are getting this kind of advice and you guys can participate alongside.

(inaudible) please go ahead.

Kevin, I think it's me Al Shams I think I'm up. First of all, I mean, I've got 45 years experience in the investment business, and I just really believe the strategy and the approach that we are taking is dead on. It is absolutely right. it will produce results. We just have to be patient. So in fact, it has produced results already. #2, when you talk about the valuation of the company, we should also emphasize there's no debt at the corporate level. So that's important to know. My question is this. What is our thinking with respect to Maven? How do you see the company getting out from under the stigma that it's been under and attracting some real investor attention.

So Al, first of all, great to hear your voice. Thanks for checking in here, and thanks for your support over the years. Maven has got all of its financials finally current. It's about 2 years longer than we would have liked. We actually were the beneficiary of it taking 2 years too long because, Daniel, was it December? Are they supposed to have the numbers are done by December of '19?

I think that's right.

And we see penalties.

Over $800,000 worth of penalties that will either be paid in cash or shares (inaudible).

To us for their being delayed -- having delayed financials.

Kevin, is that reflected in our net asset value?

It is. Yes. It is a receivable on our balance sheet but whether or not it will be shares or cash is...

That's the point. So we have receival be there. We don't know if it's cash or stock. The -- but they're current. So they have the opportunity right now, top list. They're in the queue. Daniel, is there anything you want to share on that before I get into the business?

No. I mean, I think that, look, it's -- there's -- Yes, there's a lot of steps that you have to take. I mean if you look at Quantum and what they had to do as well, just to get uplisted once they got their financials up to date, it does take some time. We're hopeful that it will be sooner rather than later, but it will take time.

So Al, it's a real business. As I said in my earlier remarks, it's a hopefully, expected -- when we used to be Board observers. So we know the business intimately. We're no longer on observers. It's a $200 million to $220 million revenue business next year. It's probably got about that enterprise value currently, maybe a little higher. It's a business that -- it's a license business. They basically will take the digital assets of some of these gigantic media companies and run the back end. So they sports illustrated, they are sports illustrated. They run the sports illustrated business for the ABG Group, which is a licensing company. Obviously, they own the Street's assets. They have other assets like history and biography. They recently bought a company called The Spun, which is doing quite well. It's run by Ross Levinson, who was a day away from becoming the CEO at Yahoo. He's had jobs at Fox and the LA Times and the rest. He was put in place last summer and is doing a very effective job. So the question is, they actually report their earnings on Monday. They're doing their first earnings call on Monday, ever. They're starting to do conferences. We tell Ross all the time, just because you're not uplisted, doesn't mean you shouldn't -- you should start talking to people and act like you are public. And so they're taking our advice there. So the numbers will get out. The news will get out. At some point, they'll be uplifted and then we can all value the business based on how we want to value it. For the most part, these kinds of businesses should have EBITDA margins of north of 10%. No reason to expect that this company can't. And, sort of at the end of the day, they're valued on revenue. And one of the biggest competitors, I think, trades at 4x to 5x revenue. So it's been Harry to say the least. We got involved at a low price because the company needed capital. It's been a shaky couple of years for the company, an advertising business going through -- a business that relies on advertising going through a pandemic. So stay tuned til Monday, that will be the first earnings call, and they're now graduating to the big leagues, and you'll start to hear more and more from them.

Okay. Just 1 other thought, Kevin. So let's say, some of the -- so you've mentioned you've had offers on some of the positions in the private portfolio. I mean if we could get, let's say, 80%, 85% of what you think that position is worth and then turn around and reinvest that money in the public market where things are selling at a 40%, 50%, 60% discount to what you think the business is worth, maybe that's a good trade. Maybe we don't maximize the value on the private side, but we can pick up great opportunities on the public side. Have you given that some thought?

We're...

Yes.

If that came in over the transfer today, we would hit the bid. But -- so yes, we're in line with your thinking.

Secondary buyers, just to put it in perspective, of venture portfolios typically bid and come in at sort of the $0.20 to $0.30 on the dollar. A high bid is usually maybe $0.50 on the dollar. And so those are the issues that we've been facing in those discussions.

So this is what happens. Somebody will come in, they'll offer us $0.40 on the dollar. We'll say we don't -- we have no interest in talking to you. They'll be like, well, that's all it's worth. We'll be like, well, we're not selling it to you. So that's the end of the conversation. And then they'll still try and convince you, and I'll ask them to say we'll say to them what part don't you understand? Like we have to find the -- what I think is easier to happen is if you can get some of these companies to almost SPAC themselves, and the privates know that. Where they're valued on our business given OPM, we would trade them at a slight discount to the reality of the SPAC price, let's say, for example. And so if you can find one of these guys to see the news on one of them, then maybe you can sell an individual position at a price that makes sense, Al, for you and I and every one of the other shareholders. But -- and so $0.85 on the dollar, yes, go find that -- go find the secondary buyer, and we'll...

Send them right our way. We'll make that happen.

Okay. Now finally, Parabellum I mean, that looks like a very small capitalization company, what, $35 million or so. I mean, is that -- does that really have enough capital and muscle to do any good?

No.

Yes. Parabellum raised $143.75. And so it's targeting business that will have, call it, an enterprise value somewhere between $300 million and $600 million. And are on businesses that are either generating EBITDA today or have visibility -- close visibility generating positive EBITDA, sometimes even positive cash flows and earnings. And so these are not -- these are going to be more like what we invest in at 180, not the -- they have $5 million in revenue today and supposedly growing to $600 million in revenue in 2026. That's not what we do. That's not what Parabellum is focused on. But they have a really nice slug of capital that, I think, brings real interesting opportunities to some good companies that are looking to access to public markets.

Okay. Well, just 1 last comment. I was in Harris & Harris Group back in 1997, '98, when they were selling for book $2 a share, nothing was happening with the stock. And then along came the Internet bubble and I think traded up to $36 a share. So at some point in the cycle, we're doing the right thing. We know that the strategy is great. We're going to get recognized. We've got the cash, no debt. We can survive pretty much anything. Our day will come. We just don't know when it's going to be. So good work and glad to be a part of the team.

Al, I appreciate that. The good news is we've -- since we started the the share price is up close to 100%. But we want it, as I've said this many times now, no reason to think that in the next 4 years we can't get to a $200 million balance sheet and close to a $20 stock. I mean that's -- I'm not here for any other reason other than to grow the stock price. I mean, otherwise, I mean, we all have other things to do, and that's my goal. And so I laid it out there for people. I guess at the end of '22, '23, '24, '25 or beginning of '26, $20 a share and $200 million balance sheet. That's the goal.

Okay. Great. Good goal.

Thanks, Al. I am not seeing any other questions in the queue.

Well, thank you, everyone. As I said at the beginning, it was a challenging quarter for our public stock picking. You could read all about that in our shareholder letter. Having said that, it's against the backdrop of actually being up 36% -- 35% to 36% as of the close of last night. So a weak quarter in the midst of a fairly good year. For us, we look forward to sharing with you our Q4 results sometime in the beginning part of 2022. And I hope everyone has a great holiday season and a happy Thanksgiving. Thank you so much.

Thank you, everyone. You can now disconnect.