Aceto Corporation (ACET) tanked 64% to $2.66 on Thursday on a very ominous press release "ACETO Board Takes Proactive Steps to Address Business and Financial Challenges". We were originally looking at this company as a long for a bounce play but settled as a strong short as it is very highly likely headed into bankruptcy after doing our research. We are up to 587 followers despite not giving out a lot of alerts, a fact that we think is indicative of a diligent and prudent stock picking history. If you like our picks you can follow our blog by clicking the follow button on the top of the left hand panel. You can also follow us on Twitter handle @StockTradePicks. If you would like to share this blog, make sure to use the URL "nasdaqnewsreports.blogspot.mx" as certain spam filters on social media don't let you post blogspot.com addresses.
The first thing we would like to address is the appointment of Rebecca Roof as Interim CFO:
"The Board announced the appointment of Rebecca Roof as Interim CFO and the resignation of CFO Edward Borkowski, who has decided to pursue another opportunity. Ms. Roof is a highly experienced finance professional and a Managing Director at AlixPartners LLP. While at AlixPartners, Ms. Roof has served as Interim Chief Financial Officer of the Eastman Kodak Company, Atkins Nutritionals, Anchor Glass Corporation, Fleming Foods, and several privately held entities. Her pharmaceutical and specialty chemicals experience includes leadership roles at Taro Pharmaceuticals and LyondellBasell, also while at AlixPartners."
Every single one of those firms mentioned in the press release as places she worked at as "interim" CFO or in another capacity went through bankruptcy proceedings:
There is $617 million in liabilities, over half of it in the form of debt, against a billion of assets. At first glance, this is not SO bad. But this is an adverse industry that is very competitive and ACET is fully admitting that it is struggling to compete. The company in its own words said:
"ACETO Corporation (Nasdaq: ACET), an international company engaged in the development, marketing, sale and distribution of Human Health products, Pharmaceutical Ingredients and Performance Chemicals, announced, in light of the persistent adverse conditions in the generics market, it is negotiating with its bank lenders a waiver of its credit agreement with respect to its total net leverage and debt service coverage financial covenants in the fiscal third quarter, and that the financial guidance issued on February 1, 2018, should no longer be relied upon. In addition, the Company anticipates recording non-cash intangible asset impairment charges, including goodwill, in the range of $230 million to $260 million on certain currently marketed and pipeline generic products as a result of continued intense competitive and pricing pressures."
When we look at a company like this, we should only compare the liquid assets against the liabilities. ACET has only $64 million in cash and $477 million in current assets, well short of the liabilities. With Ms. Roof coming on board, the direction is clear. ACET is headed towards restructuring and the equity is headed to zero, or very close to it. Maybe ACET shareholders will get a small percentage of the restructured company. But this would be worth less than the $81 million market cap that ACET has right now. Look for an opportunity to short the stock to under $2, then re-evaluate from there.
Disclosure: We are short Aceto.
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The first thing we would like to address is the appointment of Rebecca Roof as Interim CFO:
"The Board announced the appointment of Rebecca Roof as Interim CFO and the resignation of CFO Edward Borkowski, who has decided to pursue another opportunity. Ms. Roof is a highly experienced finance professional and a Managing Director at AlixPartners LLP. While at AlixPartners, Ms. Roof has served as Interim Chief Financial Officer of the Eastman Kodak Company, Atkins Nutritionals, Anchor Glass Corporation, Fleming Foods, and several privately held entities. Her pharmaceutical and specialty chemicals experience includes leadership roles at Taro Pharmaceuticals and LyondellBasell, also while at AlixPartners."
Every single one of those firms mentioned in the press release as places she worked at as "interim" CFO or in another capacity went through bankruptcy proceedings:
- Eastman Kodak went into bankruptcy in 2012, and the old version of the stock was delisted.
- Atkins filed for Chapter 11 bankruptcy in 2005.
- Anchor Glass filed for bankruptcy in 2002, and all common stock was cancelled worthless
- Fleming went into Chapter 11 bankruptcy in 2003.
- Taro Pharmaceuticals was delisted from the NASDAQ in 2006, after it had to restate financial results downwards for the years 2004, 2005 and 2006.
- LyondellBasell went into Chapter 11 bankruptcy in 2009.
The pattern here is undeniable. Companies hire Ms. Roof as "Interim" CFO for the express purpose of going into bankruptcy and emerging as a new company with the old equity wiped out. That's why she is always interim. Once the job is done, she moves on. It's clear that ACET management sees the writing on the wall here and expects to be going into bankruptcy with the equity wiped out. ACET is foretelling it in the press release by telling everyone all the firms she worked at while the companies went into Chapter 11 bankruptcy. There may have been other firms she worked at that avoided that fate but the company didn't list those ones.
Look at the balance sheet:
There is $617 million in liabilities, over half of it in the form of debt, against a billion of assets. At first glance, this is not SO bad. But this is an adverse industry that is very competitive and ACET is fully admitting that it is struggling to compete. The company in its own words said:
"ACETO Corporation (Nasdaq: ACET), an international company engaged in the development, marketing, sale and distribution of Human Health products, Pharmaceutical Ingredients and Performance Chemicals, announced, in light of the persistent adverse conditions in the generics market, it is negotiating with its bank lenders a waiver of its credit agreement with respect to its total net leverage and debt service coverage financial covenants in the fiscal third quarter, and that the financial guidance issued on February 1, 2018, should no longer be relied upon. In addition, the Company anticipates recording non-cash intangible asset impairment charges, including goodwill, in the range of $230 million to $260 million on certain currently marketed and pipeline generic products as a result of continued intense competitive and pricing pressures."
When we look at a company like this, we should only compare the liquid assets against the liabilities. ACET has only $64 million in cash and $477 million in current assets, well short of the liabilities. With Ms. Roof coming on board, the direction is clear. ACET is headed towards restructuring and the equity is headed to zero, or very close to it. Maybe ACET shareholders will get a small percentage of the restructured company. But this would be worth less than the $81 million market cap that ACET has right now. Look for an opportunity to short the stock to under $2, then re-evaluate from there.
Disclosure: We are short Aceto.
Bitcoin has gone from a concept worth pennies a few years ago to worth thousands of dollars. It may appear to some who are late to the game that the opportunity to get rich is gone. However, there are still plenty of ways to make some money trading in bitcoin and other cryptocurrency. Here are some links to valuable reports and strategies:
The Cryptocurrency Codex from the Cryptocurrency Institute
Secrets To Unlimited Free Bitcoin
The Crypto-Currency Evolution eBook
Bitcoin Complete Guide for Dummies
The Bitcoin Miracle Guide
The Bitcoin Cheat Code Book
The Crpytocurrency Course
Bitcoin Investing Live
If you're interested in making money investing or trading the stock market, here are some good resources to assist you. This includes technical analysis, investing in the weed sector, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies.
Microcap Millionaires Free Video: Cheap Gold Miner Set to Soar in Fall 2017
The dividend stock report from dividendstocksonline.com
The dividend stock report from Dividend Stocks Rock
Top rated signals for binary options from binaryoptionsprosignals.com
Goldmasterinvesting.com Ocean Of Gold Report for the top 15 gold mining companies
Trader Review shows how to time the market with its "Percent of X" indicator
The Trader's Academy Club
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MyBB: A Forum For Investors and Traders
Spartan Trader Forex Academy Live Daily Trading Room
Try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.
Top rated signals for binary options from binaryoptionsprosignals.com
Goldmasterinvesting.com Ocean Of Gold Report for the top 15 gold mining companies
Trader Review shows how to time the market with its "Percent of X" indicator
The Trader's Academy Club
The Wealth Builder's Club from beatthemarketanalyzer.com
MyBB: A Forum For Investors and Traders
Spartan Trader Forex Academy Live Daily Trading Room
Try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.
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