Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: writser on March 27, 2014, 03:38:11 PM

Title: ASFI - Asta Funding
Post by: writser on March 27, 2014, 03:38:11 PM
I am surprised to see that there is no thread for this name yet. It is (or was) part of the portfolio of a couple of respectable value bloggers: Barel Karsan (http://www.barelkarsan.com/2011/06/asta-funding-safe-and-catalyzed.html), Wexboy (http://wexboy.wordpress.com/2011/12/15/asta-funding-buying-debt-for-cents-on-the-dollar/), Alphavulture (http://alphavulture.com/2011/11/23/asta-funding-asfi/), Frank Voisin (http://www.frankvoisin.com/tag/asfi/) and Whopper investments, to name a few. Also, Francis Chou owns a chunk (link (http://finance.yahoo.com/q/mh?s=ASFI+Major+Holders)) and it was written up at VIC. All these people did a far better job than I could describing this investment (and I'm quite lazy) so I will refer to them instead for all gritty details. Here is a quick summary for those of you who never heard of ASFI before.

According to their website Asta Funding is a "leading consumer receivable asset management company that specializes in the purchase, management and liquidation of performing and non-performing consumer receivables". That sounds honorable but it isn't: their core business is buying bad credit card debt and then hiring collection agencies to squeeze every last penny from poor people :). They used to be quite good at this. In 2007 they got a bit too excited and bought a $300m portfolio (3x their current market cap) of distressed consumer debt using borrowed money. Probably a savvy trader saw the credit crunch coming and quickly sold this portfolio to the first sucker he could find. The world collapsed several months later and the acquisition almost ruined the company. This portfolio is called "the Seneca portfolio". On a tangent, I wonder who came up with that name.

Flash forward to 2011. Asta funding survived the crisis. They managed to refinance debt for the Seneca portfolio - it is now non-recourse. A big part of their distressed debt portfolios is accounted for using the cost-recovery method. These assets have zero value on the balance sheet but still generate significant amounts of cash. So accounting peculiarities make it hard to see that this is a golden goose with cash on the balance sheet covering their entire market cap and invisible assets generating significant cash flow. On top of that the company announces a buyback program for 20% of outstanding shares. All value bloggers write about this bizarre mispricing and add ASFI to their portfolio.

Flash forward to 2013. The share price has hardly moved. A problem has arisen. Basically management refuses to buy back more shares. They bought back ~2mio shares over the past years but they prefer to try growing the company through acquisitions. In this context, it is important to realize that the CEO is the son of the founder. Their family owns a huge stake and shrinking the company is apparently no option. In the past few years management acquired a wide range of businesses that all have one thing in common: they are controversial. Personal injury financing, divorce settlement funding, structured settlement financing. If you are wounded, dying our in emotional turmoil these guys will turn up at your doorstep. ;) The potential of these segments has yet to be proven.

So where are we now? What I like:

* They managed to get an even better deal on the Seneca portfolio debt (link (http://www.sec.gov/Archives/edgar/data/1001258/000119312513328398/d582721dex991.htm))
* They've been added and subsequently removed from the Russell 2000. Nobody is interested in this stock anymore. Liquidity is low. Even the value bloggers are now tired of this name (Wexboy trimming (http://twitter.com/Wexboy_Value/status/443910574171500544))
* Book value per shares is over $13 and growing. Still $90m in cash and liquid investments on a $110m market cap.
* Cash flow from operations > $20m / years. It's a bit complicated, check some of these blogs for more details. Recommended: Alphavulture is still keeping track of the company.
* I actually appreciate that they acquired a selection of hideous businesses. Profitability over popularity.

What I don't like:

* Looks like it is run like a family business, not a public company. Is giving your grandson at 29 a VP position with a $200k salary a good idea?
* Capital allocation: they should be buying back shares hand over fist. If they want to grow the company instead they should not beat around the bush every conference call.
* I think they could improve their disclosure The whole thing doesn't look very transparent anymore with all the joint ventures.

Cliff notes: ASFI is cheap, unloved, management acts questionable but they own a decent stake and will probably not ruin the company twice in a decade.


(These quotes indicate how interested the CEO is in share buybacks; for some reason I appreciate them)

Q2 2013 conference call:
Quote
Gary Stern - Chairman of The Board, Chief Executive Officer and President: Okay, this is Gary. We've -- we bought back quite a bit of stock through a buyback plan that ended, I believe...
Robert J. Michel - Chief Financial Officer, Principal Accounting Officer and Secretary: In March.
Q4 2013 conference call:
Quote
Gary Stern - Chairman of The Board, Chief Executive Officer and President: Okay. As you know, we did buy a significant amount of stock back about a year -- when was that, Bob? A year...
Robert J. Michel - Chief Financial Officer, Principal Accounting Officer and Secretary: March.
Title: Re: ASFI - Asta Funding
Post by: writser on March 27, 2014, 03:39:58 PM
That turned out to be a bit longer than expected. So, is anybody still looking at this or has everybody sold already and moved on? Feel free to point out any flaws in my previous post.
Title: Re: ASFI - Asta Funding
Post by: pantheman on April 03, 2014, 06:38:54 PM
I was in this for a while last year and invested for many of the same reasons you listed above. Unfortunately, even after the adjustment with Bank of Montreal a couple quarters ago on the Great Seneca portfolio I don't see them making a whole lot, if anything really, on the portfolio. Current quarterly run rate on that portfolio is about $2.4m and seems to be declining at close to 10% per quarter. The other issue with that portfolio is it's nearing the end of useful life (management has talked in past calls about these things having 7-8 yrs of useful life as statute of limitations can affect returns). They have a lot of judgements (~$1bil if I recall correctly) which clouds the valuation. If the judgements are that great and given the pickup in the economy in the last 2-3 years and home values rising again I find it odd they're not returning more on their collection efforts. I've wondered if they're sandbagging the collections in order to get out from under the Bank of Montreal but with the revised terms this seems unlikely.

The other businesses they've ventured into actually seemed very intriguing to me and I think they're going into them in a smart way (requiring x% return on their investments before more capital is committed, for example). The real head scratcher for me is management's aversion to stock buybacks. They have repeatedly shied away from calls for buybacks on conference calls even though the return relative to book value is a no brainer. If they are so focused on IRR why not do the easy thing and just buy back the stock? They did authorize a $20m buyback in 2012 that expired in 2013 but only used $7.9m of that.

As to book value I think you really have to take a look at the book value fluctuation in the past 3-5 years. ROE since 2009 has been abysmal (Equity for each of FY09-FY13 in order has been 157.4, 161.9, 173, 168.5, 169.6). All this while they've deviated from their core competency of CC receivables but SG&A still running $5-$7m/yr. I closed out because I started to worry that management could care less about the stock price and I don't really have a grasp of the real risk inherent in the new business lines. Realization of gains/losses on the assumed legal cases takes a good amount of time and while I thought the cases would be annuity like it seems they're looking for only 20% return, at most, while being on the hook for the whole payout if they lose (again I have no idea on likelihood of these cases being winners, though management seems to think they have a good process to weed out the good from bad...time will tell).
Title: Re: ASFI - Asta Funding
Post by: Hielko on April 06, 2014, 03:09:33 AM
Looking at book value is in the case of ASFI not very meaningful. The seneca portfolio went from having significant positive equity to having negative equity, but in the mean time the value of the assets went from probably zero to probably worth a few million. And there is of course a couple of million missing from equity because of the buybacks.
Title: Re: ASFI - Asta Funding
Post by: writser on April 06, 2014, 06:50:36 AM
Agreed, looking at book value only is not significant. It's just a pillar that supports the thesis. One share @ $8.40 buys you approximately:

~$7.00 in liquid assets
~$4.50 in structured settlements and personal injury claims
~$1.50 in net consumer receivables

versus < $2.00 in liabilities. The consumer receivables generated over $1.00 in FCF/share over the last few years. So quite some things can go wrong, as long as management is a bit sensible. Which is exactly the problem. It's hard to judge whether the acquisitions will work out and what they will do with the rest of the cash. I'm sceptical on both issues but the market is pricing ASFI as if the bank account has already been emptied.
Title: Re: ASFI - Asta Funding
Post by: writser on April 24, 2014, 10:16:37 AM
ASFI gets pumped on SA today but nothing is happening: http://seekingalpha.com/article/2156853-asta-funding-who-doesnt-like-free . Not a very good article imho. Huge focus on the numbers but nothing about the #1 risk. Too much analysis, not enough common sense. :)
Title: Re: ASFI - Asta Funding
Post by: Bharps on May 09, 2017, 02:45:05 PM
Greetings all,

New to the board but have been active on SA for years and probably know a fair amount of folks on here. At any rate, I just started buying a small position in ASFI. It certainly has hair-mgmt and the board effectively control this thing after the Mangrove-driven tender earlier this year, and the son of the chair/ceo runs a SS disability subsidiary that has been loss making and is, to say the least, unproven. That said, the tender drove big accretion in BV, it's probably around $17-18/shr now. If anyone ever played around in Compucredit/Atlanticus (I owned some converts for a few years), it's somewhat similar-mgmt has a huge position, they play in a grab-bag of junk credit. They've done a fair amount of share repurchasing in the past, the largest piece from the tender offer earlier this year. Mangrove's pressure effectively forced them to use up most of their cash to take out shares, something a lot of value types have been advocating for years. After the tender offer, the stock has dropped around ~ $10.50 to ~ $7 now.

Other than that, we have a situation with a low ROE, trading at 40% of book, mgmt highly compensated and a family control the company. What's not to love?

Happy to hear other's experience and thoughts...
Title: Re: ASFI - Asta Funding
Post by: Saj on May 09, 2017, 04:02:04 PM
Welcome, Bharps.

What are your thoughts on management behaviour? I find it really strange. They have always had a large stake as owners of the corp (relative to their salaries), but they have never behaved like it. I don't get why they care so little about shareholder value, but the evidence over the years has piled up.

And now they actually control the whole thing, whereas before there was at least some threat (that Mangrove eventually exercised) that an outsider could clean things up. As a result, I'm scared to partner up with these guys since they are now free to earn the terrible returns on capital that they do for the rest of time.

Do you disagree with my point of view? I'm happy to reconsider, as at this price returns would be awesome if those in charge actually cared about shareholder value.
Title: Re: ASFI - Asta Funding
Post by: writser on May 10, 2017, 02:43:32 AM
Management behaviour is not that strange. They use their shares to control the company and use the company as their personal piggybank (nice salaries, jobs for the family, etc.). I'd rather have them maximize their wealth through increasing share value but the Stern family just doesn't seem interested in that. The large tender was nice (*) but they only did it because they were forced to do so by activists.

I agree that based on quantitative metrics ASFI looks very cheap at the moment. Question is, what price would you pay for a mediocre business with bad management? I don't think this is a good buy at 0.7x book and I would probably buy it at 0.2x book. Anywhere in between - difficult.

What keeps me from buying at the moment:

- ROE has been disappointing historically and I expect this to continue. If the discount to book doesn't shrink returns will be mediocre.
- Management is completely entrenched now, no possibilities for activists to do anything. They treat this as their piggybank and nobody can do anything about it. So why would the discount shrink?
- If, for some reason the business starts to do well I think there is a big chance that management will take the company private at a small premium. Again, nobody can do anything about it.

Basically, the only scenario in which you would do very well is if management suddenly decides to look after minority shareholders. I think that is extremely unlikely. Since I have been following this stock management has been mistreating / ignoring minority shareholders and I expect they will continue to do so. I have owned this for several years and it was a big disappointment.

That said, last Friday this was trading at a ~65% discount to TBV and I was close to pulling the trigger. At some point the quantitative metrics trump the bad management. I'm just not sure when ..

(*) Whether a $10.35 tender is nice with TBV around $15 is actually debatable. You could also say it was a huge rip-off but the activists accepted it because they had no other options.
Title: Re: ASFI - Asta Funding
Post by: Picasso on February 06, 2018, 06:46:26 AM
Looks like they finally decided to look after minority shareholders? Maybe?
Title: Re: ASFI - Asta Funding
Post by: writser on February 06, 2018, 07:00:59 AM
Smart management. First they smoke out all minority shareholders. Finally it's time to distribute money to themselves.
Title: Re: ASFI - Asta Funding
Post by: Gamecock-YT on February 06, 2018, 09:15:35 AM
I happily sold out today. Don't trust these guys.
Title: Re: ASFI - Asta Funding
Post by: sbalsam on February 06, 2018, 09:24:25 AM
The final line in the PR is:
Mr. Stern continued, "I would like to personally thank our stockholders for the unwavering support and loyalty they have shown to the Company over the last several years."
Title: Re: ASFI - Asta Funding
Post by: Picasso on February 06, 2018, 09:48:50 AM
If they wanted to screw with the minority shareholders some more they would have done another large tender.  I'm keeping an eye on the situation because it would stand to reason that the discount to BV will be even larger after the dividend is paid but the signaling here seems to indicate there will be more dividends like these in the future.
Title: Re: ASFI - Asta Funding
Post by: writser on February 06, 2018, 10:27:13 AM
Picasso - good to see you back. What signaling do you see (apart from the fact that they just announced a giant dividend .. )?
Title: Re: ASFI - Asta Funding
Post by: Picasso on February 06, 2018, 11:16:56 AM
Well there was this as part of the tender:

Quote
Additionally, the Ricky Stern Family 2012 Trust (as Gary Stern's permitted assignee), acquired 471,086 Shares under the Purchase Agreement on March 10, 2017 for $4.9 million.

They had to use personal cash to purchase more shares (in addition to owning 50% more from the tender). Always seemed like they would do something spiteful after having to use their own cash to fend off Mangrove and would be more motivated to see the shares have better returns for shareholders since their incentives kind of shifted in that direction. There's really no reason for them to do a special dividend unless they are more interested in seeing the stock perform better over time.  They could have done another tender. So after the dividend is paid and it's trading at 30% of book, it seems kind of interesting. Also might be some selling once the dividend is paid. I think I've had a convo with someone about going long stocks with crooked management. If your incentives are aligned you can actually do pretty well.
Title: Re: ASFI - Asta Funding
Post by: writser on February 16, 2018, 02:54:55 PM
On vacation, wtf happened today?
Title: Re: ASFI - Asta Funding
Post by: writser on September 06, 2018, 12:14:07 PM
I picked up a few shares the last few weeks. This is still a horrible company but just too cheap. Pro forma tangible book value should be around $15 - $18 with hardly any liabilities. Net cash per share after deducting all liabilities should be $5 or higher. Current price: $4.20.

I got lucky with my timing: stock is up significantly the past few days, presumably due to the company giving an update (https://www.sec.gov/Archives/edgar/data/1001258/000143774918016185/ex_122901.htm) regarding their financial restatements (which, frankly, are maybe interesting from an accounting perspective but mostly irrelevant in terms of valuation) and the fact that the Nasdaq accepted (https://www.sec.gov/Archives/edgar/data/1001258/000143774918016657/ex_123476.htm) their plan for continued listing. So basically some non-events yet the stock is up ~40%. I'm tempted to sell a bit but it's still way too cheap. Possible catalysts: company gets filings up-to-date before year-end to comply with their Nasdaq plan, company reinstates dividend or the Stern family tries to take this vehicle private.

Also, due to the low float and volume this is a potential target for pump & dumps, as happened in August when the stock spiked from a $3.40 close to an intraday high of $4.75 (and back to $3.25 the next day). A small chance you can flip your shares to a hyped daytrader the next few months - I'll take it.

Not the worst place to park some cash I think.
Title: Re: ASFI - Asta Funding
Post by: Foreign Tuffett on October 02, 2018, 12:22:13 PM
Just wanted to bump this as I think it's a good idea.....rare to find a US company listed on a major exchange trading at significantly under net cash.

Hat tip to writser for pointing me in the direction of the below press release, which gives the outline of their financial position.

https://www.sec.gov/Archives/edgar/data/1001258/000143774918016185/asta20180827_8k.htm (https://www.sec.gov/Archives/edgar/data/1001258/000143774918016185/asta20180827_8k.htm)
Title: Re: ASFI - Asta Funding
Post by: aceskc on October 02, 2018, 04:12:04 PM
Having a hard time reconciling the two statements "As of June 30, 2018, the Company had approximately $32.1 million in cash and cash equivalents, and approximately $6.6 million in available for sale investments, which is after the Company declared and paid a $35 million special dividend to its shareholders on February 28, 2018. Additionally, at June 30, 2018, the Company had no outstanding debt, and under $5 million in liabilities."

Additionally, the cumulative restatement change through June 30, 2017 to the Company's consolidated balance sheet for the Non-Reliance Periods was a decrease in total assets of $3.5 million; a decrease in total liabilities of $0.8 million; and a decrease to stockholders' equity of $2.7 million. At June 30, 2017, after the restatement of the financial statements for the Non-Reliance Periods, the Company had approximately $212.7 million in total assets; $93.5 million in total liabilities; and $119.2 million in stockholders' equity. The cumulative restatement change for the Non-Reliance Periods had no effect on cash and cash equivalents


Where did the $93.5M of liabilities go b/w Jun'17 and Jun'18. ? I see the special dividend and all their tender offers, but saw nothing in their press releases about any asset dispositions. Apologies, if I am missing something that should be obvious-but not very familiar with the story here.
Title: Re: ASFI - Asta Funding
Post by: writser on October 03, 2018, 01:28:06 AM
78.6m of the liabilities in the June 30, 2017 quarterly (https://www.sec.gov/Archives/edgar/data/1001258/000143774918017137/asta20180827c_10qa.htm) were listed as 'related to discontinued operations' (as were 93.7m of assets). These assets and liabilities (structured settlements funded with non-recourse notes) were part of CBC settlement funding which ASFI sold (https://www.sec.gov/Archives/edgar/data/1001258/000143774917020899/asta20171218_8k.htm) in December 2017 for ~$10.5m, making the balance sheet effectively debt-free.

Because their filings are not up to date it's a bit of a mess to try to get a picture of current financials but the numbers in the press release mentioned above are in line with what I'd expect.
Title: Re: ASFI - Asta Funding
Post by: aceskc on October 03, 2018, 09:33:01 AM
Thank you so much, very helpful. Will now have to investigate if the call option of the free business attached at less than cash value is overpriced or not :).
Title: Re: ASFI - Asta Funding
Post by: Foreign Tuffett on October 15, 2018, 03:15:12 PM
On Friday ASFI released its 10-K for the FY ended 9/30/17. Obviously it's usefulness is somewhat limited due to it being a year out-of-date, but I skimmed it anyway. Some (obviously not at all comprehensive) quotes and notes:

Quote
The Company filed a lawsuit in Delaware state court against a third party servicer arising from the third party servicer’s failure to pay the Company certain amounts that are due the Company under a servicing agreement.  The third party servicer filed a counterclaim in the Delaware action alleging that the Company owes certain amounts to the third party servicer for court costs pursuant to an alleged arrangement between the companies.  On or about July 12, 2018, the parties agreed to settle the action pursuant to a settlement agreement and release, which provides for, among other things, the payment by the third party servicer of $4.4 million to the Company pursuant to an agreed upon schedule.

Material given the company's ~$26M market cap

Quote
Since April 2017 Pegasus has not funded new cases, but remains in business to collect on its portfolio of personal injury claim advances.

So Pegasus, which ASFI now owns 100% of, is in liquidation mode. This leaves consumer receivables and disability fee income as their only material operating segments.




Title: Re: ASFI - Asta Funding
Post by: writser on November 15, 2018, 01:32:48 PM
Filings appear to be up-to-date again. Today the past few 10Q's were filed up to June 2018 (https://www.sec.gov/Archives/edgar/data/1001258/000143774918020940/asta20181114_10q.htm). 10K should come next month. Market cap ~23.5m. 39m in cash and investments, 5m in notes receivable, 14m in personal injury claim investments. 2m in total liabilities. 6m of pretax earnings the past 9 months. Cheap but bad management with a majority position. Annual meeting in two weeks. Then (hopefully) the company is compliant with Nasdaq listing rules again.
Title: Re: ASFI - Asta Funding
Post by: Foreign Tuffett on November 16, 2018, 06:40:12 AM
Filings appear to be up-to-date again. Today the past few 10Q's were filed up to June 2018 (https://www.sec.gov/Archives/edgar/data/1001258/000143774918020940/asta20181114_10q.htm). 10K should come next month. Market cap ~23.5m. 39m in cash and investments, 5m in notes receivable, 14m in personal injury claim investments. 2m in total liabilities. 6m of pretax earnings the past 9 months. Cheap but bad management with a majority position. Annual meeting in two weeks. Then (hopefully) the company is compliant with Nasdaq listing rules again.

My thoughts are very similar. Balance sheet looks even better than I expected it to. I would also note the (previously disclosed, so not new info) 7/18 $4.4M settlement in their favor. 

One thing they still need to do is finish remediating their internal controls, but that shouldn't be a bridge too far.
Title: Re: ASFI - Asta Funding
Post by: writser on December 06, 2018, 03:46:00 PM
ASFI is completely NASDAQ-compliant again (https://finance.yahoo.com/news/asta-funding-inc-announces-receipt-210000356.html).

Quote
Asta Funding, Inc. (ASFI) (“Asta” or the “Company”) announced today that on December 6, 2018, it received a letter from the Nasdaq Stock Market LLC (“Nasdaq”) stating that the Company has regained compliance with Nasdaq’s continued listing requirements set forth in Listing Rule 5250(c)(1) and Listing Rule 5620(a) and that the Company is in compliance with other applicable requirements for listing on the Nasdaq Stock Market. The letter also confirms that Nasdaq is closing the non-compliance matter.
Title: Re: ASFI - Asta Funding
Post by: writser on December 27, 2018, 12:47:42 PM
And a 10K has been filed (https://www.sec.gov/Archives/edgar/data/1001258/000143774918022554/asta20180930_10k.htm). ~$42m in net cash, treasuries and mutual funds. Market cap ~$27m. Free company attached.
Title: Re: ASFI - Asta Funding
Post by: valuedontlie on December 28, 2018, 06:00:07 AM
will you stop providing free updates on this thing!
Title: Re: ASFI - Asta Funding
Post by: Foreign Tuffett on December 28, 2018, 06:01:52 AM
And a 10K has been filed (https://www.sec.gov/Archives/edgar/data/1001258/000143774918022554/asta20180930_10k.htm). ~$42m in net cash, treasuries and mutual funds. Market cap ~$27m. Free company attached.

Any thoughts on what their plan is moving forward? Their three remaining segments have, insofar as I can tell, been in de facto liquidation mode for at least the past six months. Maybe another special dividend?
Title: Re: ASFI - Asta Funding
Post by: writser on January 10, 2019, 01:26:47 AM
Not sure. Whatever it is, it will probably not be executed smoothly and swiftly.

Filing (https://www.sec.gov/Archives/edgar/data/1001258/000143774919000598/asta20190108_8k.htm) from yesterday:

Quote
On January 4, 2019, the Board of Directors (the “Board”) of Asta Funding, Inc. (the “Company”) appointed Mr. Michael Monteleone as a director of the Company, effective January 4, 2019, to fill the vacancy created by the resignation of Mr. Mark Levenfus, which occurred on January 3, 2019. Mr. Levenfus’ resignation was not the result of any disagreement on any matter relating to the Company’s operations, policies or practices.

Mr. Monteleone will serve as Chairman of the Board’s Audit Committee.

Mr. Monteleone is a retired audit partner, formerly with KPMG LLP.  He has extensive experience serving large multinational publicly traded companies.  His experience includes SEC reporting, mergers and acquisitions, reorganizations and restructurings, as well as other technical financial reporting matters.

Maybe a sign of things to come? If so, the big question is will they try to acquire yet another shady business or will they try to take the company private? Don't get your hopes up .. But it's very cheap.
Title: Re: ASFI - Asta Funding
Post by: valuedontlie on February 14, 2019, 05:30:55 PM
10-Q filed today:

https://www.sec.gov/Archives/edgar/data/1001258/000143774919002627/asta20181231_10q.htm#balsheet

$0.19/sh in earnings, net cash grew to ~$50m, no new info on future plans...
Title: Re: ASFI - Asta Funding
Post by: writser on February 15, 2019, 12:26:16 AM
On top of the $50m in level 1 assets there is:

- a note receivable of $3.8m, $0.5m of principal was paid back last quarter.
- a settlement receivable of $2.9m, also returned $0.5m this quarter.
- $8.9m in a personal injury claims portfolio (left from a portfolio which returned $8m in cash last year)
- a consumer receivables portfolio valued by the company at $26m (generated $18m in net collections last year)

For an additional ~$42m in assets that are generating / turning into cash and don't appear overvalued or in need of impairment. Total liabilities: $2m. Net: ~$13.40 / share vs a price of $4.30.

The company paid out a massive $5.30 dividend in 2018 and tendered for a significant amount of shares both in 2016 and in 2017, is debt free, has been profitable for 8 of the past 10 years and trades at a TTM P/E ratio of ~5x (ignoring the Q1 effect of the new tax law) despite all the cash on the balance sheet. Absolutely bonkers in a vacuum.

But of course there is hair unfortunately: management isn't exactly top-notch (understatement), management controls the company so there is a significant risk of a take-under, tender offers were only initiated after being threatened by an activist investor (which is hardly possible anymore) and corporate overhead is somewhere around $8m / year - if you capitalize that there isn't much value left ..
Title: Re: ASFI - Asta Funding
Post by: valuedontlie on February 15, 2019, 10:17:48 AM
Yes, hard to know what their intentions will be from here... they could easily dividend out the current share price and still have plenty leftover for M&A... could...
Title: Re: ASFI - Asta Funding
Post by: writser on May 13, 2019, 01:53:49 PM
q2 results press release (https://www.sec.gov/Archives/edgar/data/1001258/000143774919009662/ex_144079.htm).

Quote
For the three months ended March 31, 2019, net income was $1.8 million, or $0.27 per diluted share, as compared to net income of $1.0 million, or $0.15 per diluted share for the three months ended March 31, 2018.

Quote
As of March 31, 2019 the Company had approximately $50.1 million in cash and cash equivalents, and securities, $87.5 million in stockholders' equity, and a net book value per share of $13.09.

Looks like a decent quarter at first glance. Still very cheap (at least on a quantitative basis) if you have the stomach for it.
Title: Re: ASFI - Asta Funding
Post by: Foreign Tuffett on May 14, 2019, 07:05:02 AM
One positive development that isn't reflected in their financials yet is the payoff of their $3.8M note receivable last month: "On April 15, 2019, the Company received a lump sum payment of $4 million from the buyer, consisting of $3.8 million in principle and $0.2 million in interest income. Effective April 15, 2019, the Note was paid in full"

This continues the ongoing trend of their assets slowly being unwound and turned to cash.
Title: Re: ASFI - Asta Funding
Post by: Foreign Tuffett on May 17, 2019, 04:10:00 PM
New $10.5M share repurchase authorization. Note that the current market cap is only ~$37.5M.

https://www.sec.gov/Archives/edgar/data/1001258/000143774919010380/ex_145162.htm (https://www.sec.gov/Archives/edgar/data/1001258/000143774919010380/ex_145162.htm)

Definitely a positive development given that the company continues to trade at a significant discount to its net cash and investments.

Title: Re: ASFI - Asta Funding
Post by: tgrafos on May 18, 2019, 07:49:28 AM
Not really great news.Stock never trades.If they truly wanted to buy stock they would do a tender.
Title: Re: ASFI - Asta Funding
Post by: Tim Eriksen on May 18, 2019, 10:31:50 AM
The press release doesn't even make sense.  A 10b5-1 plan cannot be modified or discontinued at any time, that is why they are allowed during blackout periods; they are not at a Company's discretion, but rather based on the predetermined plan that gets executed regardless of general market conditions.   Maybe there is a repurchase authorization and a smaller 10b5-1 plan but that is not what they announced.     
 
Asta Funding, Inc. Adopts Rule 10b5-1 Plan in Conjunction with Share Repurchase Program
ENGLEWOOD CLIFFS, N.J., May 17, 2019 – Asta Funding, Inc. (NASDAQ: ASFI) (the “Company”), a diversified financial services company, today announced that its board of directors has approved the repurchase of up to $10,500,000 of the Company’s common stock. Repurchases will be made from time to time at the Company’s discretion, based on ongoing assessments of the capital needs of the business, general market conditions and the market price of its common stock. The program may be suspended or discontinued at any time.

Title: Re: ASFI - Asta Funding
Post by: given2invest on May 18, 2019, 12:32:05 PM
10b's can have very specific instructions such as price levels so that might be why it says "up to 10.5". 
Title: Re: ASFI - Asta Funding
Post by: TBW on May 19, 2019, 01:05:57 PM
Has there been any info on who the 10b plan is for?

I thought this was good news, but didn't really consider the 10b part.

In my mind this is very rational move by management.  If I owned as much of the company as they do I would repurchase as many shares as I could, below the cash value, and then when I do dividend myself the cash I get a much greater proportion of it.

I think the tax cuts have greatly aligned shareholders and management here, this move may be a sign of that.  By that I mean it is much better to receive cash from the company as dividends rather than in income.
Title: Re: ASFI - Asta Funding
Post by: Foreign Tuffett on May 21, 2019, 06:33:27 AM
Has there been any info on who the 10b plan is for?

I thought this was good news, but didn't really consider the 10b part.

In my mind this is very rational move by management.  If I owned as much of the company as they do I would repurchase as many shares as I could, below the cash value, and then when I do dividend myself the cash I get a much greater proportion of it.

I think the tax cuts have greatly aligned shareholders and management here, this move may be a sign of that.  By that I mean it is much better to receive cash from the company as dividends rather than in income.

That's a really interesting point.
Title: Re: ASFI - Asta Funding
Post by: writser on May 22, 2019, 01:28:59 PM
Buying and holding this was the easy part. When to sell though? I trimmed my position slighly after the recent 50% bounce.
Title: Re: ASFI - Asta Funding
Post by: Foreign Tuffett on May 23, 2019, 10:01:40 AM
Buying and holding this was the easy part. When to sell though? I trimmed my position slighly after the recent 50% bounce.

Yeah, @ > $7 a share I think it's approaching fair value.

Thanks for reviving this thread last September. It's certainly a situation that has worked out well.
Title: Re: ASFI - Asta Funding
Post by: TBW on May 24, 2019, 06:14:17 AM
That sounds a bit low to me.  Using a share count that assumes all options vest:
cash+securities: $6.76 per share
Receiveables: $0.79
Tangible: per share: $7.55

They also have operating assets of $1.25 per share, and those have been producing decent cashflow and are very conservatively marked.

If you don't think management is aligned, then yes probably fair value. 

I think there is alignment so I am willing to let it run to closer to $9 per share.  At a minimum management would want shares to be comfortably over the $7.97 strike price most of their shares vest at.
Title: Re: ASFI - Asta Funding
Post by: writser on July 03, 2019, 11:40:45 AM
A small update. Proxy is out: link (https://www.sec.gov/Archives/edgar/data/1001258/000143774919013464/asta20190701_def14a.htm).

Interesting to note that according to the proxy 6,605,915 shares are outstanding as opposed to 6,685,415 in the latest quarterly. I guess they bought back ~80k shares with their repurchase plan so far or 1.2% of shares outstanding? Not bad for a few weeks, especially given the low liquidity. Looks like they bought close to 20% of all volume.

Insider compensation is actually down y/y, nice to see. You'd actually expect very bad news in a July,3 evening filing but so far I don't see anything :P . Still cheap, still a questionable company.

The board:
Quote
Mr. Bishop previously served as a director of SFX Entertainment, Inc., a media and entertainment company, from December 2015 to December 2016. [..] As a result of these and other professional experiences, Mr. Bishop possesses particular knowledge and experience in budget preparation, control and analysis, which strengthens the Board of Directors’ collective qualifications, skills and experience.
narrator: SFX Entertainment filed for chapter 11 in February 2016.

The CFO:
Quote
Bruce R. Foster, CPA, age 59, has served as Executive Vice President and Chief Financial Officer of the Company since March 2016. Prior to joining the Company, Mr. Foster served as Chief Financial Officer from December 2005 to February 2016 of 4Licensing Corporation, formerly known as 4Kids Entertainment
narrator: 4Kids Entertainment, Inc. filed a voluntarily petition for bankruptcy in April 2011 and, after emerging from bankruptcy in December 2012, filed a subsequent voluntary petition in September 2016.
Title: Re: ASFI - Asta Funding
Post by: writser on August 13, 2019, 02:29:06 PM
10Q is out (https://www.sec.gov/Archives/edgar/data/1001258/000143774919016585/0001437749-19-016585-index.htm). Still super cheap. ~$9.20 / share in cash, bonds and equities. $0.35 / share in earnings this quarter. Book value $13.50. And company has been buying back shares:

Quote
Through August 12, 2019, the Company purchased approximately 116,600 shares at an aggregate cost of approximately $0.8 million under the Shares Repurchase Plan.

Pretty close to 20% of all traded volume (is that the maximum allowed or just a coincidence?). Not bad. Initial plan seems to end August 17 (duration of three months), seems likely they will extend it.

Shares now at $7.68.
Title: Re: ASFI - Asta Funding
Post by: Foreign Tuffett on August 15, 2019, 02:01:39 PM
That sounds a bit low to me.  Using a share count that assumes all options vest:
cash+securities: $6.76 per share
Receiveables: $0.79
Tangible: per share: $7.55

They also have operating assets of $1.25 per share, and those have been producing decent cashflow and are very conservatively marked.

If you don't think management is aligned, then yes probably fair value. 

I think there is alignment so I am willing to let it run to closer to $9 per share.  At a minimum management would want shares to be comfortably over the $7.97 strike price most of their shares vest at.

TBW I should have listened to you. I may have been overly skeptical of a management team that has been doing all the right things lately.
Title: Re: ASFI - Asta Funding
Post by: writser on August 21, 2019, 06:56:12 AM
I'm glad I held on to most of my shares a little longer. I'm not a technical trader but at this point it looks like most disgusted minority holders have already sold their position and the buyback program seems to put a floor under the price. The madman in me wants to buy a shitload of shares aggressively at this point, drive up the price ~20% and then sell the acquired shares into the buyback program. That might actually work but I don't have the balls for it.

And on the other hand, I'm not even 100% sure the buyback program is still running (initial term was for four months, May 17 until August, 17). Also I'm supposedly a value investor, not a chart reader and this is getting closer and closer to fair value so who am I kidding - I'm not gonna buy more.

Just throwing this out there hoping that somebody else will try it :) .
Title: Re: ASFI - Asta Funding
Post by: Foreign Tuffett on August 21, 2019, 07:07:04 AM
I'm glad I held on to most of my shares a little longer. I'm not a technical trader but at this point it looks like most disgusted minority holders have already sold their position and the buyback program seems to put a floor under the price. The madman in me wants to buy a shitload of shares aggressively at this point, drive up the price ~20% and then sell the acquired shares into the buyback program. That might actually work but I don't have the balls for it.

And on the other hand, I'm not even 100% sure the buyback program is still running (initial term was for four months, May 17 until August, 17). Also I'm supposedly a value investor, not a chart reader and this is getting closer and closer to fair value so who am I kidding - I'm not gonna buy more.

Just throwing this out there hoping that somebody else will try it :) .

Worth noting that the General Counsel/Corporate Secretary just filed that he sold off all his shares. He only owned 2200 to begin with, but now he owns 0.
Title: Re: ASFI - Asta Funding
Post by: writser on November 01, 2019, 01:39:39 PM
The end game: https://www.sec.gov/Archives/edgar/data/1001258/000143774919021292/ex_162356.htm

Quote
Dear Members of the Board:
 
I am pleased to submit this non-binding proposal (the “Proposal”) to acquire all of the outstanding shares of the common stock of Asta Funding, Inc. (the “Company”) at a cash purchase price of $10.75 per share, representing a premium of approximately 60% over the closing price of the Company’s common stock on October 29, 2019, and approximately 60% over the average closing price of the Company’s common stock for the past 30 trading days. Given the premium to the market price, I believe that this Proposal presents a highly attractive opportunity for the public shareholders of the Company.
Title: Re: ASFI - Asta Funding
Post by: Foreign Tuffett on November 01, 2019, 03:42:20 PM
The end game: https://www.sec.gov/Archives/edgar/data/1001258/000143774919021292/ex_162356.htm

Quote
Dear Members of the Board:
 
I am pleased to submit this non-binding proposal (the “Proposal”) to acquire all of the outstanding shares of the common stock of Asta Funding, Inc. (the “Company”) at a cash purchase price of $10.75 per share, representing a premium of approximately 60% over the closing price of the Company’s common stock on October 29, 2019, and approximately 60% over the average closing price of the Company’s common stock for the past 30 trading days. Given the premium to the market price, I believe that this Proposal presents a highly attractive opportunity for the public shareholders of the Company.

Fantastic news, particularly for something released after hours on a Friday. I nibbled on this one a bit when it dropped back in to the mid $6.00 range. Wish I had bought more!

Epic call on this name last September. Congrats.
Title: Re: ASFI - Asta Funding
Post by: roark33 on November 04, 2019, 11:49:57 AM
Any ideas on whether this gets done?  Still trading at pretty decent spread? 
Title: Re: ASFI - Asta Funding
Post by: Foreign Tuffett on November 04, 2019, 01:03:45 PM
Any ideas on whether this gets done?  Still trading at pretty decent spread?

For what it's worth, I didn't sell any shares today.

I don't see any obvious obstacles to this getting done. I think the offer is fair and the Chairman/CEO obviously knows what he's buying. Finally, I don't foresee any issues with the board's special committee or the shareholder vote.
Title: Re: ASFI - Asta Funding
Post by: Saj on November 04, 2019, 01:24:25 PM
I feel like the spread is pretty high too, so I too have held on. Maybe there is also the possibility the offer will have to be raised? Market doesn't think so, I guess.
Title: Re: ASFI - Asta Funding
Post by: writser on November 05, 2019, 06:49:37 AM
I think there's a very large chance the deal gets done and a very small chance the price will be improved.

Financing this deal should be trivial given the recent dividends and ASFI's balance sheet. Minority holders are sick of Gary Stern and Gary Stern is sick of minority holders. The price offered undervalues the company (good for Gary) but it is a large premium, actually not that bad of an offer and the only way this cash-box will ever be monetized (good for minority holders). I think basically everybody wants this deal to go through.

Insiders own ~63%, activists got bought out, there is zero liquidity and the board is filled with Gary's cronies so good luck with your attempt to get a higher price.

I bought a few more shares < $10 yesterday. The thing is, it will probably take a while to get the deal done. A special committee will be formed to 'thoroughly study the deal and fight for minority holders' (yeah right), then if I am correct there should be a vote (the company is based in Delaware, I think they need a majority-of-minority approval. Not 100% sure about this, maybe somebody could clarify). So after the committee approval they would need to file a preliminary proxy, pick a date, etc. etc. Basically the whole process could easily take 6 months or more. And there is still a very minor risk that you get screwed over in some way or another. Still, the spread is now ~7% and the IRR seems pretty decent but not super attractive.
Title: Re: ASFI - Asta Funding
Post by: KJP on November 05, 2019, 07:17:24 AM

A special committee will be formed to 'thoroughly study the deal and fight for minority holders' (yeah right), then if I am correct there should be a vote (the company is based in Delaware, I think they need a majority-of-minority approval. Not 100% sure about this, maybe somebody could clarify).

Majority of the minority is not required, but the controlling shareholder who's buying out the minority will often want it (as the controlling shareholder has demanded here) because if you have (i) approval of a properly functioning independent board committee, and (ii) approval of the majority of the minority, then the transaction is subject only to business judgment review, i.e., any court challenge is highly likely to lose.  Without those procedural protections, a buyout by the controlling shareholder likely would be subject to "entire fairness" review, which involves a much more searching judicial inquiry into the procedural and substantive fairness of the transaction than "business judgment" review and is much more likely to result in a judgment requiring the controlling shareholder having to pay more money.  For more information, google Kahn v. M&F Worldwide, which is the 2014 Delaware Supreme Court case that established the standard described above for shifting from entire fairness to business judgment review.

That is why Stern's letter says his proposal is conditioned in independent committee approval and a majority-of-the-minority vote.  It's also why his letter says he has no interest in, and will never vote for, any merger or transaction with a third party.  Is giving the committee cover for choosing not to bother investigating those possibilities because his votes are necessary and he'll never agree to them.  Thus, the committee will be limited to bargaining solely with Stern and either approving or disapproving whatever final offer he makes.
Title: Re: ASFI - Asta Funding
Post by: writser on November 05, 2019, 07:31:00 AM
Informative post, really appreciated. Thanks.
Title: Re: ASFI - Asta Funding
Post by: Foreign Tuffett on November 25, 2019, 06:10:08 AM
Gary Stern's son Ricky, who is an executive officer of the company, "has agreed to participate in the Proposal"

https://www.sec.gov/Archives/edgar/data/1001258/000143774919023470/stga20191122_sc13da.htm (https://www.sec.gov/Archives/edgar/data/1001258/000143774919023470/stga20191122_sc13da.htm)