If anyone is interested, I just completed a full investment write up:

http://stockspinoffinvesting.com/micrcap-stock-spinoff-trading-below-book-value/Here's what I wrote regarding valuation.

Nuvectra Solvency

One of the conditions that needed to be met for Greatbatch to spinoff Nuvectra was the board of directors of Nuvectra had to receive an opinion from an independent valuation firm confirming the solvency acceptable to Greatbatch. While this doesn’t give us a hard valuation number, it is nonetheless, reassuring.

Sale of Minority Interest in Nuvectra

Prior to the fourth quarter of 2015, Greatbatch owned 89% of Algostim and Pelvistim (Nuvectra’s two main products). In the fourth quarter of 2015, Greatbatch purchased the outstanding 11% of Algostim and Pelvistim for $16.7mm. This transaction values those two products at $152mm. Add $68mm of net cash and you have a total value of $214mm. This compares to a current market capitalization of Nuvectra of ~$70mm.

One other point regarding this purchase. Included in that $16.7mm was $6.9mm which was paid to Drees Holding, LLC, which is a limited liability company of the Nuvectra’s CEO Scott Drees. Drees had acquired his interest in Algostim and Pelvistim in connection with a long term consulting contract prior to him becoming CEO in July 2015.

A couple thoughts. I don’t know how Greatbatch got comfortable with the $152mm valuation. Because obviously there are conflicts of interest both perceived and perhaps real. I image Greatbatch’s board of directors got comfortable with the valuation by hiring a third party valuation firm. To cover their liabilities, I imagine they were conservative, but who knows.

Value of Intellectual Property Portfolio

In sum, Greatbatch has spent ~$125mm on Nuvectra which includes past R&D and acquisitions. As a result, Nuvectra has 107 U.S. patents (an additional 77 pending) and 49 foreign patents (an additional 43 pending). Add $68mm of net cash to that prior investment yields a total value of $193mm. This compares to the current market capitalization $70mm.

Piper Jaffray Price Target

Piper Jaffray has a $25 price target on NVTR. Here’s how Piper gets to its target:

“Our $25 price target is based on an enterprise value of 2.7x our FY 2018 revenue estimate of $78.3mm discounted one year at 10%, and assuming $88.7mm net cash and 11.1mm shares outstanding. We feel it is appropriate to value NVTR on 2018E revenue as it encompasses a more accurate portrayal of the enterprise by including revenue from the PelviStim SNS segment as well as allowing for value of a complete, maturing Alogovita SCS salesforce to be reflected.”

I also ran an EV/Sales and Price/Book comp analysis vs. med tech peers. Its available here:

http://stockspinoffinvesting.com/micrcap-stock-spinoff-trading-below-book-value/Looks very cheap on both EV/Sales and Price/Book.