Voltari Corp: Tiny NOL Shell, Icahn Taking it Private

Voltari Corp (VLTC) is a tiny nano-cap (~$5MM today) and not actionable for many people, but it was once a mobile internet advertising company that pivoted to a triple net lease real estate strategy in 2015 after a rights offering where Carl Icahn gained control of the company.  Why was Icahn interested in the company?  They had somehow managed to rack up almost $500MM in federal NOLs and several hundred million in state NOLs.  Entities controlled by Icahn own 52.7% of the common stock and 98% of the preferred stock.  That preferred stock accrues interest at 14% (13% prior to 1/1/18) and has been paid-in-kind since inception, today the redemption value has grown to over $65MM, essentially wiping out the common equity over the last 3+ years.  Additionally, an Icahn entity is the lender on a $23MM revolving note used to finance the company's triple-net acquisitions, which there have only been three: 1) JPM Chase branch in Long Branch, NJ; 2) a 7-Eleven store in Flanders, NY; 3) and a more sizable office building leased to McClatchy in Columbia, SC.

One could say he's been slowly squeezing the value out of the company for several years and on 12/7, he delivered the final blow to equity holders, offering to buy the remaining 47.3% of the company he doesn't own for $0.58 per share or for a total of about $2.5MM.  For that $2.5MM, he'll presumably gain sole access to the NOL and can start putting it to real use ( VLTC hasn't generated taxable income since Icahn gained control).  I'm far from a tax expert, but I'm guessing either his preferred stock or the passage of the 3 year look back is enabling this move without busting the NOL.

He has a history of doing this sort of thing, Cadus Corporation (KDUS) was another Icahn controlled nano-cap where he bought a dozen or so luxury homes in south Florida into an NOL shell, it generated no revenue during this period and Icahn offered to take out the equity for $1.30 per share prior to the first property sale, eventually bumping it twice to the final takeout of $1.61 per share.  We could see a similar bump with VLTC, what's a few hundred thousand more to secure access to a $500MM NOL?  But I'm also not counting on it, there are only 4 board members, 2 of which are affiliated with Icahn including the Chairman, although he's somehow considered independent despite being on many Icahn controlled boards and owns zero shares -- there are no friends to minority shareholders here to provide much resistance.  Also, the equity (placing no value on the NOL) isn't worth anything after deducting the revolver and preferred stock.  Despite all that, given Icahn's history and recent moves to clean up his empire, I think the offer will at least hold with a slight chance of a bump to secure it getting done.  Today it trades for $0.50 per share, offering an absolute return of 16% over 6-9 months it'll take to complete.

Disclosure: I own shares of VLTC