180 Degree Capital (TURN) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company has experienced a significant transformation, with 97% of its assets now in public companies, which is a shift from a previous focus on private investments [28][43] - Since the company's strategy change in 2017, it has generated nearly $3 per share in gains, despite facing losses from legacy positions [28][43] - The company has initiated a discount management program to address the trading discount of its stock relative to its net asset value (NAV) [79][80] Business Line Data and Key Metrics Changes - The company has shifted its focus away from private investments, which previously resulted in substantial losses, to a strategy centered on public companies that can be controlled [59][84] - Recent announcements from portfolio companies indicate positive developments, such as Synchronous becoming a pure play cloud service company and Intevac nearing certification for a new tool [53][54] Market Data and Key Metrics Changes - Small cap stocks have underperformed significantly, with the Russell Microcap index down 38% and the Russell Microcap Growth index down 49% from their highs [48][72] - The disparity in performance between small and large cap stocks is at a historical high, with a 3000 basis point difference noted [72] - The company believes that the current market conditions present a unique buying opportunity for microcap investments [45][46] Company Strategy and Development Direction - The company aims to narrow the discount at which its stock trades relative to NAV by actively engaging with its portfolio companies to create value [19][80] - The management emphasizes the importance of investing in companies that are expected to rise in value to increase NAV [29][80] - The company is open to exploring strategic partnerships or mergers to enhance its scale and asset base [61][62] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges faced in the current market but believes that the worst may be over, citing potential peaks in inflation and interest rates [32][71] - The management is committed to a proactive approach in engaging with portfolio companies to unlock shareholder value [19][80] - The company expresses confidence in the long-term performance of small caps, citing historical trends of recovery following periods of underperformance [51][74] Other Important Information - The company has cut expenses significantly since 2017, moving out of high-cost locations and reducing its operational budget [86] - The management has indicated that they will continue to purchase company stock in the open market as part of their strategy to support share price [80] Q&A Session Summary Question: What happened with AgBiome's valuation? - The valuation of AgBiome has decreased significantly due to challenges in raising capital and the current financing environment, leading to a reassessment of risks [5][6][59] Question: What is the Board doing to address scale issues? - The Board is exploring various options, including potential mergers and partnerships, to enhance the company's scale and asset base [60][61] Question: How does the discount management program work? - The program involves monitoring the stock's trading discount relative to NAV and taking actions as necessary to narrow that discount [88][91]