Just three months ago, Bidz.com was discussed on this site as a potential value investment, due to its 50% discount to its net assets. Since then, the stock has almost halved, giving the company about a 70% discount to its net current assets. Note that the company has no debt!
Such a discount for an American company with no debt is astounding! (For a US-listed Chinese small-cap with tons of “cash”, however, this discount could seem rather low!) What makes this situation even more incredible is that management owns some 40% of the company, so you would think that it would take steps to stop the bleeding.
You would be wrong. Cash continues to be spent trying to grow the business. Inventories are up while sales are down, and clearly the market has absolutely no confidence that management’s attempts will work.
At such a large discount to net current assets, however, some incredible returns may be made here. Surely at some price this thing becomes attractive, despite the company’s shortcomings. What price is that for you?
Disclosure: No position
