This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

OCZ's $35 Million Sale to Toshiba Leaves Zero for Shareholders

NEW YORK (TheStreet) -- Last week, I wrote an article describing the fall of OCZ Technology Group (OCZ - Get Report).

For OCZ investors hoping for a miracle, the announcement all but seals the fate of the company. Here's part of the press release pertinent to shareholders:

Toshiba to acquire substantially all of OCZ's assets in a chapter 11 bankruptcy proceeding for $35M.

So the next question for shareholders is -- how much, if any, of the $35 million will flow to equity holders. We can't calculate the exact amount because we don't know what the current cash burn rate is, but we are able to calculate close to the maximum.

Based on the last quarterly SEC filing, OCZ balance sheet included the following (rounded):

Assets

Cash & Short Term Investments $10.5 million

Receivables $12.7 million

Inventory $23.4 million

Other Current $2.5 million

Property & Equipment $6.9 million

Intangibles $4 million

Misc Assets $1.1 million

Total Assets $61.9

Based on the press release and expected cash burn we can assume OCZ has zero, or near zero, cash left. At the rate receivables are declining, we can use $10 million as an estimate. The receivables may or may not be included as an asset sold, and it may not matter depending on liabilities (spoiler, it doesn't matter).

Liabilities

Short Term Debt $1.9 million

Accounts Payable $19.7 million

Other Current $17.1 million

Long Term Debt $19.6 million

Others $4.5 million

Total Liabilities $62.8 million

The above numbers show that OCZ has $35 million from Toshiba from which to pay $62.8 million in liabilities with (the actual numbers are not likely this generous for shareholders). For shareholders buying or refusing to sell stock hoping there will be some left over after the bills are paid, it doesn't appear there is enough to go around and equity holders are last in line. 

Once OCZ files bankruptcy, the fiduciary duty of the Board of Directors shifts from equity holders to creditors. The bankruptcy filing will also mean a delisting from NASDAQ and shares will trade over-the-counter until delisted there. It's vital for shareholders to liquidate before leaving NASDAQ because the transition typically results in a loss of about 50%.

Don't develop the "I've lost this much, what's the difference" mindset. As investors, our returns over the long run are based on the decisions that we make. Never allow a losing position to remain in place longer than necessary after you determine it's a loser.

At the time of publication, Weinstein had no positions in securities mentioned.

Follow @RobertWeinstein

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
OCZ $0.00 0.00%
AAPL $130.28 0.00%
FB $79.19 0.00%
GOOG $532.11 0.00%
TSLA $250.80 0.00%

Markets

DOW 18,010.68 -115.44 -0.64%
S&P 500 2,107.39 -13.40 -0.63%
NASDAQ 5,070.0260 -27.95 -0.55%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs