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An appeal to Saint Jude (GLAE)

October 5, 2017

It seems I have a special attachment to Saint Jude, the patron saint of lost causes; I am a shareholder of Glassbridge Enterprises (GLAE). This is a company that, on the surface, appears to have little value or chance of survival. Of course, the worst part is that I paid up to become a shareholder.

The first thing to remember about Glassbridge is that in its former life as the company known as Imation it was a net-net for many years…… until suddenly it wasn’t! No, not because the share price rose, but because somehow assets disappeared into thin air, or rather more likely they weren’t there in the first place. In fact, when I bought into GLAE last winter I thought it WAS a net-net as shares appeared to be selling well below book value. Yet, when the transmigration from Imation to Glassbridge happened, pffft!, book value disappeared, and as of June 30th this year book value was $-5.68 a share! This negative book value did factor in a substantial amount of liabilities from discontinued operations ($44 million). Most of this, according to the 2016 10K, was accounts payable that management was disputing. So, since then, what’s happened to these disputed items? Well, last week the uncertainty around some of these liabilities was resolved. A lawsuit brought by CMC against several former Imation entities was settled; $10.025 million of restricted cash assets from discontinued operations will be released to CMC and an additional $1.5 million in cash and $1.5 million in notes will be paid out over the next year. Offsetting this, $21 million of current liabilities from discontinued operations will move off the balance sheet. From what I can see this should improve book value by approximately $8 million ($1.60 per share). Of course non-restricted cash, it seems, will suffer! Note that this still leaves $23 million of liabilities from discontinued operations on the balance sheet, of which $11 million appear to be accruals for “legal fees” (2016 10K) against which there don’t appear to be any segregated current assets. Hmmm… I would love to see a little more color on this in the next 10Q, but I imagine that we will have to wait for the 2017 10K to get more information unless something is resolved in the meantime.

Since the above is primarily accounting shenanigans it doesn’t really help us to know whether there is ANY value left in the Imation carcass or whether some value is currently being created by GLAE operations (asset management). So I’m still waiting to see if I’ve dumped money into a black hole or whether phoenix-like, Glassbridge will rise out of Imation’s ashes. Mr. Market obviously doesn’t think much has been resolved as shares have bumped down over the interim.

Stay tuned and say a prayer to Saint Jude for me.

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