Yet Another Value Podcast - Jeff Moore and Thomas Braziel on their speculative deep value play, $AAMC

Episode Date: September 10, 2021

Jeff Moore and Thomas Braziel discuss their new position in AAMC. AAMC is an illiquid microcap, which significantly increases its risk, but Jeff and Thomas think the company is likely to have a successful settlement of their preferred stock. After settlement, AAMC should have net cash per share in excess of today's share price, and then the company could make a significantly accrettive acquisition.Jeff's original tweet on AAMC: https://twitter.com/ragnarisapirate/status/1433519100152721412?s=20Jeff's YAVP first appearance on THRY: https://youtu.be/196QthwtDMkThomas's first YAVP appearance on GOED: https://youtu.be/eKnnl7AaMMAChapters0:00 Intro1:30 AAMC overview6:40 Some extra AAMC goodies7:25 Why will Luxor settle their prefs?11:40 Bill Erbey's background16:15 Discussing a potential crypto acquisition23:10 How a crypto transaction could rhyme with SPRT28:00 Discussing a fix and flip34:55 Other possible deals36:55 The longshot Erbey / Blackrock lawsuit41:55 AAMC's cash burn43:30 Could AAMC's new execs reinforce the potential upside here?45:00 Closing thoughts

all right hello and welcome to the yet another value podcast i'm your host andrew walker and with me today i'm excited to have two repeat guests my friends jeff more thomas brazil how's it going guys we were not by not saying yes we're doing great at the same time uh well i'm trying to give you the floor normally i start this podcast with my guest responding to me asking how it's going but i'll pass that let me let me start this podcast the other I do every podcast. First, disclaimer, nothing on this podcast is investing in a device. I'll particularly remind everyone of that because we're going to be talking about a relatively e-liquid micro stock. It's a stock that I think all three of us believe is probably a cash shell,

but there is a chance. We'll discuss it. There's a chance that these prefers that we're going to talk about are in the money, and it's a worthless company. So everybody should remember, nothing on here is investing advice. This company in particular, risky microcap. These two guys are wild men. So everybody needs to do their own due diligence. second thing I start this podcast with is a pitch for you to my guess. The good news is this is a repeat appearance for both you. So include your first appearances in the show notes. People can go back and listen to those. They want to hear the full pitch. But you know, I just find you to super sharp investors. Great eye for picking up quirky microcaps and events. And I'm excited you guys can come on

to talk about the new one. So all that at the way, the stock we're going to talk about is Altosource Asset Management. The ticker is AAMC. And Jeff, I, I guess I'll start turning it over to, you know, just broad strokes. Why is AAMC so interesting and why are you guys coming on the podcast to talk about it? Yeah. So basically, the hypothesis, this thing's a cash shell, but selling for less than we think that the cash is going to be worth. There's, and there, I've known about for probably nine months. And there were some really weird preferred stock lawsuits on it that, I mean, who knows how the, the judgment or something could have gone on

that, but they've settled two of the three right now. And kind of as you've already written up, Andrew, like, you know, there's a lot of incentives to settle the last one. The first two settled for, I think it was 12 cents on the dollar. So if the if Luxor, which is kind of a fund in wind down mode, and they've got this investment in a weird side pocket that, frankly, I think, is a pain in the ass for whoever's having to manage it. They just can't want to keep this thing open forever. I think they're incentivized to settle that, probably on similar terms to the others. And if they do that, then you're looking at anywhere from, say, $32 to $35 a share in net cash after you take out the liabilities and stuff. They have been moving investments

that they had made in REITs around and converting those into cash. I think at the end of the quarter, they had about, I think it was like $29 million worth of breed investments. And if you look at just a bunch of the READ ETFs that are out there, those are generally up by 10, 12, 13%. So, So, you know, that may, depending on if they still own them or if they've cashed them, there may be some more cash from that. But, yeah, so, I mean, you know, one of the 40, there's a share of where they owns about 40%, Bill Irby, William Irby, and, you know, he's got interests in a couple of crypto exchanges, and they've done, previously this company had been involved in some real estate

things. And so they have openly come out and said, hey, we are actively exploring, purchasing a fix-and-flip lending business or a crypto business. And, you know, so right now, especially where Thomas and I were buying, you know, we're buying for, you know, less than two-thirds of what we think that cash could probably be or should realistically be. And then you get, so there's your margin of safety is that cash. And then a clean balance sheet at that point. And then you get this kind of free call option for a fix-and-flip lending business that I would compare to potentially sake of capital, which is a little, it's not.

a little anymore. They've done a lot of debt offerings and stuff, but it's a pretty good size fix and flip lending business that I really like. I know that a lot of people hate them, but I've got a background in real estate. I tend to think that those companies are probably a bit better than most outside investors. And then if they go into a crypto business, specifically like the forum, which is an interesting crypto exchange, you know, we can debate the merits of crypto all you want. I kind of think crypto might be bullshit and, you know, Thomas is into it. That's cool. I like that. I mean, it's a lot of stuff that. I mean, it's fake money. I mean, I can't imagine that the powers that be in the

little bit of people out there once a but I mean, if they buy a crypto business in exchange, I think that's a real business, you know, and ultimately the thing could rocket ship because of that. And it certainly has a ticker for that. It's low float. So everybody, this is a quintessential micro crap. I think that's a phrase that Andrew coined. I accidentally coined that on my podcast.

But hey, let me pause you. there. And then I'm going to get Tom Stutz on it. But I just want a high level for everybody is listening because we went through it really quickly. The thesis here is AAMC has 90 million in cash plus equity on their balance sheet. If you just looked on their balance sheet, they've got 150 million in preferreds left outstanding. So you'd say 90 minus 150 is negative 60. That's bad, right? But Jeff, as you were saying, they've already settled some of these preferreds for about 12 cents on the dollar. So the real math here might be 90 minus 150 times 12%, which would get you to about 70 million of net cash and equity.

That would be well over $30 per share versus today's share price is under 30. So is that the high level that you're talking about just for asset value? Yeah, basically. I mean, I've not pulled out my calculator for this conversation and actually calculated that out. I haven't done that in a few days. But yeah, I mean, that's the rough math. Yeah.

And they have settled, like I said, two of them. And basically when you're looking at this, I mean, you should be reading all of the documents, right? But you can basically get the thesis from just reading the last 10Q and the last 28Ks. I mean, there's probably 35 pages of documents you need to read and half of that doesn't even matter. You tweeted this, I don't know, Monday, last Friday, something like that.

I think last Friday. And within six hours, I had read the 28Ks and the 10Q you were talking about. I was like, oh, yeah, I get it. This is pretty simple. As I said in my write-in, I was like, you could just read Jeff's tweet and that's basically the thesis. But Thomas, do you want to add anything? I know there are specific things on this that, on this I want to turn to you, but do you want to add anything to the stuff Jeff and I have talked about so far? Nothing. Nothing so far. No, so Jeff actually did a great

job. I'll let me add two things. One, yes, please. Or two things. One, there's a, there's a very large lawsuit, which, uh, you know, we can debate the merits of the almost, I mean, I think it, I think it is actually a billion. It's been a minute since I've checked on it, but a billion dollar lawsuit against the mortgage originators that they were the mortgages they were servicing. And also, you know, this is kind of like one of the last remaining for public investments that Bill Irby has to potentially, you know, be a Phoenix. And I think those are particularly attractive. So, you know, willing to wheel and deal cash show, you know, and I think that the, I would also

add that if you really read the documents on the E Preferreds, they're incredibly toothless. So there are two things that I really want to get your your thoughts on. So the preference, we did, we did mention that they've settled with, I think it was Wellington and Putnam. They settled for about 12 cents on the dollar. Luxor is the last person on standing, but Luxor is leading a lawsuit against the company. Luxor owns a lot more of the preferreds than Wellington and Putnam. And Luxor, I think you guys said this is side pocketed or part of a winding down fund or something. So Luxor might also be looking at this and saying, well, you know, like, Like, Wellington and Putnam have businesses to manage. This is our last thing. Let's fight until the end and try and maximize value because we're the last kind of person from this becoming a cash sale. So I guess, Thomas, I'll start with you, the preferred. Why do you feel so good that Luxor is going to have to settle around 12 cents on the dollar? I don't think they have to.

Let's take the other argument. Let's say if they don't. So they have to be paid in 2044. It's a long time from now. Yep. a long time so even if you were to assume like i don't even know like eight percent on the cash do you get to the to the payment in 24 i don't know i mean they're i think they're i believe their pick or i think they're bullet maturity even in the market if they try to sell them and wind down

their fund they're probably only worth 20 cents on the dollar maybe 30 cents on the dollar So I'm not saying it's perfect, but, you know, lawsuit plus cash plus, you know, the directors have the obligation to, well, I just say this is the DGCL. It's not really St. Croix law. But on the DGCL, you'd have every right and opportunity to maximize a shareholder value under the business judgment rule. And, you know, maybe that means divining the money out now. Maybe that means doing a deal. You know, there was a very famous European activist. who was sitting on a piece of debt that was due in 10 years. And he said, look, I can go to Monaco and put it on red or black or we can renegotiate this debt piece. What do you want to do? So you have a lot of options. And I think someone on Twitter said it's like a plank chicken with the preferred.

Okay, it is. The difference is the chicken isn't up until 24 and we get to make all the moves. We get to move all the chess pieces between now and 244. I'll shut up now. I guess, no, I guess the one thing I worried about, because you guys know I'm here if you like when two funds settle at 12 cents on the dollar and there's one fund outstanding, you've got to think precedent says 12 cents on the dollar. But I do worry, Luxor looks at this and says, hey, you know, 12 cents on the dollar for us, 150 million, 12 cents on the dollar is just under

$20 million, right? Well, we've got a lawsuit outstanding because part of the press, people can go read the documents themselves, part of the press, they were supposed to be putable back to the company every five years or something. And the company, the reason these have become toothless is the company said, we don't have the funds, we're not going to do it. And a court, I I think pretty much have held that, but Luxor is suing to say that they don't have to. But Luxor could be looking at it and say, well, you settled with everyone else. But now for us, like, you guys are going to burn $2 million in this lawsuit defense if we keep this lawsuit up. So maybe Luxor is looking at it and saying $2 million against a $20 million settlement,

these guys are going to have to take it up, up, up, up, up. And, you know, every $1 million that goes to the press is a lot of money that's coming away from the common. So how would you look at that kind of game theory or chicken on Luxor side? I mean, Chuck So, Chuck Sore, I call it Chuck Soor. Chuck Soor is basically a liquidating hedge fund. This is a side pocket investment. It's the last remaining investment. I mean, Luxor itself has its own regulatory issues.

That's why it liquidated. I don't want to like, throw too many stones. But like, this is not exactly people that have the cleanest hands. I don't know if they had some, if they had some relationship with Irvy, and that's why they did this deal. I doubt it. I think they were probably just not doing any work. work and they weren't doing duty. And it was a different time.

You know, Bill Irby wasn't as quite in, I would say, now he's at redemption mode. There was a time when he was untouchable pariah, pariah mode. So this was pre, pre-redemption, pre-pariah Bill Irby. And, you know, Bill Irby was like on the cover of like, I don't even know, like Fortune magazine and shit like that. Like people were talking about Bill Irby. Like he was like God's gift to the mortgage industry. That was my next question.

So either Jeff or Thomas, who ever want to talk about, can we just quickly go into Bill Irby's background because as you said he he is like you know on the heels of the financial crisis he was a rising star and then everything fell apart i mean this man has road rocket ships up to the moon and down to the ground so can either you give me a little bit more background on bill erby i mean i can do it jeff can you do do you know enough of his background honestly no okay i'll get some but this is only from like as an outsider you know i had people calling you about bill irby talking me about the spinoffs and he was doing there was like ATLS and there was like what is the other one it was ATLS there was AAMC there was there was like

a million spinoffs I never seen so many damn spin off it was all coming out of aquin if I remember correctly is that right yeah everybody was like oh this guy's a genius all these spinoffs everybody was kind of liking it to like Howard Jonas I feel like it was like everything's like what is Howard Jones is original entity IDT IDT is the original Howard Jonas and that yeah there's been some crazy stories with that one as well yeah and like Like, they were like, oh, this is like, this was going to be like straight path and this one's going to be like this. I was like, oh, wow, this is getting exciting.

And I think when it was either AAMC or A-TLS, one of the ones that was doing this software, I can't remember, it spun off in 20 and it went to like 2000. I mean, it was like the greatest spinoff of all time. And now it's at like zero or something. It's not a zero. But so, and, you know, everyone thought someone was giving me a little vignette of of Irby recently and they said you know everyone thought this guy was all about technology but really like he was just like a no hacksaw man like he would come in and just like cut costs like crazy

and tell you like I know how much it costs to run this operation and half of you guys are needed and half of you aren't so why don't you guys just decided a group who's needed and it is not or I'll make the choices myself and and that's how he would run the show so he was very conscious of costs and it makes sense because there aren't that many efficiencies in the world and this guy was, you know, acquiring businesses. So it's not like he was like, you know, coming up a new product or something. And it makes sense. And so that's what I know of Bill Irby. And then, you know, I remember he was on the cover of like all kind of magazines and well regarded in the mortgage industry. And then he famously sort of moved to the Virgin Islands. Everybody thought

he was a genius because he was going to say all this taxes and he was doing for shareholders and rah, right, rah, wasn't this great. He was so shareholder friendly that he was going to move himself across the world to save money for taxes. And, you know, I'll stop. there. I don't even know what happened. I know some of the indictment stuff or not indictment. I shouldn't say that, but the legal issues. The only thing I could add there is, I think that was all right. You know, a lot of the fortune was built on the heels of the financial crisis, mortgage servicing rights and all that. And there was lots of, there were lots of lawsuits, investigation. I don't know. But eventually there was a settlement with NYDFS or whatever that was basically, hey, you know, yes, they were the low-cost mortgage

provider, but it's because they didn't invest into anything, right? Like their systems were so bad. There were lots of that allegations, and I believe this is going to be important. So with Irby, I think that my thesis, the piece I like is this man, yes, he went way up, he went way down, but now you're buying a cash shell, and he has shown the ability before it to capture the kind of stock markets, as you called it, the sizzle versus the steak. So if you could do something that gets a lot of sizzle here and you're buying below cash, well, you know, that could be really great. One of the key questions I have, so I think as part of the settlement with the New York

financial services or whatever. I think he's precluded from joining a board or serving as an executive member as a public company. And he owns almost 50% of the stock, but he's not on the board. He doesn't have any management positions here. So am I thinking about that right? And if that's right, how involved is he actually going to be in how AAMC deploys this cash? I mean, I think they still need his vote because he's such a large shareholder to be able to get anything done that needs to require a shareholder resolution. But that's, correct. My understanding is he's not allowed to start one on board or have any executive capacity of the public company or something like that. Jeff, do you have anything there or anything?

No, I mean, you can't ignore a large shareholder like that. Yeah. And the facts, the fact that the two of the businesses they talked about targeting were fix and flip real estate, which remember Irby made his kind of fortune with mortgage servicing rights and crypto, which Irby has done some podcast where he says, Jeff, you mentioned the crypto investments he has. He's a crypto bull. I think that is all you need to know that he's kind of got his thumbs on the scale of where this cash is going to be directed. Let's see. Let's turn to where the cash is going to be directed. So I think what you got, you guys, me, we're bullish on is if they make the right acquisition here, small float, things could get pretty crazy.

We can talk about precedence here, but there's two routes it seems they'll go, either fix and flip or crypto or maybe mortgage servicing. but, you know, I think the one we'd all be super excited for is crypto. So either, Thomas, I know you're the Crypto Bull. People were emailing me today saying, hey, Thomas did a podcast saying he's got an $80 basis in Bitcoin. Bitcoin's a lot more than $80. But, you know, either of you can start. If they did crypto, what do you think the targets are?

What do you think the deal would look like all that type of stuff? I mean, since he's a financial services guy, I think he's going to lean more towards crypto financial services, meaning like exchanges, maybe wallet provider, or something that's got it like fixed income, but it's got like actual cash flow. I think he's going to be less inclined to do deals where, you know, in VC land, where gray product, very interesting potential business model,

but how do we monetize it? I feel like it'll probably stay away from that kind of stuff. That would be my two cents on that. I mean, I know a lot of the, I see a lot of the deal flow in the sort of crypto space. So I can imagine the stuff he's being shown. some stuff might have a crypto flavor, but not be crypto. So for instance, like recently I was talking with a company that is really a CFD provider,

but they have a crypto element. And they, they, I think this CFD is like, can you, can you, can you, uh, break up that acronym? I think, I think they're just contract difference providers. It's not really relevant in the States, but in the UK is quite relevant. And I have a thought here. And then, and then Jeff, I want to hear on the fix and flip stuff because I'm not opposed with this.

I mean, those are great businesses, too. But just to finish on crypto, CFD contract is difference. It's really a European thing. These are companies that allow people to basically kind of like a Robin Hood. You know, they allow people to basically punt around with their capital. And people think, oh, these good businesses, it's like, okay, maybe socially we can talk about whether these are great businesses.

But economically, these are pretty decent businesses, allowing people to basically gamble in financial markets, you know, pinging on a few, I guess, you know, seven deadly sins is not a bad thing. And they have pretty low valuations compared to their crypto peers. So a lot of them are lucky to go public via SPAC or things like that. So I can I can see a transaction where there's some CFT provider, you know, it's, it's the St. Croix, right, that they're incorporated? Yeah, I think that's right. Even if it was listed in the States, it wouldn't be a problem because you would have a sub that's foreign. But so you could buy something it like a decent multiple and then you could basically post like oh look at sofi look what

sofi's trades for you know like look at what look at what this crypto company do look at robin hood trades you know and so you can do that kind of like uh spack math i'll call it spack math because it's not real math it's spack math we were talking before you know i agree with you there here's the other thing before you go because of some of the people that are on the board i think it's possible that things that wouldn't necessarily fly for a delaware corporation might work for this St. Croix Corporation because of some very influential people that are on the board. But I'll finish there. Could you give me an example of something that wouldn't fly for a normal Delaware corporation

that you think kind of might be doable here? Just companies that are worried about regulatory oversight from like a Delaware court or a New York court, especially like a New York court. So in New York Corporation, you got FinC and things like that that can be incredibly restrictive. I mean, the SEC filed a lawsuit against Ripple. It was like one of the top 10 projects in crypto and they filed a lawsuit saying this is security. And yet the SEC has come out and said that crypto is not a security. And it's like, oh, okay, which one is it? Now, when you read the lawsuit, it's pretty damning. I mean,

what went on in terms of the sales. So I won't unpack that. But let's just say that there's a lot of regulatory uncertainty where someone think like, hmm, wouldn't it be nice to have a little bit of cover with a, you know, the governor of St. Croix changing the law so that I know that I have some, what's the phrase people use? Like, I don't know. some safe harbors get a u.s cost get a u.s. equity cost of capital but without the u.s. regulatory risk that makes it exactly thomas less thing on crypto so it doesn't seem to me like you think who knows right we're third party's speculating but it doesn't seem like you think like a minor is the play here or something you think it's more of a real business you could no well miners have

real cash flow so i mean because you can basically hedge out the you can basically hedge out the bitcoin you can go in the futures market i'm not opposed to it a minor. I don't think you'd have that same benefit of U.S. regulatory oversight. That's not really normally a problem. But yeah, I'm not opposed to a minor. Minor exchanges. Anything that produces cash flow that's not necessarily something too strange. Yeah. Let me flip it over to Jeff. Jeff, I want to do flip it over. Jeff, I want to talk fix and flip in a second, but I just want to stay on the crypto thing. When you were kind of doing the overview, you mentioned Irby had a position in a crypto company currently. Can you dive into that a little bit? Yeah, it's the forum. He was like

an angel investor in it. You can just Google William Irby crypto exchange and it'll pop up an article on that where he was talking about it. Basically what they do is, well, I mean, really it's kind of like what's happening in Central America, right? It enables businesses to take crypto payments from their customers, right? Which I find that to be pretty fascinating. So kind of like square for crypto? Yeah. Yeah. So, I mean, and there can be a real future there. I mean, it doesn't even, that's a thing. Like, it doesn't even have to get a huge market share, really. I mean, you know, they could, you know, the local ghetto market down the street from my house, you know, then to be able to say crypto, I think that'd be fascinating, you know. And if they get,

you know, a couple thousand of those, you could get some really interesting stuff happening. And, you know, then you get economies of scale and all that other stuff. I just think it's fascinating. And there's really not a whole lot of risk for them, right? Because, I mean, they can hedge things out. I mean, it's just an exchange. So, and then there are tetrarian things I'm sure they can get into. But there's some interesting articles on and management of it seems pretty good. And it just seems, you know, really, if you've got an investment tied up in that, like, why wouldn't you want to get that into a public entity, you know? Especially one that you control. You know, I think one of the things as value investors, right?

And one of the issues I've always had with SPACs is, hey, here's a SPAC with 10 dollars per share. They're going to go buy something, right? And they're going to take $200 million in trust. They're going to buy something for $200 million. And then if you're betting on going up, you're basically saying, hey, whoever sold this sold way too low, right? Like, we're basically betting on a seller selling way too low. So I think one of the first pushbacks would be, let's say that you go buy a crypto company, right? A crypto company is going to say, Bill Irby, you've got $70 million on AAMC's balance sheet. We'll take your $70 million. We'll go public through you, whatever the structure looks like, right? And then people are going to say,

well, you know, why did they sell too cheaply? Is the market going to be excited about this? And the reason I like this is you're buying below cash. And I think there are several recent precedents that say, yes, the market might get really excited about a crypto deal. So Jeff, I'll turn to you, but Thomas, you feel free. Can you give me some of the precedents or one precedent for something that the market's gotten really excited about that's done a crypto deal? Well, support.com. And I want to say, I was brilliant because I found this before anyone, right? I was buying it. And April and March of last year for like a dollar, a share was trading for, you know, two thirds in that cash.

And I thought I was just a fucking genius because I, you know, I got a 30% return on it or something when it traded up to net cash. And then, you know, don't think about it. It comes across my fee lead that they're doing a crypto deal. And I'm like, oh, well, this is kind of dumb, you know, whatever. And I bought them out of it now. And then it turns out Thomas was buying into it after the crypto deal and stuff and did okay with it.

And then I think, I don't know, would you sell it at, Thomas? You know, I didn't play it well at all. I bought it in $250 and I sold it at like $3. So I did not play it well at all. It's a long story. I was doing other stuff. You guys might know. I was working on other stuff. But I'm super long Bitcoin. So like our simple long crypto, so I was trying to be prudent to be like, I don't, even though I love the sizzle, I don't need more crypto exposure. So it was more I'm trying to be prudent. Just to give everyone some background. Support.com. As Jeff said, this was a well-known cash shell among all value investors for years and years and years.

And they had this crappy support business, support.com. There was some weird litigation. I can't remember it. I think they were doing care for one of like Circuit City or something. I can't remember. But Comcast as well, but he traded below cash. We were like, this is a crappy business. In March, they announced the deal to buy a crypto miner with all that cash.

It went from 250 to three. And then the deal went through a couple weeks ago and the stocks gone from, you know, for a while, as I like to say, it still started with the three. There was just an extra digit behind it, right? So it was a 10x. No, no, they announced a deal. It went from, it went from $2 to $8. And it trickled down to like three to two, three bucks.

And now it's going on. And then it went. Once the deal kind of closed and they got options on it and everything, it went, Wall Street, that's parabolic. But that's one of the things I like about A&C, right? They announce a crypto deal. You're buying below cash. You've got the shot that it turns into support.com.

So I like it. It's like a value investor's way to play speculation. But, Jeff, anything else on that? I love the ticker symbol. People actually confuse it with AMC on some of their threads, which, I mean, I don't guess that's a good thing or not. I kind of chuckle every time I see that, though. Hey, it's happened in the stock market several times recently, right?

For a day or two, people get the, you know, they think TLSA is Tesla and TLSA goes up 100% for a day or two. So you've got, that's a weird, that's a weird call option to be buying. as value investor, but it's possible. What about, but Jeff, go ahead and Tomas. Since you said that one point,

I think it's important, which is like so much of what we're trying to do is like find risk averse ways to make, you know, high returns on rest of capital. And part of that is, you know, you know,

like you just said, like there's steak, which is just like, there's like meat and there's some meat on that bone. And then there's just like, okay, yeah, they could do a pretty,

this guy like really wants to do a deal. And he has a lot of capital. And he's not going to anything stupid. but I don't hopefully but but but it's just even like green first like you think Mike Mitchell was trying to like shoot the lights out and go for a 10x like no they did a good deal and then he assessed the did he and he was like hmm that's actually a pretty good deal he bought it as a cash shell did a good deal and then he was like hmm that's really interesting and they're like we're working on something else and they're not selling the deal and he's like

holy croly you just made me very wealthy so there's something there's something to me said for like you know I think it's like it's back it's back to what's his name I I don't think it was named now, but, you know, to Honda Betts, you know, you're sort of like high uncertainty, low risk. Yeah, it's like high, high uncertainty, low risk. To me, this is like very high uncertainty and very low risk. It just is. That doesn't mean, like, this is a small stock, so everyone should do their own work and also, like,

you know, buy over time because he doesn't have to do a deal tomorrow. That's the other thing. The stocks run a little bit recently. He doesn't do a deal tomorrow. He has years to do a deal. But that's what I like. I like high and uncertainty, low risk. Well, you know, we focus on crypto because I think crypto is the thing that could bring the most sizzle and sexiness to this. But there, Irby's got a history with financial services. They specifically called out fix and flip as a as a place they might invest. So Jeff, I know you've got experience in the space. Could you tell me, what is a fix and flip company? And why, why do you think it would be kind of attractive if they took that public instead or if that's where the deal ultimately landed? Yeah. So fix and flip is, you know,

You got an investor and a real estate investor, right, and they find a junk piece of property that, you know, maybe they want to do a really quick closing on, but they need a lot of cash for it, and, you know, maybe they don't have time to go to a bank for it. So they go and say, hey, I need $500,000 to buy this house. It's probably worth $6.50 right now. And then they go to the lender, say, hey, you know, I need to do this deal. And they go, okay, we'll do, you know, we'll do this because we think we've got to a margin of safety on it. They give them funding for it. Sometimes they give them fix up money.

These are generally pretty short-term loans that are high interest. And, you know, a lot of times there's a lack of due diligence on the property, too, because I mean, you know, sometimes not credit worthy people borrowing. But a lot of times, you know, you have credit worthy people doing the borrowing. It's just they need to close like now to make the deal done. I mean, I can't tell you how many real estate deals I've done where like my offer was, I've offered less money. It's just I was able to close the deal like that instead of having a wait. a month and a half for a bank to go through underwriting and, you know, cross all their checkboxes and stuff.

I can dream, but, you know, as somebody who doesn't do a lot of real estate, it does strike me as I get, you know, you can have four sellers in the stock market where there's a margin call or something, but what's a reason that a seller in real estate where generally there aren't margin calls, you know, the loans are pretty long? What's a reason a seller would need to sell today versus a month from now for a higher price or something? Okay. Well, I mean, there's some cycle.

psychological study. I can't remember what they were doing where it's like, hey, I'll give you $50 today or I'll give you $51 tomorrow. Which one would you rather have? Everyone always says $50 today. Now, if you say, hey, a year from now, I'll give you $50. And then a year and a day from now, I'll give you 51. People then are willing to wait that extra day because they've already waiting for a year. And I think that that's kind of similar because a lot of times, you know, you have people who have inherited property or maybe code enforcement is after them over stuff and they're accruing fines by the day or they're behind on the mortgage. A lot of times there's just a psychological thing where it's like,

I've got to get rid of this right now. I need cash to, you know, go move or, you know, just, you know, settle in a state or something like that. So, you know, and, you know, with the offers we put in, if it's all cash versus something that's contingent financing, it's like, okay, there's an unknown to that. So it may not be that, like, I'm closing two weeks quicker than the other person. It's also that other unknown of, well, yeah, he's closing two weeks sooner.

I get my money a little bit more. but there is some risk that maybe the appraisal doesn't come through on this property for the other buyer that's offering me money, right? Because like whenever I'm buying stuff, it's like, man, I just did my walkthrough. I'm not even doing an inspection. As long as this house is still standing the day, and in roughly the same condition on the day of closing, I'm going to show up and I'm going to buy it. By the way, the only other thing I need is a clear title. So I mean, I think that that's kind of the incentive set up for a lot of these things. Yeah. So fix and flip, you know, it strikes me as a business. It's

It strikes me as a pretty good business, probably higher risk, but pretty high returns if you know what you're doing. But one of the things, this company, net of the preferreds, we've talked about assuming the preferred stick the haircut, $70 million in cash. Are there fix and flip businesses worth $70 million? Because it strikes me as more business where I'd be like, hey, Jeff really knows what he's doing with real estate. Him and I go into business together. I give him a bunch of cash. But, you know, Jeff is really the intellectual capital. Are there business where you could go out and buy a fix-and-flip business for $70 million?

Does that make sense? Yeah. I mean, you can definitely see some things. Sycambe Capital is an example, right? They're public. You know, they're only nice. S-A-C-H is the ticker for those of people who are kind of playing along. Yeah, and their market cap right now is $142.5 million.

And let's pull their balance sheet real quick. I mean, they're doing over $13 million a year in revenue. They're trailing 12 months is almost 14, it looks like. And they've got total assets as of the end of last year of $226 million. It's been a while since I've looked at them. I'm pretty sure they've done some more debt offerings since them. So that number may be going up. I mean, you can really scale those businesses pretty quickly if you know what you're doing.

And Sakeham is actually a very well-run business. If you're looking for something to kind of teach you about the business, you should go check out their presentations. they're run by a guy who's an accountant. He's really sharp and he's really motivated by kind of their interesting reach structure for dividends. Is that the one where him and his brother had some weird lawsuit? I think you and I were talking about him. We're like, oh, there's going to be some issues at the Thanksgiving dinner table there. Yeah. I'm not totally certain what happened with that, but it seems like one of them wanted out. And, you know, there was some weird stuff.

That seems to be all taken care of. I mean, right now that thing's yielding. I want to say just under 10% and in general that used to be called was that used to be called Manhattan Bridge? No,

that's a separate one actually. They're smaller. And the funny thing is Sakem actually has a much better debt stack than Manhattan Bridge did.

Manhattan Bridge, like the way their loans were written because they were kind of doing these sweeps with banks and stuff and like if the banks that were kind of

lending them money didn't like the loans, they could just go into Manhattan's accounts and just take them. Yeah. The Sakem actually has baby bonds that they issued. And that was one of the things, that's how I found out about him, is one of my buddies.

When we thought COVID was going to kill all of us and we were sanitizing our Amazon packages, we were looking at those baby bonds. And like I was buying them for like, I think $12 or $13 and they had a 25 face. So like, I yielding a shirty on that was like 30% or something stupid. I remember you sent that to me. And I was like, hey, Jeff, that looks pretty interesting. But these guys, they've got a bunch of shorts earn loads. and they're buying houses. And this is like peak early April 2020. And I was like,

everything's down 50%. They're bankrupt. Their market is bankrupt. But you know, things worked out. But the AMC, like if you look at the market cap of Manhattan Bridge Capital, they could actually buy Manhattan Bridge Capital right now. I mean, Manhattan, well, I don't think the guy would sell it for this. But the market cap is, call it $74 million, right? So that's, that's compelling. And it's got just under 8% yield. So that's, That's compelling, even from where we own stock, I think. Jeff, we mentioned fix and flip as a possibility. We mentioned crypto as a possibility for them to buy.

Is there anything else? I think they published one other thing in their 10-Q, but is there anything else just based on your understanding of the company? I know you guys have talked to other. I'm insulted you talk to other people than me about this, but other people you've talked about your diligence around Irby. Is there anything else you think they could go with that they would buy that, hey, you'd be excited about, the market might get excited about,

or just something you think they're likely to acquire? no Jeff has given me a shrugs emoji Thomas what about you anything else worthwhile talking about as I think I think anything in financial services Bill Irby's going to feel comfortable with and I say I say he's going to feel comfortable with the board's going to you know at the end of the day like I'm sure it's going to be there's been oops deal like oh did I freeze on you you you cut out for one second go I think anything in financial services are comfortable with. And just on the fix and flip, like, you also forget that they're like other people than the equity holder. Like if a bank

owns a property and they're in the money for $145 million, they're selling, or $145,000, they're selling for $160,000. Who the hell do they care? Or what do they care? They don't care that's the guy buying it. They just want their money today. Yep. Like, what do they care of the equity holder is going to get shortchanged $10,000 or $20,000? No, I hear you. I guess my worry. you know, my original worry with fix and flip, it's just, it's very, very intellectually capital intensive and kind of relationship driven. It's the person who's doing the fix and flip where the asset is. And I just always worry about those because it also seems like very much a cost of capital cash driven business where there's not a lot differentiating. It is. No, I would agree.

I think there's some guys have come up ways with making marketplaces or to lower their cost of capital, meaning they like they have the baby bonds or they have a marketplace, you know, where they're going to, like, resell it. But I think for the most part, like, it's a yield business, like, you know, just like a bank or something. Sticking with you, Thomas, one thing, I mean, I've written it off at zero. I think most of us were off at zero, but it could get real substantial is Irby is bringing a lawsuit.

I think it's against BlackRock. And the way I understand. And Pimpco. The way I understand it, you know, he's seeking billions. I think AAMC would split. Irby is bringing the lawsuit, and I believe he's paying for it, but I think AAMC would split the proceeds, but I can't see I'm super updated on it.

I kind of described it zero, but it could be substantial. So could you give us a little background there and how that would play out, how big it could be to AAMC if we got lucky and we won or something? I mean, do you want me to give my real honest opinion? Yeah, yeah, why not? Thomas is in Italy and he's having some drinks with this podcast, so he can get real honest with us. Okay, so they bought it in, I think they brought it, they're bringing in Virginia or they're bringing in St. Croix? I think they brought it in St. Croix. I heard the reason they brought it down there was because they wanted a judge to give them a judgment. They were like hoping for a kangaroo court judgment, whatever. You know, you can say what you will of that. I think the hardest part, you know, in all, and just to be real is, you know, who's the offended party and like, you know, okay, so every tort has two parts. Like when you bring a lawsuit, it's a tort, right?

Right. So what's the tort? The tort is, you know, was there liability and what were the damages? Okay, what's their liability? Okay, maybe they'll find tons of smoking guns and there's liability. But the question is like, how was AAMC actually damaged by this? I mean, maybe you could say. Can you back up, Thomas? Because we talked about how are they damaged and who's the offended party, but we haven't said what the lawsuit is for yet. Oh, I mean, again, it's been a while since I've actually looked at the lawsuit, but my, my, my, if I remember the lawsuit correctly, it's basically for selling them mortgages and I assume mortgage service rights to go along with that that were, you know, bad.

There was no due diligence done and, you know, fraudulent. You know, these loans were basically fraudulent loans. I think the tough part for a servicer is going to be, you know, isn't the investor really the offend party, you know, not the service company. Yeah, but maybe they can make the argument that they're part of the daisy chain and that, you know, they lost all of the income from the rights and from the servicing because these were all fraudulent loans, which they had in good faith hired people and set up businesses that they could have profited from if these weren't fraudulent mortgages.

I definitely think it's got some sizzle. I wouldn't pay a lot for it or anything for it. But it's possible you can get a judgment for a few hundred million bucks. I mean, it's really not out of the cards. Again, I wouldn't pay anything for it. You know what these things? You know, there's a famous thing you'll hear. If you have a lot of lawyers as friends, I'll say things like,

that's a fact-intensive question. And what they're really meaning is nobody really knows until you start seeing the email chains. and you start seeing like the depositions and what people knew and when they knew it and how they knew it and what they really you know so these are very fact-intensive questions you know you can be surprised and the face value of the lawsuit i believe the the lawsuit the there are seeking seeking 10 figures and damages right so if aAMC splits half of that and you know even if they settle for pennies on the dollar of 10 figures there's two billion share is outstanding. If AMC gets half of it, let's say it's 100 million settlement,

AMC gets half of it. Cool. We're talking more than it's $20 for sharing cash. So super long shot. I would not advise anyone to bet on this coming out, but it's always nice to have a long shot or two in your net cash shell that you're buying, right? With tax assets that would cover a lot of those proceeds that they got them. Jeff. What's their tax asset position? Do you know? I believe it's, they have NOLs. I can't remember off the top of my head how much. And I also believe they have tax advantages because they are a Virgin Islands company. So I think they pay a lot less there too, which is also, you know, crypto could have some pretty bad tax ramifications. Fix and flip is a cash heavy business, short term gains. So I do think the tax assets could get pretty

interesting there. But off the top of my head, I can't remember the exact position. Jeff, did you want to add anything on either their tax position or the lawsuit that we're talking about? looks like they've got 285 and well federal NOLs maybe I don't know I don't know how many zeros are on this

balance that they're not reporting it says 285 someplace though so you know not buying it for the NOLs but you know that's thrown up for free so last last question I want to do

and then I'll turn it over to you guys for closing thoughts you know, the tons of risks here. Everyone should remember, not investing advice. We're talking about a net shell. If the preferred to have teeth, it's a zero. You know, obviously, Irby has some hair on him. You've got risk there. Acquisitions are risky.

So everybody should remember that. But the one thing I look at is the cash burn, right? This is a cash shell. And if your cash burn is zero, that's great. You're buying under cash and the cash is always there. Cash burn here actually pretty high. A lot of that, I think, is related to the preferred lawsuits and all that, which, again, that's why I'm a little bit worried about the,

the lawsuits dragging on, but can you guys just talk to me about how you look at the cash and the cash burn and everything here? Well, look at the incentives, right? I mean, for, if they're in a lawsuit with the preferred shareholders, they're kind of wanting to make the company look worse than it is. So, you know, that's kind of the point. I think that they'll probably slow down. Yeah, that's a good point. Thomas, anything else to add there? I mean, I just actually heard our investment thesis by saying that because we just kind of telegraphed part of that to like the attorneys for Alex or I don't know oh come on yeah I am with you but look everybody it would be tough for them to come be like these three guys on the podcast said this is what

you're trying to do because every company chose to do that you know my worry here is I think in Q2 they burned about two million dollars of cash from remembering correctly two million shares outstanding so that's a dollar per share in cash you do that a couple quarters in a row that adds up real quickly from you know we're buying under 30 and they've got a little bit over 30 in cash So, Thomas, anything to add on the cashburn? Last thing here, and I'm going to tip my cap to myself here, I think one thing that was underreported here is they hired two new executives in the past three months. And these are real guys, right? They hired a new CFO, who if I remember correctly was the controller at Diamond Resorts, which was a $4 billion timeshare company that just did a huge deal sold to HGV, Hilton Grand Vacations.

So he's a real guy. He just came off a successful sale. And then they hired a new, I think it's legal counsel who was a high up lawyer at Goldman. So it's not like, as I've said, it's not like to hire Jeff Bezos and Steve Jobs, but they hired real people. And I was kind of looking at it as this is a $55 million market cap company, cash shell that would be worth zero if the perverts are here. Like the fact that they could hire real executives speaks to A, the executives probably got comfortable that this isn't going to file for bankruptcy or be worthless because of the prefs in the next six months or something. And B, they're not hiring, but I don't think they

join because they want to join a cash shell. I think they join because they talk to Irby. And Irby says, hey, here's the acquisitions we're working on. We're going to build something really sexy or getting on the ground floor of a rocket ship. I mean, I'm pitching my own thesis a little bit and pitching a little bit of speculation. But do you guys see that differently? Do you you all want to just agree with me outright? Like, how are you thinking about that? I think that's very well put, Andrew. Yeah. Well, that's what I like to hear.

Let's, let's run in unison. Kumbaya, my stock, kumbaya. We've been running for about an hour. It's a super interesting thesis, but it's cash shell, right? So you can speculate, but beyond talking the prefers, talking the incentives and everything, which I think we hit on them all, there's not a ton of talk about. But, Jeff, I'll start with you. Is there anything you think we should hit harder, anything we didn't hit that you're kind of wanting

to get off before we wrap this up? Nope. Perfect. Thomas, what about you? Anything else we should have hit? Anything we shouldn't hit? No, buy it over time, guys. Like, there's not a deal like right now.

Like, just if you're interested in the story, do your due diligence and like take your time. Like, this isn't going anywhere. That's great. So just before we wrap up, I'll remind all listeners, microcap, pretty liquid, quite risky. So not investing in advice. If you decide this fits your risk. profile, you've got to use limit orders on E-liquid microcaps. So just remember both of that. But nothing on here was investing advice. Jeff, it was great to have you on for a repeat podcast. Thomas, you did my

podcast maybe two or three weeks ago. I've got to listen to the Bill Brewster podcast that just dropped. And then you did this podcast today. I mean, you are just a podcast machine right now. But guys, it was great talking to both of you. I love this thesis. Again, I saw it, dropped everything. Researched in six hours. It got a little bit of a position. So I appreciate you guys coming on and sharing this with us and yeah if you guys ready we'll wrap it up there yeah thanks very much Andrew looking forward to having you guys on for the next one talk to you all soon