Wednesday, February 17, 2010

Reminder: Grubb & Ellis (GBE) Earnings Tomorrow; Company Previously Released Q4 Results and Gave 2010 Outlook

Since I wrote up Grubb & Ellis (GBE) as a possible short, the company has released its Preliminary Results for Fourth Quarter 2009; Updates Fiscal Year 2010 Outlook.

The company's revenue and EBITDA for the fourth quarter of 2009 fell short of the previous guidance of  revenue of $149 million to $161 million and adjusted EBITDA of $6 million to $10 million. They instead expect to report revenue of approximately $147 million and adjusted EBITDA of approximately $1.0 million.

The company now anticipates 2010 total revenue of $550 million to $575 million and adjusted EBITDA of $10 million to $15 million. The preferred stock has a 12% dividend. That's $10.8 million annually on the $90 million of preferreds, leaving potentially nothing for the equity.

GBE has a market cap of $97 million. I don't think there is any debt besides the preferreds so the enterprise value is around $190 million. That seems far too high for $10 million in EBITDA, reinforcing my suspicion that the equity has no value and the company is really owned by the preferreds.

Also notable is that the preferreds are convertible at $1.65, which is only 13% higher than current levels, and the preferreds constitute a huge "overhang." 

The company will release its fourth quarter earnings before the market opens tomorrow. Management will host a conference call at 10:30 a.m. Eastern Time to review the results. The direct dial-in number for the conference call is 1.800.706.7749 for domestic callers


petertm said...

Where does the preferred trade and under what symbol? Thanks in advance.

CP said...

The problem is that it's not listed.

For some price, it would be for sale, of course, and might make a good hedge.

I am comfortable shorting GBE outright though.