AgileThought (NASDAQ: AGIL) stock was up 120% yesterday. AGIL stock then fell 27% after hours yesterday. This is the sort of behaviour we might expect when a stock is entirely divorced from the fundamentals and has become a plaything of the meme stock traders. The problem for us in trying to ride those waves of sentiment and speculation is that of course there’s no guide as to when such bursts of interest are going to happen, not more importantly perhaps when they’re going to stop. They become near random incidences of crowd behaviour, something which is very difficult indeed to trade.
Leaving subjectivity aside and moving to objective factors, AgileThought is almost certainly worth nothing: “Agile Thought (NASDAQ: AGIL) stock is up 53% after falling 17% yesterday. The apparent cause of this rise is that Agile has just gone into Chapter 11. For of course this is the new normal, a stock price goes up when the company claims bankruptcy protection. Everyone knows that’s value additive for the equity, right? Alternatively we might, just ever so gently, suggest that the meme stock traders haven’t quite grasped the balance of how these things work out.” and “Of course this is called a “strategic financial restructuring” because “we’re bust” is such an unlovely phrase. Looking at the balance sheet we don’t see much in the way of assets there. Of the $189 million claimed $130 million seem to be goodwill and intangibles. We’d suggest that those aren’t going to turn into a residual payment to the equity.
Now, sure, we can be wrong about such things. But our expectation is that the equity here is going to go to zero. The company itself is already saying that the final outcome is going to be a private company after the recapitalisation.”
AgileThought stock price from Google Finance
Now, we could be wrong about that, of course we could. But this latest flurry we think has been set off by this: “Tech company AgileThought Inc. received conditional approval from a Delaware bankruptcy judge Thursday to sell its assets for $75 million in a credit bid to stalking horse bidder Blue Torch Finance. . . .” This is something that is mildly interesting, not something that suddenly makes AGIL stock worth anything.
For this was all presaged in the original filing: “A Blue Torch affiliate has agreed to serve as the stalking-horse buyer of substantially all of AgileThought’s assets, subject to higher or better offers. The proposed transaction is subject to court approval, and other customary conditions.” The aim here is not to actually swap those assets for the $75 million. It’s to provide a number to the judge who is considering the Chapter 11 proceedings. That’s what the “stalking horse” means. That is, they’re not going to sell the assets for $75 million then pay that out to stockholders. That wouldn’t cover the debt at issue anyway.
Yes, we agree, meme stock speculation is terribly fun. But it pays to know where the price is goig to end up after all the excitement. We still think AgileThought is going to zero.
