Prescience Point, the respected activist short seller based in Baton Rouge, LA, is sticking to its thesis on major trucking company Celadon Group. The firm recently issued an updated report reiterating its original position that Celadon has survived solely on the generosity of its lenders, whose patience is likely running out. Prescience Point first issued a report on Celadon in April 2017. After a big decline, shares of Celadon rose nearly 300% from their lows on the back of a management replacement and three amendments to its credit agreement from lenders.
From Prescience Point’s update:
In the prevailing 9 months since we released our reports, CGI’s auditor BKD withdrew its audits of CGI’s financial statements; CGI’s top 3 executives were replaced; CGI disclosed an active formal SEC investigation; and, CGI violated its debt covenants and would have already declared bankruptcy if not for the generosity of its lenders who have amended the credit agreement three times since May.
We believe Celadon’s runway is ending and that the equity is worthless.
On Dec. 22, Celadon’s creditors gave the company another 3 months to refinance its term loan but they’ll have to pay a higher interest rate and agree to turn over more collateral in the event of a default. Time will tell and it’ll be interesting to watch this one play out.