ASCMA, aka Ascent, aka Brinks Home Security, aka MONI, aka Monitronics is being sued by a group of their lenders who allege:
As of June 30, 2018, MONI itself is hopelessly insolvent with only $2.1 million of cash and cash equivalents on hand. MONI, a business that loses more money every year, that has limited cash, and that has a negative book equity, owes approximately $1,731,235,000 to creditors.
And the stock market has punished ASCMA even further since the suit, down another 50% in the past week:
What is going on? In this note, we examine:
Who ** ***** ****** *** ***
****** ******* ******* ********* ** * ***** ** ****** noteholders***** ***** **** *** ** ****. The *****, ******** ******* ** ******'* purchase ** *********** *************, ******, ***** other ******, ****** ** ***** ** breach ********* **** ** ********** ** make ******** ** $*** ******* ** pay *** **** ** ********** ********** Monitronics'/Brinks **** ********'* *****. **** **** would ** ******* ** ****** *** dying *******,*** ********* *********** ***** ***** ****** ****** ** pay *** *** **********' ***** **** they **** *** ** ****.
*******, ***** ******* ***** *** ******** payment ** * ********* ******* ** stave *** *** **********:
*** ********** ** ** *** ** to *** **** *** ***** **** scenario *** **** ***** ** ****** in *** ********:
*** ********** ***:
********** *** *** ******* *** *** executives.
*** ********** *** ****** ** **** the **** ********.
98% ***** ****
** ***** **** ** ******** ****, the ******* *** ******* ** $**.**/*****, plunging **% ** *** **** * years:
****** *** ***** ******** ******** **** attrition *** *** **** ** ******** an *******. *** *******, ***** *** filed ** *** *** ** ****** 2018 ******* ******** *** ******** ***** price. *** ********* **. ****** ***** out *** *******'* "********" ********* ********:
ADT ** ******
******'* ****** *** ** ~$** *******, which ** ********** **** ******** ** others ** *** *****.
******* **** ** ***'* $* *******.
********* **** *********' ***** ** ******* shows *** *** ** * ********* Ascent ** **. *** ****** ** ~1.5x *** ******* (******* *** *** ongoing ******), ***** ****** ** ******* at * ****** ************ *.*** ** its *******.
*** ********* **. ****** ****** *** **** the ********* ******** **** **** ****** worse *** ***** ** ****:
Arecont **********
** ** **** ******* **** ****** in **** *** *** **** ******* value *********** *** **** ** **** ******** with */** *** ********* ****** (******* **** ******* ~$** million ** ****** ~$*** *******).
********, * **** ** *** *******'* 2017 **-* ***** *** ****** *** high ****:
Bankruptcy ****
****** ****** ** $*** ******* *** debt ** $*.** ******* ****** **** at **** ** **********, *** **** argues:
RMR ********* ** ~*.**
***** ******** ******* *** ********* ** generally ***** ** *** *** *****, Ascent's ** **** ~*.**. ***** **** sounds **********, ** ** * ******** of *** *******'* ********** *** ****** valuation *** ******* **** **** ********. While *** ******* *** *** ** the ~$** ******* *****, *** ********* is **** * ******** ** * month's ***.
** ****** *** **** * *** RMR *********, ** ***** ** ***** ~$1.2 ******* ***** ** **** ** used ** ** ***** * ***** ago.
Future *** ****** *** ****/******
****** ****** *********** ************* ** **** for $*.* *******. ** **** ****, ********** ** both ********* **** **********, **** *********** saying ****** ***** ***** "*********":
*** *** ****, ****** ******** *********** would ******* ****** ******:
****** * ****** ***** *** ******* is *** ** ******.
****** ** ***** ** **** * difficult **** ** ******* **** *** high **** ****, ***** *** ****** in *** ******'* ****** * ***** loss, ******* ******* *** (**** *** valued) ****** ** ******* ****** **** bankruptcy.
Dan, good reporting!
One thing we are still trying to understand is how much of Ascent / MONI / BHS is their own poor execution vs a general / structural issue for alarm monitoring companies, many of which are very highly leveraged. Anyone with thoughts on that, please comment or email dan@ipvm.com
Thank you, John! Yes, please, readers, feel free to drop me a line if you have experience in the area of highly leveraged monitoring companies.
We believe the current generation of ASCMA/Moni/ BHS management is highly skilled and very capable marketing management… however they do not need skilled, highly paid, marketing and sales managers….. way too late. We believe they are at the “bottom of the hole and still digging”. They now need highly skilled legal, financial and strategic guidance. Note, I am not a skilled legal and financial guy, but know the some of the basics from my 50 years in the industry, including national management and much M&A. So interpret my observations accordingly.
The Moni business model is really quite simple… remote monitoring and billing/collection of alarm contracts purchased in bulk from hundreds of “system originators”, aka third party dealers that also do the sales, installation, and service. Moni has very little or no infrastructure beyond the Dallas headquarters. They are seeing success with their “home automation”, but also too little too late. Their critical core base of RMR, contracted Recurring Monthly Revenue, about 700,000 systems, are the outdated and deceptive property protection “deterrent” systems (low priority or no police emergency response when Moni call for help). Deterrent systems, are experiencing very high and sustained attrition all across the industry, including ADT, for obvious reasons….big surprise when customers learn of a big hole in their security system. This attrition is very costly to replace.
ADT is unlike Moni, with major residential and commercial infrastructure (costs) throughout the country, for the complete circle of sales, installation, service, billing/collection, legal, financial, M&A, including some dealers, etc, etc... But still anchored with millions of low priority “deterrent” system, that can expect the same high and destructive attrition, holding down market value.
The “private security industry” is growing very fast throughout the globe. It is still very fragmented in the US (15,000 independent dealers; 2500 sources remote monitoring) with dozens of business models, most of which are outdated. Lots of the current players will survive and be rewarded when they recognize the status-quo will not survive. Several of the new business models will get traction and do very well… maybe reason new guys like Amazon and Google are attracted.
Source: Lee Jones; Support Services Group
And today they became a penny stock:
Up 19 cents today, or for them nearly 22%:
Someone evidently thinks there is some value left but the market valuation is still under $15 million, which is incredibly low for such a larger corporation.
Yes, incredibly low…. but also incredibly high when looking at the true debt, and true attrition (cause of attrition noted earlier) and true cost of attrition replacement.
This looks pretty grim .... so a penny stock is one that trades below 1 dollar US, but what do you call a stock that trades below a penny?
How is this possible? Are they still in business?
Well I would imagine the 700,000 accounts are worth at least 30 to 35 times RMR, if one could do a asset sale to get away from the debt. I bet they are trying to pull this off or maybe this is what the creditors are trying to stop with the lawsuit, haven't had time to study it.
Well I would imagine the 700,000 accounts are worth at least 30 to 35 times RMR, if one could do a asset sale to get away from the debt.
Sure, if they can get rid of the $1.7 billion in debt ;)
If they cannot pay the debt, the equity would be wiped out, the company sold and the bondholders take what the remainder sells for. As you mention, presumably they are trying to work out some sort of deal, though the stock price signals that the likelihood of existing shareholders retaining any significant value is low.
Certainly has been done many times before. The shareholders are gonna take a haircut either way.
The market value of RMR = 30-35x, as mention by Larry, is historically correct. However we believe the current market value of “deterrent” systems is beginning to collapse (low or no priority police response), dropping at least 25% in many municipalities. Most of the ASCMA/Moni customer portfolio is deterrent type property protection, originated by incongruous “dealers” all across the country, without a reliable field service infrastructure. Lots of attrition, long term. We believe the millions of deterrent systems within ADT is a reason for holding down ADT stock to single digits.
Quick Update: ASCMA is a pretty big gainer today, up 95%:
We're looking into what might be going on behind this jump and will update with anything we find out.
And by day's end yesterday, up a total of 119.63%:
