Asset management firm Equus Total Return, Inc. (EQS) went as high as 7% in trading session on Monday session but settled at a gain of +1.14% to $1.77 at ring of the bell.
The Houston, Texas-based company recently decided to restructure its business model announcing that most of its shareholders had approved the Board of Directors of the Firm to classify the removal of the Company’s election as a business development company (‘BDC’) under the 1940 Investment Company Act as part of a future structural transition of Equus into an operating company. The Board also voted to increase the number of common and preferred shares allowed by the Company from 50 million to 100 million shares and from 5 million to 10 million shares, respectively.
Instead of a closed-end fund arrangement, an operating company structure may be better in different ways for Equus and its owners. This provides a larger range of opportunities for growth by integrating with other operating entities and acquiring them. Instead of net asset value, the corporation will enjoy a price based on traditional operating criteria such as sales, income, and gross profit. Due to Equus not being governed under the 1940 Act, the policy would lower relative enforcement costs. An operating company’s status would make it more flexible to issue common and preferred stock, as well as other forms of shares, as a consideration for the company’s acquisitions and expansion.
The firm last month also announced that it had obtained an initial payment of US$18.2 million in conjunction with the selling of its PalletOne, Inc. shareholding. The residual sum, which is expected to be obtained in the second quarter of 2021, is focused on future tax returns and a range of post-closing modifications relating to increases in working capital and numerous other items on the balance sheet.
Previously at the end of last year, UFP Industries, Inc. had closed its acquisition of PalletOne’s equity, and that the $232 million purchase price was focused on a cash-free, debt-free balance sheet. As of 28 December 2020, UFP and PalletOne projections of PalletOne’s debt, debt-like instruments, and other changes, including transaction costs and expenditures, culminated in the owners of PalletOne holding a pro forma net equity value of approximately $130 million.