CoSine Liquidation Threat Over
Mellon HBV Alternative Strategies LLC, a hedge fund, which at one point owned 6.7 percent of the company, filed a 13 A/D document with the Securities and Exchange Commission (SEC). In this document it said it would no longer push for the company to liquidate its assets and return equity to shareholders. It also disclosed that it had sold 104,135 shares in the company reducing its ownership to 5.7 percent.
Mellon cited CoSine’s recent financial performance for its change of heart. The company has significantly reduced its cash burn rate to $7.9 million for the quarter, while almost tripling its revenue to $6.0 million (see CoSine on Comeback Trail?). While it’s still too early to say that the company is in recovery, the situation is improving. CoSine now has about $76 million in cash, which, at the reduced burn rate, could keep it alive for another two years, says Mellon.
Last month, Mellon hired an unnamed investment bank to try to liquidate the company and return its assets to shareholders (see Mellon Hires Banker for CoSine). The hedge fund had been very vocal about its dissatisfaction with the company’s performance for several months (see Mellon Pressures CoSine for Sale) .
While Mellon may not be pushing for liquidation, it still believes that CoSine will not be able to achieve profitability on its own. As a result, the firm has charged the aforementioned investment bank with exploring possible acquisition or strategic partnership strategies.
CoSine has vigorously opposed the idea of liquidation from the beginning (see CoSine: Not Ready to Sell). But on the company’s last conference call, Steve Goggiano, president and CEO, allowed that the company was willing to explore other options.
It’s not surprising that Mellon has backed off on its liquidation demands. Some investors speculated that when Mellon hired a banker it was really trying to gain control so that it could take the company private and sell it to an equipment vendor in need of its IP services systems. But that scenario looks less likely now that the firm has reduced its ownership to 5.7 percent from 6.7 percent.
Neither CoSine nor Mellon responded to requests for comments on this story.
CoSine is trading down $0.23 (3.97%) to $5.57 today.
— Marguerite Reardon, Senior Editor, Light Reading