&nbsp;Manchester United is a famed English Premier League soccer club that has lost its way from glory in recent years. Despite its recent history of poor performance, it continues to be one of the most popular soccer clubs in the world. Back in 2005, The Glazers bought the club via a LBO and later took the company public in 2012. The cash flow from the club went into servicing the debt and as a result, reinvestments in the club suffered. Christiano Ronaldo even publicly stated that the facilities, kitchen, and stadium have barely changed since he left the club a decade ago.&nbsp;&nbsp;Now the cash flow from sporting clubs usually stays lean because it funds players wages and future trades. However, on top of the mounting debt, the Glazers pay themselves <a class="text-black duration-200 hover:no-underline underline after:content-['_↗']" href="https://www.manchestereveningnews.co.uk/sport/football/man-utd-news-dividends-glazers-25309982">millions in dividends</a>. The fans noticed the poor leadership and publicly protested the Glazers leading to immense pressure from fans and pundits alike. In November 2022, the Glazers finally considered <a class="text-black duration-200 hover:no-underline underline after:content-['_↗']" href="https://www.cnbc.com/2022/11/22/manchester-united-exploring-strategic-options-including-sale.html">putting the club up for sale</a> on the same day they terminated Ronaldo&rsquo;s contract. Interestingly, they hired Raine Group as an advisor to oversee the sale process which has been involved in several big-name sports deals like WWE&rsquo;s merger with UFC, Chelsea&rsquo;s sale to Clearlake Capital etc.&nbsp;However, more recently the Glazers were rumored to pull the club <a class="text-black duration-200 hover:no-underline underline after:content-['_↗']" href="https://www.tipranks.com/news/glazers-consider-pulling-manchester-united-nyse-manu-off-the-market">off the market</a> in what looks like a notorious bargaining tactic to me. The shares took a hit. At current prices ($19.30/share), we are looking at a $3.3B market cap. However, valuing a heritage sports club is a difficult exercise due to the precious intangibles. Looking at the valuations of other clubs in the premier league, we can get a rough idea of what MANU could be worth. Chelsea was sold last year for $5.4B, Liverpool is currently valued at $4.5B. Given that Manchester United is an older, more popular and a more historic club than both of these, the current valuation doesn&rsquo;t seem too steep.&nbsp;MANU also received two offers in the last year, British billionaire Sir Jim Ratcliffe has <a class="text-black duration-200 hover:no-underline underline after:content-['_↗']" href="https://www.skysports.com/football/news/11095/12891591/manchester-united-ownership-bid-sir-jim-ratcliffe-remains-the-leading-candidate-to-buy-premier-league-club#:~:text=Sir%20Jim's%20takeover%20proposal%20includes,5bn%20and%20%C2%A35.5bn.">bid between &pound;5-5.5B for just more than 50% of the shares</a> (~$5.8B) while offering to keep the Galzers&rsquo; involved. Sheikh Jassim of the Qatari royal family also proposed to buy the <a class="text-black duration-200 hover:no-underline underline after:content-['_↗']" href="https://www.the-sun.com/sport/8904353/qatari-takeover-man-utd-announcement-ratcliffe/">entire club outright for &pound;6B</a> (~$7.5B). This is roughly double to the current share price and given that the next door neighbors (Manchester City) are owned by the Emirates, I can see a good incentive for the Qatari royal family to purchase MANU.&nbsp;The biggest risk I see here is the dual class share structure of MANU. It has class A and B shares where A shares carry 1 vote and B shares carry 10 votes. Glazers&rsquo; own 100% of class B shares and roughly ~4-5% of the class A shares. Looking at the <a class="text-black duration-200 hover:no-underline underline after:content-['_↗']" href="https://ir.manutd.com/~/media/Files/M/Manutd-IR/Governance%20Document/mar-2023-mu-plc-interim-accts.pdf">latest quarterly report</a>, the company&rsquo;s issued share capital comprised 54,537,360 Class A ordinary shares and 110,207,613 Class B ordinary shares. This means that a buyer can purchase class B shares from the Glazers and still maintain economic and voting ownership of the club while leaving the class A owners stranded. I think this is the primary reason why the shares currently trade at such a wide margin from the proposed bids. However, there are <a class="text-black duration-200 hover:no-underline underline after:content-['_↗']" href="https://seekingalpha.com/news/4015298-manchester-united-gains-on-report-jim-ratcliffe-reworking-takeover-offer">new reports</a> that Jim Ratcliffe is restructuring the offer to address concerns of minority shareholders. I like the risk-to-reward ratio here.&nbsp;Disclosure: I own shares of MANU

(MANU) Manchester United exploring potential sale

&nbsp;Chek-Cap (CHEK) is a small ($16M market-cap) clinical-stage medical diagnostics company engaged in the development of an ingestible imaging capsule that utilizes low-dose X-rays for the detection and imaging of colonic polyps and colorectal cancers. Earlier on March 21st, <a class="text-black duration-200 hover:no-underline underline after:content-['_↗']" target="_blank" href="https://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=117349963&amp;type=HTML&amp;formType=6-K&amp;dateFiled=2023-03-21&amp;cik=0001610590&amp;CK=1610590&amp;symbol=0001610590&amp;companyName=Check-Cap">they had announced</a> that their C-Scan clinical study did not meet their goal to further continue the program. Later on June 6th, they shared that <a class="text-black duration-200 hover:no-underline underline after:content-['_↗']" target="_blank" href="https://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=317546297&amp;type=HTML&amp;cdn=b1445875459af2e52bd6d296160e73b2&amp;formType=6-K&amp;dateFiled=2023-06-06&amp;cik=0001610590&amp;symbol=0001610590&amp;companyName=Check-Cap">the company is pursuing strategic alternatives</a> and has hired Ladenburg Thalmann &amp; Co. as an advisor. They also shared that they are laying-off 90% of their workforce after which they will have 8 remaining employees.&nbsp;Last week, Chek announced that they are <a class="text-black duration-200 hover:no-underline underline after:content-['_↗']" href="https://app.quotemedia.com/data/downloadFiling?webmasterId=101533&ref=317695650&type=HTML&cdn=48561aa5ed11ade7764d59e5db863401&formType=6-K&dateFiled=2023-08-17&cik=0001610590&symbol=0001610590&companyName=Check-Cap" target="_blank">reverse merging with Keystone Dental</a>. Proforma, CHEK shareholders will own 15% of the combined enterprise (KSD) at a valuation of $39.7 million and Keystone Dental security holders are expected to own approximately 85% of the combined company representing an equity valuation of $225 million. Now what synergies does a colon cancer research company have with a dental implants company? I dunno. However, it would make sense for Keystone to go public and save the underwriting cost by acquiring an almost cash-shell like company for a small premium.&nbsp;The shareholder vote will be scheduled in Q3 and CHEK is expected to have a net-cash position of $22.3 million at closing of the transaction which implies a $17.4 million premium to the net cash target. Given that CHEK will issue around 33,750,000 shares to complete the transaction, at current prices (~$2.75/share) the implied value of KSD is around $93MM, that's less than 2x 2022 sales. The company being listed in the US should help with the multiple.&nbsp;Given the outcome, I think the vote is likely to go through. However, in the worst case if the vote doesn&rsquo;t pass, this is the back-of-the-envelope liquidation value I got to (using Q2 June 30th numbers):&nbsp;<img style="display: block; margin-left: auto; margin-right: auto;" src="https://lh4.googleusercontent.com/_Z9OUIriNAJx_TqBu2gwwpKUzwXxdr_CteUg3DM96wqq1ySdJ3vL5qi4d6U_iqCzzh88IGsNSA985xbyJPsTugbFqXbOUdXszZItl2RvD9VzEYqoi6lMgR4ysbRiZcdXqXGc9VWwNnCUIp2nKj00lGA" width="403" height="251">&nbsp;Kind of bummed out I couldn&rsquo;t purchase the shares when it dipped on the press-release announcement.&nbsp;These are some risks I could think of:<ul><li dir="ltr" aria-level="1">I couldn&rsquo;t find much information on insider ownership here. The company is also based out of Israel so there could be an incentive misalignment here.</li><li dir="ltr" aria-level="1">CHEK also didn&rsquo;t mention a liquidation scenario in their announcement. If the reverse-merger does not go through, cash burn could hurt the margin.</li><li dir="ltr" aria-level="1">The expected multiple will depend highly on Keystone’s revenue margins which is unknown. This is a risk but the gap here is wide enough to warrant a small position.</li></ul>&nbsp;Disclosure: I own shares of CHEK

(CHEK) Chek-Cap reverse merger with Keystone Dental

&nbsp;This post outlines the rules of the game I&rsquo;m playing. I&rsquo;m sharing this for two main reasons. Firstly, it&rsquo;s to formalize my approach as a constant reminder for myself of the parameters I&rsquo;ve established. Secondly, I&rsquo;ve learned a great deal from materials generously shared by other investors I admire, and I&rsquo;d like to give back in the hope that this helps others. Many of these principles are drawn from other investors whose approaches resonate with me. However, each of these has been acquired through my personal experiences&mdash;knowing what works well for me and aligns with my personal investing style.&nbsp;Where to Hunt&nbsp;The first important factor for me is understanding my own playing ground. What I&rsquo;ve found to be the most enjoyable and rewarding is analyzing mispricing that often presents itself around special corporate events. These events could be anything from M&amp;A, spin-offs, demergers, liquidation events, tender offers, and others. I find it much more reassuring to invest in something that might appear optically cheap knowing that there&rsquo;s a significant 'catalyst' anticipated to affect the price movement of the underlying.&nbsp;However, this approach inherently requires that my inputs are complete and accurate. Accuracy is of utmost importance, which means I need to stay updated with business news, carefully read public filings, and thoroughly analyze any potential value gaps. This approach almost turns investment research into an intriguing puzzle to solve, making it quite enjoyable.&nbsp;The Six Rules&nbsp;If I can&rsquo;t put a price on it, I can&rsquo;t buy it&nbsp;In other words, when something appears to be undervalued, I need a clear understanding of why this particular asset is deemed 'inexpensive.'&nbsp; I&rsquo;ve found that assessing the viability of the typical well-established profitable (or bluechip) companies&mdash;where projecting future cash flows and discounting them to their present value is the norm&mdash;are harder for me to accurately evaluate. For instance, knowing the returns and final value of a bond over upcoming years until maturity, I can calculate its present value with precision. However, personally, forecasting future cash flows for most companies is much harder and error-prone. Moreover, these companies also usually sell for a hefty premium which I can&rsquo;t stomach paying.&nbsp;&nbsp;However, I&rsquo;ve found that scenarios like liquidations or securities trading at a negative enterprise value, combined with specific special corporate events, offer a clearer landscape for valuation. This clarity makes it more feasible for me to establish a price.&nbsp;Opportunity Cost&nbsp;Nearly every decision I make is influenced by its opportunity cost. Time and the available amount of money are the two finite constraints within my framework. Consequently, every decision becomes an equation of these two variables. If I have a range of &ldquo;good&rdquo; ideas, my responsibility becomes assessing which one warrants the greatest allocation of my time and funds. This perspective also simplifies selling decisions at times; if I anticipate another asset to yield superior returns within my expected time horizon, it might be logical to sell and redistribute funds.&nbsp;Margin of Safety&nbsp;Nearly all my investments come with a perceived <a class="text-black duration-200 hover:no-underline underline after:content-['_↗']" href="https://www.investopedia.com/articles/basics/07/grahamprinciples.asp#:~:text=Graham%20refers%20to%20value%20investing,and%20sell%20at%20a%20premium." target="_blank" rel="noopener">margin of safety</a>. I approach my position sizing by considering how much downside protection I have&mdash;essentially, how much I could potentially lose if things were to go bad. Fishing for a substantial margin of safety almost always makes this decision simpler.&nbsp;Shareholder Oriented Management&nbsp;The previous point sets the stage for this one. Misaligned management incentives can significantly erode value. When management takes actions that don't align with the best interests of shareholders, it diminishes the perceived value gap; a situation I aim to avoid. This is also why I value indicators like insider ownership and near-term management pay structures, as they often reflect the alignment between management and shareholders.&nbsp;The Rare Birds&nbsp;I borrowed this terminology from Michael Burry&rsquo;s strategy blueprint. Essentially, ever so often (think Netflix or Adobe in 2022), companies with strong durable advantages and a history of delivering high returns on invested capital emerge at attractive prices. I think of these as companies that could fit on Chuck Akre&rsquo;s &ldquo;<a class="text-black duration-200 hover:no-underline underline after:content-['_↗']" href="https://www.akrecapital.com/investment-approach/" target="_blank" rel="noopener">three-legged stool</a>&rdquo;. These opportunities might arise due to pricey acquisitions or temporary capital expenditures, but if they don&rsquo;t seem detrimental to the company&rsquo;s long-term prospects, I&rsquo;m happy to include them in my portfolio.&nbsp;Managing the Portfolio&nbsp;Given the nature of my holdings, managing my portfolio becomes just as crucial as selecting stocks. While investing in a company on the verge of a special corporate event, it becomes imperative to keep up with the company news and SEC filings and reevaluate the thesis incrementally. If the actions taken by the management deviate from my thesis, I&rsquo;m happy to sell and move on.&nbsp;On Selling&nbsp;I&rsquo;ve found selling particularly difficult to do and it is something I&rsquo;m still learning and trying to get better at. Buying has just one objective, you lay out some cash today to get more in the future. However, selling involves a range of considerations&ndash;&ndash;taxation, trimming an oversized position, selling to buy a different enterprise, and more. Looking back, I've sometimes sold prematurely or held onto positions for too long.&nbsp; While there&rsquo;s no easy answer to this one, I appreciate Joel Greenblatt&rsquo;s tip: &ldquo;Trade the bad ones, keep the good ones&rdquo;.&nbsp;

Laying Out My Investment Philosophy

&nbsp;I.e., why I started this blog. &nbsp;Before setting up this website, I debated among alternatives where I could pen down things I&rsquo;d like to write about. Substack seemed like an obvious choice, after all everyone seems to have one these days. However, Substack seems to me like an ideal fit for newsletters, not blogs.&nbsp;&nbsp;The main purpose of this blog is to share the knowledge I've acquired about software engineering and investing as my experience has grown over the years, all while continuing to learn in the process. I don&rsquo;t intend to put my writing behind a paywall, and I certainly don&rsquo;t intend to constrain myself with a regular writing schedule. This blog is supposed to be experimental, playful, and occasional in nature. More importantly, I aim for this platform to compel me to do a write-up before investing in any enterprise. I&rsquo;ve consistently found that writing about my ideas enhances my thought clarity, as it compels me to seek complete and accurate information while also revealing any blind spots that I might otherwise overlook.&nbsp;Many of the features that I&rsquo;ve added to this website are also inspired by Blogger. There is something about Blogger&rsquo;s simplicity that resonates with me more than Substack. Substack pursues growth through recommendation systems, in which the algorithm suggests Substacks with similar themes or those endorsed by other authors. In contrast, I aim to attract readers in a more organic manner&ndash;where they come across my write-ups because they also happened to look at some obscure security that I&rsquo;ve been researching. I might trade off some growth for the sake of quality, but I&rsquo;m ok with that.&nbsp;Besides, as an engineer by trade, I also have a strong bias for self-hosted solutions. Owning my own section of the internet gives me greater control over the design, layout, and overall aesthetics of my blog, which can be more closely aligned with my personal style. I also don&rsquo;t mind the added benefit of ownership and complete control over my writing, as opposed to hosting it on an external service. As a backend infrastructure engineer, I don&rsquo;t often get to write frontend software. Setting up this blog felt akin to a fulfilling&nbsp;<a class="text-black duration-200 hover:no-underline underline after:content-['_↗']" href="https://github.com/sanchay0/home/" target="_blank">weekend hackathon project</a>.