Meru Networks, Inc. (MERU) - Is this the start of a bidding war?

On 5/27/15, MERU announced that they had entered into an agreement with Fortinet, Inc. (FTNT) for a sale of the company. The deal was structured under section 251(h) of the Deleware General Corporate Law. The 251(h) statute was enacted in late 2013, and summarized as simply as possible, fast tracks the occurrence of a merger without a shareholder vote. A brief review of the merger agreement shows that MERU does maintain the ability to terminate the agreement, but it will cost $2.2 million to back out. My opinion of this announcement is that MERU has finally decided to tell the market that they are in play! I expect that new parties will submit offers in the near future, and that the price of the stock will continue to increase.

Thank You

Frank Vigilante

SDN Excellence

MERU just received more recognition for their technology(see link below). The stock is trading at a market cap of ~31 million. They have historical revenue of almost $100 million per year. They just paid off their senior lender. These factors and much more are why CH11 risk is minimal for MERU.

http://www.marketwired.com/press-release/meru-networks-receives-2015-sdn-excellence-award-nasdaq-meru-2010909.htm

Thank You

Frank Vigilante

Meru Networks, Inc. (MERU) - Tax Assets Start The Party

From MERU's most recent 10-K

Just look at those NOLs! MERU has a (net) NOL carry-forward of ~$60 million, which is completely negated by their $93mln valuation allowance...this is their way of saying that they don't expect to profit enough in the near future to realize this huge tax benefit. The GAAP accounting rules have minimal consideration for fluctuations in a corporate balance sheet that can swing a company to a profit.  

By my understanding of "The IRS Section 382 Limitation", an owner who takes over 50% control of MERU within the next 36 months would (at a minimum) be entitled to the gross NOL carry forward times the tax exempt rate. The tax exempt rate may be at a paltry ~2.5% these days, but that still equivocates to $1.5mln in immediate tax savings for a big corporate acquirer.   

In the next post, I will discuss MERU's gross NOLs and their debt structure with respect to said tax credits.

Thank You

Frank Vigilante 

Meru Networks, Inc. (MERU) - Don't Let a CH11 Scare You Away

The Distressed Asset Investor

Welcome to "The Distressed Asset Investor". This blog is meant for individual investors who want to understand how to invest in financially troubled companies.

The first company that I recommend to BUY is Meru Networks, Inc (MERU). As of the close of trading on 3/30/2015, MERU's stock is trading at $1.45/share with a market capitalization of ~$35 Million. Because of its very recent (and suspicious) drop in stock price of over 40%, a Chapter 11 Bankruptcy is not out of the question. I believe that a CH11 would not maximize value as an equity sponsor could do much better with this company.

In my subsequent posts, I will provide my reasons why MERU is poised for an equity sponsor, and why now is a good time for the retail investor to purchase the stock.

Thank You

Frank Vigilante