O/T: A Mattersight 2018 "Going Private" Transaction? End Game, For Hercules -- And Its Connectors?

[Here's a bit -- from one of our other properties, to chew on -- while we are away.] Bob has touched anew, overnight, upon a theme we first talked about back in August. And thus, Bob's (below) may be the "polite way" the whole going-on-17-year-mess gets resolved.

It turns out that Hercules may have been connected to Mattersight through one or more of its long-time board members/larger (long-suffering) investors. [More background, here.]

Now Bob (quite cogently) suggests what might well be the end-game here: a so-called "going private" transaction, in which Mattersight would no longer have to show the world all of its manifold delays, miscues and pricing woes. And the large investors who've introduced Hercules to Mattersight get at least a bit of their capital returned, in the form of useful NOL carry-forwards. [Look for lots more liberal tax code "gaming" rules, as to NOLs, under the coming Trump administration. Just check his own history, there. But I digress -- he will offer tax policies friendly to businesses in need of bail-outs -- like this one, called Mattersight -- over the next four years. Trust that.]

Back to the main story line, then: It would also be easier to sell off that vast Mattersight NOL (some $260 million worth, and rising quarter by quarter) -- both quietly, and quickly -- if Mattersight were a private company.

But I agree with Bob's earlier comment, on Tuesday, that the NOL will fetch far less than the about $90 million current market cap of Mattersight (at its trading price at present on the NASDAQ OTC, multiplied by the currently outstanding share count).

Even so, the possibility is fascinating. Here is Bob's excellent analysis -- driven by the Mattersight SEC Form 10-Q filing:

"...The Hercules loan is going to be an interesting element in the next 6-12 months of MATR’s existence. I was wrong, slightly about the 2nd and 3rd tranches. tranche 2 is for $2.5 million available after July 1, 2017 and the 3d tranche is for $5 million available September 2017. Interest is a minium of 9.75%. It also includes a stock warrant for over 428k shares at $3.50/share. This is designed to give Hercules an upside over the interest payment should MATR stock go up. It’s basically a stock option.

Here’s where things get interesting: the loan covenants. The first guards against revenue the stock tanking for a prolonged time (>6 months). If it does, Hercules wants out. The second deals with unrestricted cash. MATR must maintain a minimum of $7.5 million. It gets knocked down to $6 million if they reach EBITDA positive of $1 million. Unrestricted cash at Q3 end is $14.6 mllion. By the end of Q4 it’s likely to be $11 million and by the end of Q1 It risks breaking $7.5 million.

March 2017 could be an interesting month in the life of MATR

I’d suspect that by then MATR needs to have a stock sale in place to raise cash. OR... Hercules is going to offer some sort of debt for equity swap plus cash giving Hercules [and or the connectors] a significant ownership share, likely over 90%. This could be a path to a “going private” transaction for MATR...."

I suspect Bob's onto something substantial, there. It would solve many a problem for Mattersight, and its forever bleeding bleeding bleeding large investors. We shall see.

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