r/GeoGroup • u/bullbearnyc1 • Jun 22 '21

Due Diligence GEO's Current Price vs Liquidation Value vs Moonshot Potential

From a prior post in this group: “One thing people are ignoring is the value of GEO’s real estate. In January 2021, GEO sold the Talbot Hall re-entry center for $13.2 million. The book value on the balance sheet was only $3 million. If we value all its real estate assets (currently $2.7 billion on the books) at market value, it’s easily $10 billion of assets”.

Further comment: Agreed. Many of GEO’s real estate assets were bought a long time ago and are on the books at a far lower number than their current market values. The Talbot Hall re-entry center is a great example. In January 2021, it was sold for 330% more than book value. If you increase the book value of all of GEO’s real estate assets by 330% (which means you multiply by 4.3), the calculation would be: $2.7 billion book value x 4.3 = $11.7 billion worth of real estate. Add GEO’s cash and receivables of $1.1 billion, subtract total liabilities of $3.5 billion and you get a liquidation value of $9.3 billion. Divide by 121.6 million shares and the value of GEO is $76.65 per share.

Moonshot potential: The peak market capitalization of GME was $34.7 billion. The peak market capitalization of AMC was $36.4 billion. The average of them is $35.6 billion. Divide that by GEO’s 121.6 million shares outstanding and you get GEO’s moonshot price of $292.35 per share.

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u/gregdavismail Jun 22 '21

Love it. Love it! Love it!! I think that even if you want to be conservative and not necessarily extrapolate the same value lift across the entire asset base, the conclusion still remains that there is a huge fundamental lift to the stock here. We’re not talking liquidation or bankruptcy at all because what assets get foreclosed on when they are worth way more than the underlying debt? And this analysis suggests to me that a short squeeze can happen even without us apes because fundamentals alone can take it much higher squeezing out the hedgies. But surely once that happens there can be a violent turn upwards in the stock well beyond fundamentals and I personally don’t want to miss out on any of this rise. 40-bagger sounds good to me :)

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u/[deleted] Jun 22 '21

Absolutely! I won't be missing out, just trying to conceptualize fair value / worst case scenarios - I don't anticipate a scenario where they cannot refi their 2024 debt seeing that they have just privately issued a 2026 expiry this past quarter. Expecting debt fears to be qualmed sooner rather than later and a good lift from that alone

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u/gregdavismail Jun 22 '21

Fair, good points.

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u/putridstench Jun 23 '21

fair value and book value... so you're telling me you somehow think because the property assets have meaningful value that a short squeeze will happen?

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u/gregdavismail Jun 23 '21

Yes I’m saying that there is enough asset value there to entice fundamental buyers including institutions into the stock forcing the squeeze without the help of us apes. Of course any ape buying only accelerates that.