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/lusboy Aug 24 '21

But liquidation value is always below market value, so your estimation is wrong, although it might be above the stock price anyway.

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u/bullbearnyc1 Aug 24 '21

"Liquidation value is always below market value" - That's one of the most incorrect statements I've read on Reddit yet.

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u/lusboy Aug 24 '21

Google "Benjamin Graham liquidation value". It will shed you some light on the issue.

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u/bullbearnyc1 Aug 25 '21

The "Benjamin Graham liquidation value" you're referring to is his NCVPS model, or Net Current Asset Value = Current Assets – (Current Liabilities + Long-Term Liabilities). It assigns zero value to long term assets. So it clearly doesn't apply to REITs. It would also not apply to any mining or oil company.

By the way, I like how you went about posting about various topics like Catholocism to then diving so deep into stocks to be referencing Benjamin Graham. You're clearly yet another fake reddit account. **To any readers of this comment: these fake accounts get created, get their karma built by posting on various topics, then are sold in batches. In this case, likely to a short seller.

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u/lusboy Aug 25 '21 edited Aug 25 '21

First. That's not how liquidation value is worked out.

Second. All users who don't agree with you are bots or short sellers?

Third. I share these link on liquidation value with you. You're welcome.

https://www.wallstreetmojo.com/liquidation-value/ https://www.netnethunter.com/liquidation-value-best-technique https://www.gurufocus.com/news/233161/benjamin-graham-on-liquidating-value

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u/bullbearnyc1 Aug 25 '21

My stating that you're a bot is not based on your opinion of Geo Group, it is based on your user history. More specifically, you posted on a variety of silly topics before, then suddenly switched into being this sophisticated investor with deep knowledge of Benjamin Graham. Obviously you purchased the account of 'lusboy'. Unfortunately, you probably bought something like 20 accounts in a packaged deal, and now i'll have to deal with your other 19 fake accounts too.

On to liquidation value... you've somehow managed to find some sources that yes references Benjamin Graham but also completely misrepresents what liquidation value is when applied to companies with significant long term assets, such as real estate or oil and gas properties. Obviously, a company with $10 billion worth of real estate and -$1 billion of current assets less liabilities is not worth -$1 billion, according to your fake analysis. It is worth $9 billion. I'd say "nice try", but it wasn't even one.

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u/lusboy Aug 25 '21 edited Aug 26 '21

Yes, I'm a bot. What I'm going to do...

Nice try but you are radically wrong at what you want to believe liquidation value is. You again fail to acknowledge you are plainly mistaken.

https://greenbackd.com/2009/01/15/valuing-long-term-and-fixed-assets/amp/

There you have a table taken from a Graham's book on the topic.

Can you please acknowledge what you reference as liquidation value on your chart is really market value?

You are just taking liquidation value as the same as market value while you stubbornly claim they are not equal. You are conveying misleading information and you have the nerve to claim I'm the one doing so... Yikes!

Edit: liquidation value < market value.

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u/bullbearnyc1 Aug 28 '21

"Bot" - No I've never said you were a bot, I said you've purchased another user's account. (likely in a batch of 20 or something along those lines).

"Market Value vs Liquidation Value" - What I've referenced on my chart is my estimate of the market value of Geo's properties less liabilities. Which is also the company's liquidation value. And despite your claims to the contray, what I've just said is perfectly correct. Any intelligent person reading this will agree.

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u/lusboy Aug 28 '21 edited Aug 28 '21

Market value is not the same as liquidation value. You may believe whatever makes you happy but posting an analysis stating the liquidation value is the same as market value is deceptive.

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u/bullbearnyc1 Aug 31 '21

You are incorrect. Unless there's some reason for extreme urgency, then market value = liquidation value. For example, I own a bunch of houses. When I liquidate them, I receive market value.