Advanced Emissions Solutions, Inc. (ADES): Why Coliseum Capital Keeps Raising Its Activist Stake?

As a new filing with the Securities and Exchange Commission has revealed, Christopher Shackelton and Adam Gray‘s Coliseum Capital has bought a bunch of shares of Advanced Emissions Solutions, Inc. (NASDAQ:ADES) increasing its stake to around 2.09 million shares. The fund acquired 375,000 shares of the company in one transaction at a price of $20.97 apiece. Following the increase, Coliseum’s activist stake amasses 9.6% of the company’s common stock.


Coliseum Capital’s activist stake goes further than the fund amassing a significant stake in the company. Coliseum first disclosed ownership of Advanced Emissions Solutions, Inc. (NASDAQ:ADES)’s shares in its 13F filing for the last quarter of 2013 and at the end of July, Coliseum boosted its stake in Advanced Emissions Solutions to 1.71 million shares, equal to 7.9% of the stock. Aside from the increase, the board of directors of the company appointed one of Coliseum’s managers, Christopher Shackelton, to the board. Moreover, Mr. Shackelton was appointed to the finance committee of the board. Overall, Coliseum has a big bet on Advanced Emissions, the position in the company amassing over 11.70% of the fund’s total equity portfolio value.

Mr. Shackelton has a lot of experience of being on a company’s board of directors. Aside from Advanced Emissions Solutions, Inc. (NASDAQ:ADES), the co-founder of Coliseum also serves as director on the board of LHC Group, Inc. (NASDAQ:LHCG) and was previously on the board of Rural/Metro, before the company was sold to Warburg Pincus. In fact, the Rural/Metro case is particularly interesting and sparked many discussions involving Mr. Shackelton. With Coliseum owning a 22% stake in the medical emergency services company, many say that Mr. Shackelton was interested in the company being sold. However, there are still several unsettled lawsuits accusing the former board of selling the company too cheap at around $6.0 million.

Now, with this information in mind, Mr. Shackelton’s involvement in the board is more interesting, taking into account that the stock of the small-cap company has been losing ground since Coliseum initiated a stake. Advanced Emissions Solutions, Inc. (NASDAQ:ADES) currently trades at around -24% year-to-date and has been struggling on several sides. In August, the board of directors’ Audit Committee discovered that its previous annual financial statements have mistakes and have to be restated.

Advanced Emissions Solutions, Inc. (NASDAQ:ADES)’s solutions is operating in a profitable segment, being engaged in providing emissions solutions to the power generation and other businesses. With the environment being a major concern nowadays, it’s clear that Advanced Emissions has the potential to grow its business and its financial results. The same seems to be the opinion on most analysts since the stock has a consensus rating ‘Buy’. Ealier in September, Brean Capital boosted its price target on Advanced Emissions to $47 from the previous $34, which represents a more than 100% premium on the current price.

Some passive investors also seem to be bullish on Advanced Emissions Solutions, Inc. (NASDAQ:ADES), as our records show. During the second quarter, Michael Barnes and Arif Inayatullah‘s Tricadia Capital Management and Michael M. Rothenberg and David Sackler‘s Moab Capital Partners raised their stakes in the company by 35% and 18% respectively. Tricadia now owns 883,400 shares, the position amassing around 4% of its equity portfolio, while Moab holds 850,400 shares, the stake representing around 9.4% of its equity portfolio.

Nevertheless, despite the Advanced Emissions’ stock underperformance, the company might still bring value to its investors in one way or another. Coliseum’s top picks have had a mostly positive returns over the years. For example, the fund’s top position, represented by The Providence Service Corporation (NASDAQ:PRSC), has more than doubled in the last several years, with Coliseum being a long-term shareholder and betting around 30% of its portfolio on the company. Since following hedge funds’ moves can provide many insights to retail investors, Coliseum’s investment into Advanced Emissions Solutions, Inc. (NASDAQ:ADES) and the stock’s cheap price should be kept in mind.

Disclosure: none