BioScrip Inc (BIOS): Coliseum Capital’s New Activist Target

Christopher Shackelton and Adam Gray’s Coliseum Capital initiated a new position in BioScrip Inc (NASDAQ:BIOS), according to a recent 13D filing with SEC. Coliseum acquired some 15.69 million shares, the stake being comprised of 625,000 preferred shares, 1.8 million Class A Warrants,  1.8 million Class B Warrants, which effectively gave Coliseum ownership of 18.6% of BioScrip’s outstanding shares.

BioScrip Inc

Before setting up his own shop in 2005, Christopher Shackelton served as an analyst at Watershed Asset Management and also in the investment banking division of Morgan Stanley. Coliseum Capital seeks to invest in distressed and special situations and BioScrip seems to fit the criteria pretty well as of now. Market value of the fund’s portfolio stood at $310.82 million towards the end of 2014. The fund is long in a total of 9 companies, according to its latest 13F filing. Moreover, Coliseum has a significant exposure to the Healthcare sector, which accounts for 52% of the portfolio value. During the fourth quarter, the fund initiated two new stakes in Ascena Retail Group Inc (NASDAQ:ASNA) and Installed Building Products Inc (NYSE:IBPand sold out of its stake in Jamba, Inc. (NASDAQ:JMBA).

Both BioScrip Inc (NASDAQ:BIOS) and Installed Building Products Inc (NYSE:IBP) are small cap companies with respective market capitalizations of $322.59 million and $674.17 million. While researching for profitable strategies for retail investors, we have discovered that the popular small cap picks of hedge funds perform even better than the most popular stocks, which are mostly represented by large cap companies. The small cap strategy that we developed beat the S&P 500 ETF (SPY) by a staggering 79.4 percentage points since August 2012 through March 2015 and returned 132% during that period. We have also been sharing these stock picks in our newsletters since 2012.

During the last three months of 2014, Coliseum purchased some 1.72 million shares of Ascena Retail Group Inc (NASDAQ:ASNA) valued at $21.61 million. The stake amasses 6.95% of the fund’s portfolio value. Among over 700 hedge funds that we track, the interest in the national specialty cloting retailer rose during the fourth quarter as 27 firms had $327 million invested in the company as compared to 24 fund with $343.3 million a quarter earlier. Chuck Royce’s Royce & Associates had the highest stake with 7.8 million shares valued at $97.97 million. The company is also among top picks of Alexander Medina Seaver’s Stadium Capital, which owns 5.96 million shares.

Ascena Retail Group Inc (NASDAQ:ASNA) is down nearly 27% over the last 52 weeks. Fourth quarter financial results didn’t help the falling stock price as Earnings per Share (EPS) of $0.07 came by $0.01 short of estimates and revenues of $1.29 billion also missed the mark by $10 million. The Apparel & Accessories Retailers industry as a whole is up by about 12.55% over the last year.

The fund’s stake in Installed Building Products Inc (NYSE:IBP) amasses a smaller percentage of Coliseum’s portfolio as 216,500 shares valued at $3.86 million were added during the fourth quarter. Installed Building Products is a residential insulation installer in the United States. The Company’s building products include insulation products, garage doors, rain gutters, shower doors, closet shelving and mirrors. Installed Building Products Inc (NYSE:IBP) recently made the largest acquisition in its history as it paid $35 million for BDI Insulation. The deal extends the company’s presence in the markets of Southern California, Washington, Idaho and Utah. The stock is up by nearly 75% over the last year and the company has recently announced a stock repurchase plan of 315,000 shares for $6.1 million.

Although Installed Building Products Inc (NYSE:IBP)’s popularity among hedge funds increased to 16 from 13 funds invested in the company  a quarter earlier, the aggregate investment decreased in the fourth quarter to $75.89 million from $91.95 million. The highest stake among these firms was held by Jay Petschek and Steven Major’s Corsair Capital Management amounting to 1.16 million shares valued at $20.75 million.

The BioScrip Inc (NASDAQ:BIOS) deal included Series A Convertible Preferred Stock valued at $100 per share, Class A warrants to purchase common stock at $5.295 per share and Class B warrants to purchase common stock at $6.595 per share. Coliseum’s interest in BioScrip has come at a time when the company is not only down by nearly 40% over the last 52 weeks, but has also lost favor among some hedge funds as the firms invested in the company decreased to 15 during the fourth quarter from 20 investors in the previous quarter. At the end of last year, Bart Baum’s Iconic Capital Management held about 2.44 million shares  of the company valued at $17.08 million.

BioScrip Inc (NASDAQ:BIOS)’s fourth quarter financial results included a net loss per share of $0.69 which was $0.7 below the estimates, while revenues of $253.7 million also came in $5.92 million lighter than expected.

Disclosure: none