CONN’S Inc. (CONN): Christian Leone’s Luxor Capital Goes Activist as it Continues to Buy Stock (1.95 Million Shares on Monday)

As reported yesterday, Christian Leone’s Luxor Capital Group has been boosting its exposure to CONN’S, Inc. (NASDAQ:CONN) for quite some time. According to its latest filings with the Securities and Exchange Commission, Luxor has yet again augmented its stake in the company, and gone activist on it –although it did not announce any plans in relation to the company. Through several transactions, the fund acquired approximately 1.95 million shares of CONN’S, Inc. (NASDAQ:CONN), for prices ranging from $29.39 per share to $30.78 per share. Following these purchases, Luxor may be deemed beneficial ownership of 7.58 million shares of Common Stock, which represent approximately 20.9% of the outstanding shares of Common Stock.

Christian Leone

Luxor Capital Group had trimmed its stake in CONN’S, Inc. (NASDAQ:CONN) by 16% over the second quarter of the year. However, over the second half of the year, it has more than doubled its exposure to the company (the fund had disclosed ownership of around 2.94 million shares in its latest 13F filing).

CONN’S, Inc. (NASDAQ:CONN) stock is down more than 61% year-to-date, and almost 38% since the end of the second quarter, so one can understand why Luxor sees a chance to buy. Currently valued at 11.6 times the company’s earnings, this $1.1 billion market cap specialty retailer of branded consumer durable goods trades at a 75% discount to the specialty retailers’ industry average.

In addition to Mr. Leone’s bullishness, most of the top institutional investors in CONN’S, Inc. (NASDAQ:CONN) augmented their involvement in the company over the second quarter. David Einhorn’s Greenlight Capital added 7% to its holdings and now owns 3.5 million shares, while Daniel Gold’s QVT Financial upped its stake by 150% to roughly 762,000 shares.

As outlined in a previous article, CONN’S, Inc. (NASDAQ:CONN) still looks like an attractive investment, despite its declining stock price (and maybe, to some extent, because of it). The company reported revenue of $353 million for the second quarter, up from $271 million a year ago, and solid same store growth in most of its categories. However, earnings declined to $0.48 per share, from $0.52 last year. From a qualitative point of view the retailer also looks well positioned. The company opened 14 stores during the last few months.

In addition to being a retailer, the company provides credit for its clients. Many analysts do not like this part of its business, as it creates trouble at times. For the second quarter, the revenues from credits rose 37.8% to $64.3 million, with the portfolio balance surging by almost 40% to $1.18 billion. Nonetheless, the provision for bad debts also grew, to $18.3 million, mostly on the back of higher than expected delinquency.

Disclosure: Javier Hasse holds no positions in any stocks or funds mentioned

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