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Monarch Alternative Capital Urges for Meeting With Scorpio Bulkers Inc (SALT)’s Independent Directors

In a new filing with the U.S. Securities and Exchange Commission, Monarch Alternative Capital, led by Michael Weinstock, has disclosed a letter it sent to the independent members of Scorpio Bulkers Inc (NYSE:SALT)’s board of directors. The investor expressed its deep disappointment over the shipping company’s stock performance, which has dropped by 80% since its initial public offering (IPO). In addition, Monarch states in the letter that it wants to meet with Scorpio Bulkers’ independent board members, outside of the presence of the company’s management, for constructive discussion regarding the company’s matters. According to the filing, Monarch holds 34.55 million shares of Scorpio Bulkers Inc (NYSE:SALT), equivalent to 10.31% of the company’s outstanding stock. The stake represents an increase from 34 million shares the investor reported in its previous filing.

Michael Weinstock - Monarch Alternative Capital

Monarch focuses on distressed and bankruptcy situations. The investment firm has more than $5 billion in assets under management (AUM). Monarch is led by an experienced team of professionals that helps the fund exploit the existing investing opportunities both in the United States and Europe. The fund manages a public equity portfolio worth $415.95 million as of March 31.

Michael Weinstock
Michael Weinstock
Monarch Alternative Capital

Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research has shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return more than 120% over the last 34 months and outperformed the S&P 500 ETF (SPY) by 65 percentage points (see more details here).

Scorpio Bulkers Inc (NYSE:SALT) is engaged in providing marine transportation of dry bulk commodities. The company, which owns 12 vessels, has a market cap of $600.21 million. Recently, Scorpio Bulkers Inc (NYSE:SALT) conducted a public offering of 133 million shares of common stock at $1.50 a share. For the three months ended June 30, 2015, the company posted a loss of $138.6 million, or $0.71 per share, versus a loss of $15.0 million, or $0.11 per share, for the same period last year. During the past 30 days, the company’s stock has increased by 10.43%. Among the funds we track, Monarch is the largest shareholder of Scorpio Bulkers, followed by Marc Lasry‘s Avenue Management and Michael Lowenstein’s Kensico Capital Management, which own 16.53 million shares and 15.34 million shares as of the end of March, respectively.

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