William C. Martin’s Raging Capital Management has sold off about 17% of their activist position in Standard Register Co (NYSE:SR) according to a recent filing with the SEC. Raging Capital now owns 904,931 shares, down 183,093 shares from the 1,088,024 shares they reported ownership of as of September 30.
Raging Capital, which was founded in 2006 by Martin, who also oversees the fund as its Chairman and Chief Investment Officer, is a Princeton, New Jersey-based investment firm. The fund, which had an equity portfolio valued at $893 million as of September 30, had a strong first half of 2014, up 14.4% for the period, and has enjoyed a healthy compound annual growth rate of 26% since its founding.
Some of the fund’s biggest positions at the moment are in natural gas companies, with Range Resources Corp. (NYSE:RRC) and EQT Corporation (NYSE:EQT) representing the most valuable positions in its equity portfolio. They stated in a September quarterly letter that they felt the sector would soon enjoy the fruits of higher natural gas prices as a result of greater demand, which would drive profits higher.
More recently, Raging Capital has gone bullish on A. M. Castle & Co (NYSE:CAS), a metals processor and distributor with ties to the natural gas sector, among other energy sectors. Raging Capital bought up 3.7 million of the company’s Common Shares, which gave them a 17% activist stake in the industrial goods company.
Standard Register Co (NYSE:SR) is a completely different beast entirely for Raging Capital, and not in fact a newspaper, as their name might suggest. They are instead a company that offers a broad spectrum of services to clients, ranging from market research and brand imaging, to logistics and marketing.
Raging Capital first built their activist position in Standard Register Co (NYSE:SR) back in the third quarter of 2013, after the company acquired WorkflowOne in July, a move which sent their stock soaring. The merger of the two companies, which both happened to be 100+ years old and based in Dayton, Ohio, was seen as an extremely complementary pairing. It ended up creating one of the largest printing companies in North America, with annual revenue of $1 billion.
The company, whose stock once traded at nearly $200 back in 1998, had fallen to less than $3 before the merger, which sent it soaring above $14. We reported on Raging Capital’s activist position in Standard Register back in January, disclosing their ownership of 681,986 shares at the time, which gave them an 8.3% stake in the company. At that time, Raging Capital made it known they wished to have a qualified director elected to the Standard Register board, which eventually turned out to be Martin himself.
However, if expectations were that the company could reverse its misfortunes following the merger, those expectations have yet to pan out. The stock slowly drifted back under the $3 mark over the next few months, and last week took another drubbing on unflattering financial results, which sent it below the $2 mark on January 28. Raging Capital sold 126,295 of their shares the next day, for just $1.99, showing that they too were clearly unimpressed with the results. The stock has since tumbled to a record low of just $1.24 in the days since, giving Standard Register a market cap of just $13.14 million.
Standard Register Co (NYSE:SR) has hired advisors to help the company go through a financial makeover, while the possibility of the company being sold is now a very real one as well. Standard Register is suffering from debt service requirements, pension obligations, and weak financial results that have left it in a very vulnerable position, and likely in need of debt restructuring and possibly liquidation of some of their assets to avoid bankruptcy.
Needless to say, things do not look very good for Standard Register Co (NYSE:SR), and even their once stalwart champion in Raging Capital appears to be giving up on them, which is a good indicator that a miracle does not seem likely, and buying in even at these low prices is likely foolhardy.
Few of our tracked hedge funds here on Insider Monkey have shown much interest in Standard Register over the years, but they did have one other major investor from among their ranks in the form of Edward A. Mule’s Silver Point Capital, which holds 1.65 million shares. Jeffrey Gendell’s Tontine Asset Management, and Phil Frohlich’s Prescott Group Capital Management each had small stakes of 182,610 and 108,741 shares respectively, as of September 30.
Disclosure: None
