In a change of pace, instead of doing what we normally are known for, which has historically been activist short-selling, we are publishing an activist long idea, as in providing a roadmap of what we think is the right decision for an activist should pursue in order to drive shareholder returns at a certain company we deem undervalued.
In fact, this will be a regular theme from now on. As long-time readers might know, Ragnarok has two divisions: Ragnarok L/S and Ragnarok Quant. Today, we introduce a new division called Ragnarok Activism: Covering securities where management does NOT have total voting rights, and an activist could drive meaningful change. More writeups of this genre for paid subs coming soon!
As for today, we found a 100 million dollar company with a net cash position of 37 million with no debt, and with a strong core business that did about 175 million dollars in revenues in 2025. This core business is a recognisable and popular brand in its niche.
So, what gives? Why is the equity trading at depressed valuations despite an ultra-strong balance sheet and income statement?
It all boils down to management.
By splurging capital on useless acquisitions and deteriorating the bottom line via bloated cost-bases of the new acquired businesses, management has created an illusion of a deteriorating, rapidly loss-making company. Moreover, management has let the share count almost continuously, and have not made satisfactory efforts to return cash to shareholders, except a measly dividend.
Ragnarok Research believes that by a few simple fixes, shares could trade atleast 60% higher than where they trade right now, and any activist firm could undertake this task and bring about change.
By enacting an asset-sale or a divestiture of the non-core assets and using proceeds/savings for a buyback, in addition to conducting a strategic review to sell the core brand(getting the company acquired), we think meaningful share price appreciation could occur.
In case a buyer for the whole company(core business) cannot be found, proceeds form divesting non-core assets along with a portion of the net cash position can be used to sustain operations and fund growth.
In order to express our opinion, we have made a powerpoint presentation highlighting our thesis:
Below is our opinion on why CLAR needs an activist intervention and would trade meaningfully higher.
As for how we are sizing this(as we are not going activist on this, but still appreciate the hidden value that lies with the security), I am allocating 5% of my portfolio to this trade, and will start trimming positions above 30-40% above current prices, in case the market realises the value residing in the security without any activist intervention.
