This is more of a question post than my own due diligence.
Companies like Carvana and Transocean have provided monster returns for investors willing to buy in the “dead period” when nobody cares/company looks like it will go bankrupt.
In my view, LUMN is saddled with such extreme debt that it could be a deep value play IF they are able to hold on and not go bankrupt. Maybe they can go 5-10x like Carvana or RIG.
From what I gather, management seems to have a long term plan that includes asset sales to pay off big chunks of debt, buying back shares (idk if that is a good idea if they are distressed: see Bed Bath and Beyond), later investing a big chunk of capex in a couple years to expand the business, and hopefully roll over the debt.
So IMO this is a rates play but I haven’t done enough homework. Bonds seem priced for bankruptcy and maybe that is an awesome way to play the recovery but I bought a handful of shares since it recovered post lead cable FUD with a massive green day and added a few otm call options as far out as I could. I think this isn’t something I would bet big on but it could be a stock where you turn nothing (a very small amount of your money, like .1-.3% of your portfolio) into something (2-3%) if it works out. And sometimes things can work out quite fast. I remember reading about RIG on WSB at the bottom when it was $.80/share and I thought about buying LEAPs and seeing what happened. I didn’t bc too many people said they were going bankrupt and there was too much dilution. Little did I know that in distressed asset investing, it DOES NOT matter if you get diluted to hell. Risk of going to zero trumps that by a lot. If LUMN can also buy back shares along the way, that would be even more impressive, but seems risky to throw away money at reducing the float if you go bankrupt. Additionally, if they sell a bunch of assets, wouldn’t that potentially massively decrease cash flow?
Any thoughts on LUMN timeframes, execution risk, and expectations if it works out?
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