Wednesday, June 29, 2022

Here’s Why Cosi Inc (OTCMKTS:COSIQ) Just Popped

Cosi Inc (OTCMKTS:COSIQ) is a penny stock that has grabbed hold of the attention of traders during the stock’s recent rip off the lows. The move comes on no obvious new headlines. However, traders should note the “Q” at the end of the ticker. This is a Chapter 11 case and it is going through a process guided behind-the-scenes by actions taken in bankruptcy court. Our sense is that the current dramatic rally off the lows is likely related to the auction process for sale of part or all of the company’s assets.

At this point, according to recent filings, all bids must be in place by November 28. Because next week is foreshortened by the Thanksgiving holiday, the 28th is really just a few trading sessions away. It’s possible that enough bidders have started to line up for company assets that some extra money may be left over after accounting for everything such that shares have a value on December 14, when the auction will go into the books. From the way the stock is acting, it would appear those holding short for $0 are getting worried about this, or plenty of other folks think they know it for sure.

Cosi Inc (OTCMKTS:COSIQ) bills itself as a company that owns, operates, and franchises fast-casual restaurants. The company offers food and beverage products for four dayparts comprising breakfast, lunch, snacking, and dinner.

It also provides catering services for breakfast, lunch, afternoon snacking, and special events. As of December 28, 2015, COSIQ operated 79 company-owned and 31 franchise restaurants in 15 states, the District of Columbia, the United Arab Emirates, and Costa Rica. Cosi, Inc. was founded in 1994 and is headquartered in Boston, Massachusetts.

On September 28, 2016, Cosi, Inc., along with its 4 affiliates, filed a voluntary petition for reorganization under Chapter 11 in the US Bankruptcy Court for the District of Massachusetts.

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It’s important to appreciate the relevant 8K to get a sense of how this process will unfold:

“On November 1, 2016, Cosi, Inc. (the “Company”), a Delaware corporation, issued a press release announcing that, as previously reported on the Company’s Current Report on Form 8-K filed on October 28, 2016 (Commission File No. 001-36196), the United States Bankruptcy Court for the District of Massachusetts (Eastern Division) entered the Order Establishing the Bidding Procedures Relating to the Sale of All or a Portion of the Debtors Assets [Docket No. 280]. The Bidding Procedures set forth the process by which the Company and its subsidiaries (collectively, the “Debtors”) are authorized to conduct an auction for the sale of all or substantially all of their assets under Section 363 of the Bankruptcy Code.

“The Bidding Procedures are for the purposes of seeking and evaluating offers for the assets, on the terms and provisions set forth in such Bidding Procedures, in addition to the bid contemplated by the proposed stalking horse bidder (“Stalking Horse Bidder”) affiliated with the Debtors’ debtor-in-possession lenders, as set forth in an asset purchase agreement dated as of October 18, 2016, among the Debtors and the Stalking Horse Bidder (the “Stalking Horse Agreement”), which remains subject to approval of the Bankruptcy Court. Bids must comply with each of the requirements set forth in the Bidding Procedures in order to be considered qualified bids. The Stalking Horse Bidder will be deemed a qualified bidder.

“Qualified bids must be received on or before November 28, 2016, at 5:00 p.m. Eastern Time, and must provide that the Sale will be consummated on or prior to December 14, 2016. If the Debtors receive no qualified bids for the assets (other than the bid of the Stalking Horse Bidder), the Debtors will not conduct the auction and will designate the bid of the Stalking Horse Bidder as the successful bid. If the Debtors receive one or more qualified bids, other than the bid of the Stalking Horse Bidder, the Debtors will conduct the auction on November 30, 2016, in accordance with the Bidding Procedures until the Debtors have selected the successful bid.”

Recent action has seen more than 110% piled on for shareholders of the stock during the trailing week, a rally that has pushed up against longer standing distributive pressure in the stock.

Now commanding a market cap of $2.9M, COSIQ is deep in the woods of navigating a Chapter 11 process. The next step will be collecting the bids above the pace of the stalking horse. We have seen many instances where that results in a paycheck for common shareholders. Those powering into the stock on Friday are thinking just that. We will update the story again soon. For continuing coverage on shares of $COSIQ stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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