Disclosures

HC2 Holdings Inc

I, Sarkis Sherbetchyan , certify that this report reflects my personal beliefs about this company and that no portion of my compensation was, is or will be directly or indirectly related to the specific recommendations or views discussed in this report.

Disclosure

  • B. Riley & Co., LLC, or any of its affiliates, does and seeks to do business with companies covered in its research reports.
  • A portion of this analyst’s compensation is based on the sales, trading and investment banking activities of B. Riley & Co., LLC.
  • B. Riley & Co., LLC, or its affiliates, beneficially own 1% or more of any class of common equity securities of the company covered in this report.
  • This report may be distributed by FBR Capital Markets & Co., an affiliate of B. Riley & Co., LLC and as such constitutes third party research. For additional information, please visit http://www.fbr.com/disclosures.
Disclosure Chart

Ratings Distribution as of August 21, 2017
Rating Number of Companies Percent of Total
Buy 145 74.4%
Neutral 49 25.1%
Sell 1 0.5%
Total 195 100%
% with Investment Banking Relationships
Rating Number of Companies Percent of Total
Buy 23 88.5%
Neutral 3 11.5%
Sell 0 0.0%
Total 26 100%

Explanation of B. Riley & Co. LLC's Rating System

  • Buy: We generally expect “Buy” rated stocks to have an above-average risk-adjusted total return over the next 12 months. We recommend that investors buy the securities at the current valuation.
  • Neutral: We generally believe “Neutral” rated stocks will have an average risk-adjusted total return over the next 12 months.
  • Sell: We generally expect “Sell” rated stocks to have a below-average risk-adjusted total return over the next 12 months. We recommend that investors reduce their positions until the valuation or fundamentals become more compelling.

Risks and Considerations

  • Acquisition/Integration - The Company actively evaluates potential acquisitions as part of its growth strategy. Acquisitions pursued by the Company could be dilutive to financial results and result in a difficult, dilutive or expensive integration.
  • Acquisition/Integration - The Company recently completed acquisition(s). If the Company fails to successfully integrate the acquisition, the deal may lead to disappointing returns.
  • Growth Plan - There are many factors that may impact the company's ability to achieve its stated growth objectives.
  • Insider Ownership - Directors and executive officers collectively own a significant percentage of the Company. While this may align interest with other shareholders, investors might view a future sale by any director or officer negatively.
  • Liquidity and Solvency - The Company has a significant debt load and interest expense, which may hamper its ability to invest in the business. Also, the Company may need to raise additional capital in the future and access to such capital is difficult to predict.
  • General Industry - The Company could miss our estimates and/or their financial guidance.

Additional Risks and Considerations

    • Competition – The company operates in a highly competitive environment for acquisition opportunities, including from public companies with similar business strategies, investment partnerships, blank-check companies, private equity firms, among others.
    • Economy – A decline in economic growth or economic disruptions could have a negative impact on the company’s operating units and financial results.
    • Foreign Currency Risk – The company has operations outside of the U.S., primarily in the U.K., exposing the company to foreign currency exchange rate fluctuations, which could adversely impact the company’s operations and/or financial condition.
    • Holding Company – The company is a publicly traded holding company and its equity interests in operating subsidiaries and other investments comprise primarily all of its assets. As a result, the company’s principal revenue and cash flow is distributions from subsidiaries, which may be limited by law or by contract in making certain distributions to the holding entity. Further, the holding company’s ability to service debt and/or to finance future acquisitions are dependent on the ability of subsidiaries to make upstream cash distributions.
    • Insurance Operations – The company’s insurance operations are subject to legal restrictions and regulatory requirements, including the amount of statutory capital that must be held to maintain financial strength. Further, financial results from the insurance operations could be negatively affected if actual performance differs from management’s assumptions and estimates.
    • International Operations – The company operates in international markets and could in the future pursue additional investments in foreign entities. Exposure to international laws, regulations, politics, taxes, and currency poses risk to the company’s operations.
    • Minority Investments – The company owns minority interest in a number of entities, over which the company does not exercise control and/or has little to limited influence. As a result, the company may be unable to direct or manage those operations to drive value.
    • Loss of key personnel – The current management team will be instrumental in executing the company's growth strategy. The resignation or loss of a key member of management would have a negative impact on the company.
    • Significant Stockholder Security Sales – Future sales of substantial amounts of common stock by holders of Preferred Stock or other significant stockholders could adversely impact the market price of the company’s common shares.
    • Refer to the company's SEC filings, particularly its 10-K filing, for a discussion of additional risks.