However, now that we have massive changes to tax law, I think it’s important to look at how some of this will affect MATR.
1. Corporate tax rate drops from 35% to 21%. A 40% reduction. Not that MATR makes a taxable profit, but it reduces the value of the accumulated deficit by 40% to a potential buyer. This is a $40M hit to MATR’s market value which should be reflected in the stock price in coming weeks.
2. Short-lived capital assets (most of what MATR capitalizes) can now be fully deducted in the year the asset is acquired. Residual depreciation of such assets still on the books can be deducted in year 2018. What I think this means is that the pathetic dodge of touting EBITDA every quarter is moot. A company like MATR is now operating/reporting on a cash-flow basis.
3. Accumulated deficits can only be used to shelter up to 80% of income. This reduces the value of MATR’s accumulated deficit a little bit more to a potential acquirer as the time value of money deflates the real value of the accumulated deficit. It’s not like the accumulated deficit is cash in the bank being invested. Its a nominal value that doesn’t change over time (except when a company adds more deficit to it or reduces it, by making a profit – not likely in MATR’s case).
4. Profitable companies are offering raises and bonuses to their employers because their taxes are going down. How will Mattersight compete?
Author/Condor here: I concur, completely.
And I’d note then that $2.40 on the NASDAQ OTC seems quite a bit more than fully valued, in view of all of this.
Well played, Bob. Well-played. Onward — with a friendly wave to Proskauer, here; and at the RIOT Blockchain site — smile.