Ratel Capital

welcome to my random thoughts! Not investment advice!

@youngermunger7 DM not open :-)

@RatelCapital1 Fire away

@negligible_cap Is there some reason that the significant owners (the family) had to pay such a large premium. I can't recall seeing this large of a premium in a take private deal (with equity being rolled over)

*UTZ TO BE TAKEN PRIVATE AT $14.25 PER SHARE IN CASH 91% premium paid taking $UTZ private. Chip valuations are really getting out of hand here.

@WaterworldCapi1 @InvestLikeBest I see that he does talk about the LNG risk.

@InvestLikeBest Thanks. Tons of extremely difficult to forecast items 2+ years out is my point. Doesn't mean he's wrong just that it's a complex adaptive system difficult to forecast.

Possible he is right but what he's saying is completely impossible to forecast, it's just a blind guess basically. If for no other reason, natural gas output is much more tied to associated oil production. Anyways just buy $TLN.

@WaterworldCapi1 Does he talk about the risk that the government shuts down or slows down approval for LNG exports in the bull scenario?

Between $OBE and $CLW and $SNX - I am long Clearwater!

The long line of NG gas will be expensive in 2 years. I have found it a very difficult thesis to get correct.

@liensofnewyork Restaurant week?

I have no airline points. My credit card is free. Chipotle doesn't have my email address. I not giving Starbucks free working capital. I'm not downloading that app. I'm not using that referral code. I don't want to see the restaurant week menu. I'm not subscribing to save. I'm not accruing. I'm free

@blindspotvalue If you read the reports there is skeptical commentary on the RISI price increase. I think you will need to see a few months of confirmation before anyone buys the number. It’s understandable given the history here. I think $100-125mm ebitda is possible for next year.

@RatelCapital1 I agree.. very few believe the mid cycle number - looking at historical EBITDA/t even adjusting for re-allocated overhead/conservatism gets you confortably above $100M.

Another interesting paperboard name.. $CLW. Pure-play bleached paperboard manufacturer (1.4Mt/5Mt industry capacity or 30% share) across 3 mills. Steady demand industry (LSD% growth). Sold tissue biz for $850M in H2/24 (6x EBITDA), a lower ROA/more volatile business and bought 3rd mill (Augusta) for ~$700M. Right into a brutal downcycle…

@Antifunbw @TheHawkStocks Mine was 100 percent human slop

@RatelCapital1 @TheHawkStocks This was clearly written by AI with zero human thought behind it. Just ignore it. For the record every time you read: “This isn’t X, it’s Y” - AI slop

$ABVX quiet period is over. Phase 3 is behind us. A year of rumors is behind us. Credible reporting says there is more than one bidder at the table. Then they upsized the raise. That cash is not defense. It is leverage. It means they can walk. It means they can run this alone into UC and Crohn’s and let big pharma watch the patent cliff get closer every quarter. A seller who does not need to sell sets the price. Any day now. $ABVX $XBI $NKTR $RVMD $CYTK $SLS $BCRX $ERAS $VERA

@blindspotvalue the sell side is at approximately $100MM for 2028 EBITDA. Very few people believe the $200MM mid-cycle number. Which is the opportunity. I laid out part of my thoughts. The set up seems interesting although the appetite for small cap value with leverage is non existent.

Long-term guide is $200M+ EBITDA and $100M+ FCFE, meaning current valuation is super depressed (sub-3x EBITDA and 40%+ levered FCF yield. Even with significant haircuts for conservatism is super cheap and whole EV now below Augusta purchase price… I view $45+/share as possible even at 5x EBITDA. Quite compelling but some uncertainty on debt refis/duration of downcycle key unknowns.

Part 4 on $CLW: the hopeful turn in SBS pricing. The main question was whether tighter supply would show up in demand, backlogs and pricing. Over the past several months, it has—although you would not have known it from Clearwater’s reported financial results - which were not great. On Smurfit Westrock’s April 30 call, Tony Smurfit said demand had strengthened rapidly across most paper grades, with SBS reaching a sold-out position much faster than management expected. In his words, “basically all paper grades are in effectively sold out position right now.” Asked whether the improvement merely reflected pre-buying ahead of announced price increases, he acknowledged that possibility but said it was not something $SW was seeing to a significant degree. Instead, he pointed to the cumulative effect of capacity leaving the system over the prior 18 months. $SW is also actively moving customers from certain CRB products into CUK and SBS where those grades can provide equal or better performance. They are driving the substitution (which it must be pointed out is mostly due to approximate price parity) Clearwater described similar conditions in their call: strong backlogs across its paper machines, cup and poly-coated products sold out with backlogs well beyond normal levels, and sufficient customer demand to operate its three-mill network fully at the revised production level of approximately 1.2 million tons for the balance of the year. Here is the disconnect: none of this had yet appeared in Clearwater’s reported earnings or guidance. Q1 adjusted EBITDA was only $2 million. Q2 guidance called for adjusted EBITDA between breakeven and negative $10 million, reflecting the Lewiston maintenance outage and higher input costs. Full-year assumptions still included approximately $70 million of carryover pricing pressure from 2025 and explicitly excluded any benefit from Clearwater’s announced price increases or future improvements in RISI pricing and operating rates. The operating commentary suggested that the market was tightening. The reported numbers and guidance still reflected the prior deterioration. (This is traditionally how CLW provides guidance with respect to pricing) Meanwhile, price increases broadened across the industry. Clearwater moved first in February, announcing $60 per ton on cup grades and $50 per ton on other products. Cup and extruded grades had the stronger backdrop; implementation in folding carton remained difficult while the market was still visibly oversupplied. However, By late May: $GPK announced $60 per ton on SBS and CUK, effective June 8. Sappi announced $60 per ton on SBS. $SW announced increases of 4%–6% across CUK and SBS, effective June 15. Together, Sappi, SW, GPK, CLW represented the vast majority of SBS production. The Sappi announcement was particularly notable in my view. Sappi was still ramping the Somerset machine whose approximately 500,000 tons of additional capacity had created much of the industry imbalance. A producer with a new machine to fill would ordinarily have a strong incentive to compete aggressively for volume. Our interpretation—not something Sappi stated explicitly—is that its decision to announce a price increase suggested management preferred to ramp the machine into a more stable pricing environment rather than continue competing for volume at progressively lower prices. That did not guarantee implementation. But after two years of severe pricing pressure, it was a meaningful hopeful signal. Sell-side channel checks remained skeptical, and given the reported financial results, reasonably so. The prevailing view was that the announcements represented attempts to recover higher input costs rather than evidence of a genuinely tighter market. Surveys continued to describe SBS as over-capacitized and suggested that folding-carton implementation would be difficult. Announced increases fail regularly in oversupplied commodity markets. The producers still had to prove that customers would pay. In July, the RISI index reflected increases of $60 per ton on SBS cupstock and $40 per ton on SBS folding carton—the first upward move following roughly $200 per ton of cumulative declines. One monthly print does not establish a complete cycle, and folding carton remains more competitive than cupstock. None of this is financial advice. Please conduct your own due diligence. Feedback and pushback welcome.

Part 3 on $CLW: what is actually happening in the SBS market. For the past year, sell-side commentary on SBS has repeated the same three points: the market is oversupplied, there is no pricing power, and unclear who would cut supply. All three were true in 2025. And in 1q2026, cost pressures added a fourth point. The situation looked bleak. Often that's the best time to invest in cyclical industries. We believe the market has the potential to correct faster than the prevailing consensus appreciates. The evidence has accumulated slowly over the last few months. Start with the main issue. Oversupply from Sappi. Into largely flat demand, Sappi converted and expanded Somerset PM2, bringing roughly 500,000 tons of annual SBS capacity into a North American market of approximately 5.7 million tons—nearly a 10% increase in industry supply. This was a decision made 4 years ago. At the time it looked smart - margins were very high. In hindsight it looks like a terrible decision. Operating rates fell to approximately 82% by Q1 2026, pricing declined sharply, and Clearwater management estimated that industry supply exceeded demand by approximately 400,000–600,000 tons. Here is what has happened since: February 2026: Smurfit Westrock $SW permanently closed a 127,000-ton SBS machine at La Tuque, Quebec, along with its associated Pointe-aux-Trembles extrusion facility. This was permanent capacity removal—not temporary downtime. February 2026: Clearwater attempted a price hike due to cost pressures. A small portion went thru on Cups but the rest did not go thru due to oversupply. April 2026: Clearwater restructured Cypress Bend, reducing mill roles by approximately 20% and targeting $8–12 million of annual savings. $CLW reduced planned network production to approximately 1.2 million tons versus 1.4 million tons of stated capacity. Management says customer demand is sufficient to run fully at that revised level for the balance of the year. May 2026: Nippon Dynawave suspended production at its Longview, Washington mill following a chemical-tank implosion that killed 11 workers. The human loss matters far more than any investment implication. From an industry perspective, however, a significant liquid-packaging and poly-coated producer remains offline with no announced restart date, and poly-coated lead times have extended to approximately 12 weeks. (However, not a big piece of the market) By Clearwater’s estimate, first-half actions removed approximately 280,000–300,000 tons of production or capacity—roughly half of the estimated excess supply. RISI forecasts industry operating rates approaching 90% by year-end, the level management believes begins to support a return toward cross-cycle margins. Two demand tailwinds have helped as well. First, bleached-paperboard imports are forecast to decline another approximately 12% in 2026 after falling last year. Tariffs, currency movements and higher European energy and transportation costs are making imported board less competitive. Second, substitution has shifted in SBS’s favor. After two years of price declines, SBS is now cheaper than CUK on a per-ton basis, despite higher manufacturing costs and a superior print surface. It is also cheaper than CRB on a per-square-foot basis because heavier CRB is generally required to match SBS performance. SBS shipments were approximately flat in Q1, while CUK and CRB shipments declined roughly 3%. Clearwater says CPG customers are actively shifting business from CRB to SBS and that there are “very few applications” where substitution is not possible. The company is also sold out in cupstock and poly-coated grades. None of this is financial advice. Please conduct your own due diligence. Feedback and pushback welcome.

@CapitalObserver No position in the name but I am surprised it hasn't rallied along with the increased positive news on Chatgpt's new model.

$ORCL doesn't rally on AI days or software days

@InvestSpecial thanks for sharing. How have you thought the quality of VIC has been over the last 2-3 years?

$PESI has 2x’d since the May lows. One of the better VIC pitches in recent years. Story is developing more or less as expected. PESI is the preferred contractor for basically all off-site grouting coming out of Hanford. Still looks like there is more juice to squeeze here.

Part 2 on $CLW - this time focusing on management Some thoughts on current management at $CLW. Arsen Kitch is a relatively young, smart and capable CEO. He comes across as very knowledgeable in earnings calls and the expert commentary we have seen generally agrees with our view. It's hard to argue the timing of the Augusta acquisition was good — it materially increased Clearwater's exposure to SBS near the top of the cycle. But given the assets the company now owns and the current industry setup, we believe he and the CFO and the BOD can lead $CLW out of this cyclical low point. He has handled the unglamorous work of the downturn well: more than $50 million of cost reductions in 2025, followed by the difficult Cypress Bend restructuring, which is expected to generate another $8-12 million of annual savings. Clearwater has also won important new customers that should translate into sales over the next couple of years. The proxy reports that Kitch beneficially owns approximately 294,000 shares, or 1.8% of the company. He has meaningful skin in the game. That said, he is very highly paid relative to Clearwater's size and history of shareholder returns. Reported total compensation was approximately $5.2 million in 2025 and $6.0 million in 2024. The Board has historically been very generous with compensation — potentially a function of the peer group in the proxy. Clearwater's prior peer group had a median market capitalization of approximately $2.2 billion and a median enterprise value of approximately $3.0 billion, versus roughly $300 million and $600 million for $CLW. Clearwater was the smallest company in its own selected peer group. The latest proxies show improvement: the Board has revised the peer group to include companies more consistent with Clearwater's reduced scale. Shareholders have expressed some concern as well. The 2026 stock incentive plan, which authorized a new reserve of 2 million shares — approximately 12.5% of shares outstanding — received only 54.7% support among shares voted. However, shareholders have voted very strongly in favor of the current BOD. None of this is financial advice. Please conduct your own due diligence. Feedback and pushback welcome.

We have owned $CLW on and off over the past decade. Historically, it has been a mediocre company with weak management execution, questionable capital allocation and essentially no durable shareholder value creation across several industry cycles. The stock has moved up and down, but long-term shareholders have little to show for it. Management, by contrast, has continued to get paid. Clearwater was previously overleveraged after making a large and poorly timed investment in tissue capacity. That investment failed to generate the expected returns and contributed to a subsequent leadership change. COVID then created an extraordinary surge in demand for toilet paper and other tissue products, materially improving earnings and helping the company reduce leverage. An external event repaired much of the balance-sheet damage created by prior capital allocation. By early 2024, $CLW was already evaluating strategic alternatives for its tissue business. That created a credible path to sell tissue and then pursue a sale of the remaining company, whose principal assets would have been its two legacy SBS paperboard mills. In our view, that was the better strategic outcome: sell tissue, decline to make another large cyclical investment and market the remaining paperboard company to a strategic buyer. Given what followed, shareholders would likely be in a significantly better position today. Instead, management chose to expand aggressively in paperboard. On May 1, 2024, $CLW closed the approximately $700 million acquisition of Graphic Packaging’s Augusta, Georgia mill. The transaction added roughly 600,000 tons of annual bleached-paperboard capacity, increased Clearwater’s paperboard capacity by nearly 75%. Augusta itself was not necessarily a bad asset. The problem was the strategic decision, the purchase price and the point in the cycle. Clearwater materially increased its exposure to merchant SBS while significant new industry capacity had already been announced. Sappi’s Somerset expansion was expected to add substantial SBS supply, with production beginning in 2025 and ramping thereafter. Graphic Packaging’s commentary after the transaction is instructive. GPK monetized Augusta at an attractive price, exited most of its open-market bleached-paperboard exposure and reduced a source of earnings volatility. Reading GPK’s earnings transcripts, it is difficult to avoid the conclusion that management viewed the sale as an excellent strategic outcome. The asset may have been sound, but the timing of the sale was excellent for GPK. Clearwater took the other side of that trade. Only after Augusta had closed did $CLW announce, in July 2024, the sale of its private-label tissue business to Sofidel for $1.06 billion. The transaction closed in November 2024 and allowed Clearwater to repay the debt associated with the Augusta acquisition. This was a smart capital allocation decision - a fair price which benefited both buyer and seller. Essentially $CLW doubled down on paperboard just before pricing weakened, new capacity entered the market and industry utilization deteriorated. The result was familiar: another major capital-allocation decision made at the wrong point in the cycle, followed by elevated leverage, depressed earnings and continued poor shareholder returns. That history is important because the current investment case is not based on exceptional management or a high-quality compounder. It is based on the view that the earnings power of Clearwater’s paperboard assets is materially higher than current results imply—and that recent positive moves in RISI SBS pricing may begin to expose that gap. None of this is financial advice. Please do your own due diligence. Feedback and pushback are greatly appreciated. I will provide more commentary shortly.

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