Unlocking Value in IDT (IDT, GNE)

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Many investors may not know what IDT Corporation (NYSE: IDT) unless they have been around for years and years.  The company has three units: Telecom Platform Services, Consumer Phone Services, and Genie Energy.  Most think of the company as a telecom outfit and that is about to more of the case as the company is looking unlock value.  Today came word that a tax-free spin-off of Genie Energy Ltd. has been filed for via an initial registration statement.  Genie will apply to have its Class B common stock listed on the New York Stock Exchange under the ticker symbol “GNE”.

Some of this action was known.  Back in June, the company raised IDT’s cash dividend by almost 5% to $0.23 from $0.22.   approximately five percent from $0.22 per share to $0.23 for the third quarter of IDT’s 2011 fiscal year.  When it raised the dividend, it also noted that it had approved the purchase by the company of 302,000 shares of Class B Common stock from Howard Jonas at $24.83 per share, which still left him with 23.67% of the total outstanding capital stock of IDT.  The company had also previously noted the consideration of this and another spin-off.

Genie Energy consists of the following:

  • IDT Energy, an energy services company that resells electricity and natural gas to residential and small business customers in New York, New Jersey and Pennsylvania;
  • A 99.3% interest in Genie Oil and Gas, which consists of (1) American Shale Oil Corporation, which holds and manages a 50% interest in American Shale Oil, LLC, an oil shale initiative in Colorado, and (2) an 89% interest in Israel Energy Initiatives, Ltd., an oil shale initiative in Israel.

Each IDT stockholder will receive one share of Genie Class A common stock for every share of IDT Class A common stock and one share of Genie Class B common stock for every share of IDT Class B common stock.  As of August 25, 2011, there were a total of approximately 1.6 million shares of IDT Class A common stock, and approximately 21.1 million shares of IDT Class B common stock issued and outstanding.

IDT did note that it expects to execute the spin-off in late October 2011 after the registration statement becomes effective.

IDT also noted that it has received a Private Letter Ruling from the IRS and will receive an opinion from PriceWaterhouseCoopers LLP as to certain related matters on which the IRS does not rule, both of which confirm the spin-off as a tax-free entity.

No action is required by IDT stockholders to receive the shares of Genie common stock.

IDT shares are responding to the move.  The stock is up over 6% at $21.18 against a 52-week range of $13.43 to $30.46.  The market cap after the gains today is still only $487 million.

JON C. OGG