I added meaningfully to my $JAKK position in the low $12s. Short thread for anyone still following the name or doing work. I think r/r is getting too good to ignore as the Company gets caught up in the small-cap selloff
The thesis hasn't really changed since my initial Substack writeup. In fact after a stellar 2Q, the market was figuring out the potential here and the stock rallied to $15.5 - a very rapid rerate from $9-10/share pre-earnings
Yet now the stock is off almost 25% from recent highs... to be fair there have been some market-related updates; shipping/logistics challenges around the globe seem to have gotten a bit worse, and some COVID worries, but positive news too, such as the expanded child tax credits
And the overhang from the Senior Note conversions has completely been removed, as can be calculated from the disclosure in the 10-Q. $14mm Face Amount as of 2Q'21 quarter end, and $13.7mm in total converted in July and August (ref. 8/9/21). $0.3mm remaining must be gone by now. 
I still estimate $60-65mm of EBITDA for 2021 as a realistic base case. This implies $35-40mm of FCF after capex, interest and taxes (so maybe slightly less assuming some W/C use). This is 30-35% FCF yield to the fully diluted market cap
Leverage is pretty manageable too. Assuming $60mm EBITDA, $JAKK is only levered ~1.8x on a gross basis. And guess what? Mgmt. wants to continue paying down the Term Loan with cash flow. A lot of deleveraging is coming in the next ~6 months
I really struggle to find names cheaper than this in the market given the setup here. Of course the stock may even fall further in the near term, but I'll be ready to add opportunistically on dips.
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