Description

This idea dovetails to another recomendation for Liquid Audio(LQID). If you liked Blue320's idea to buy LQID as a possible liquidation play this allows you to buy LQID even cheaper by buying HITS.
First some background, HITS was a another liquidation play primarily run by Barrington Capital Group(BCG). BCG bought a 36% stake in HITS and basically shutdown the company. They fired all the employees and sold off all the assets. They distributed a $3/sh. dividend and kept the remaining shell with no employees except 3 principals from BCG who make a nominal salary. The result is a company with $2.69/sh. in cash with a zero burn rate and some significant NOLs. With the hits trading for $1.95/sh. you can buy it at 72 cents for a dollar of cash.
Now on to LQID, in September HITS announced they had bought 515,000 shares of LQID between $2-2.40/sh. This is in addition to the shares bought by the other partners of BCG. If Steele/BCG succeed in getting LQID to liquidate some of the cash will go into HITS coffers. By buying HITS you can participate in the liquidation OF LQID by using discounted dollars of HITS. This could even be a tax free transaction for HITS because of the HITS' NOLs. I know NOLs are hard to use so this benefit might be problematical.
The problem with this whole scenario is that HITS management(BCG) doesn't intend to liquidate HITS but instead to use it as an aquisition vehicle. It might be some time before you can realize the intrinsic value of HITS. However BCG hasn't ruled out an ultimate liquidation and since BCG is by far the largest shareholder it appears to be unlikely they would do anything against their own self interest. Also HITS is pretty illiquid so it is hard to accumulate.

Catalyst

The catalyst is buying dollars for a discount and then getting the benefit of the LQID play.