Footstar, Inc.
Thesis
Footstar, Inc. emerged from bankruptcy with a large cash balance and no outstanding debt, making it an attractive investment opportunity. The company has significant net operating loss carry forwards that provide a tax shield for potential acquirers, and its proprietary brands, particularly Thom McAn, hold substantial value. The adjusted present value of the company under a liquidation scenario suggests a favorable risk-reward profile for investors.
Did it work?
The long thesis rested on embedded asset value — cash, NOL tax shields, and the Thom McAn brand — catalyzing an acquisition or liquidation that would deliver favorable returns. Nearly 19 years (230 months) later, the stock is down 3.4%, meaning the anticipated catalyst never produced positive shareholder value; at best the asset backing preserved roughly the original capital. With the entire horizon long past and no upside realized, the thesis did not play out.