What If Peter Kellogg’s Mercer Problem Is Really a Deep Value Case?

He owns almost 38% of the equity. The assets may justify a fight. The 2026 financing may decide whether that equity still matters.

Peter Kellogg already owns the problem.

He is not looking at Mercer International from the outside, trying to decide whether a stock under one dollar is cheap. He is already inside the situation. After the May 2026 purchases, his amended 13D showed 25.38 million shares, or about 37.9% of Mercer. The same disclosure showed entities controlled by him buying another 1 million shares between roughly $0.84 and $0.96 in May. At that size, the stock chart is not abstract. Every $1 move in Mercer is about $25 million on his disclosed position. A move from $1 to $3 is roughly $50 million of additional value. A move to $5 is roughly $100 million. If the next financing leaves existing shareholders with only a thinner residual interest, the same arithmetic turns against him.

The stock currently trades below one dollar, with a market value around $63 million. That alone does not make it interesting. Low prices are common in stressed situations. Mercer is interesting because Kellogg owns a very large equity position in a company where the assets may still matter, while the 2026 financing path may decide whether existing shareholders keep enough of those assets to benefit.

The latest numbers are rough. The first quarter showed a $52 million net loss, or $0.78 per diluted share. Cash was down to $84.5 million. Shareholders’ equity was negative. The German revolving facility needed a waiver after a leverage covenant breach. The Canadian facility matures in January 2027. The 2028 and 2029 notes sit in a credit market that already prices stress. This is not a hidden compounder. This is an asset-heavy company trying to buy enough time for its assets to matter again.

Kellogg’s problem is bigger than pulp prices. A pulp cycle can recover after shareholders have already been diluted. A mill can remain useful while the old equity loses most of the economics. Mercer now sits in that zone. The assets may justify a fight. The balance sheet can still make that fight expensive.

The assets, in today’s dollars

The accounting book no longer carries the thesis. At March 31, 2026, Mercer had $1.964 billion of assets and $1.969 billion of liabilities. With 66.983 million shares outstanding, that is roughly $29.32/share of accounting assets against $29.40/share of liabilities. The company also disclosed $834.8 million of current assets, $1.069 billion of net PP&E, and negative shareholders’ equity.

That kills the simple book-value pitch. The case has to move from accounting value to industrial value.

For paid subscribers:
We have the setup: the book value is gone, but the assets may not be. Below, we get into the work that matters:

• a recovery value test, with stress/base/better-cycle scenarios;

• the 2026 refinancing problem;

• what Kellogg can actually do with nearly 38% of the equity;

• the dilution math behind a rights offering, preferred stock, warrants, or bond exchange;

• and the unanswered questions that still matter before sizing a serious position.