Seth Klarman Increases Stake in Borders and Invests Heavily in SPACs

Somehow I missed this when it was released.

Baupost Group head and value investor extraordinaire (by that I mean 20% plus annual returns) Seth Klarman has increased his stake in Borders Group (BGP).

Baupost now holds 5.72 million shares, up from 4.9 million held in the May filing.

What is really odd about the filing is the number of "blank check coporations" or SPAC's Klarman owns shares in.

There is :

• Capitol Acquisition Corp. (CLA)- 2.1m shares
• BPW Acquisition Corp. (BPW)- 1.1 m shares (including warrants)
  
• China Holdings Acquisition Corp. (HOL)- 1.05m shares
  
• Columbus Acquisition Corp.- (BUS)- 750k shares
  
• GHL Acquisition Corp (GHQ)- 3.5m shares (including warrants)
  
• Global Consumer Acquisition Corp. (GHC)- 5.9m shares (including warrants)
  
• GSC ACquisition Corp. (GGA)- 850k shares
  
• Hicks Acquisition Corp. (TOH)- 1.9m shares
  
• Highlands Acquisition Corp. (HIA)- 525k shares
  
• Prospect Acquisition Corp. (PAX)- 3.4m shares (including warrants)
  

There are a total of 22 SPAC's listed in the filing. I could not find any relationship to them other than the investment by Klarman and Baupost. It is odd and warrants more looking into. It does seem a bit odd that the SPAC's are alleged to be "gambling" for ordinary investors but here we have a true value investor, and a very good one going headfirst into these things..

August 13HR Filing

Comments

[SPACpro:]

Big mistake to think that SPACs are gambling, when in fact SPAC common shares are very low risk and essentially like buying treasuries at a discount. Klarman is quite correct to buy. When one buys SPAC common you are backed by the SPAC trust account. Funds buy at a discount to trust that deliver them a worst case yield to liquidation (a SPAC that fails to get a merger approved) that is somewhat above alternative uses for their cash. The trust account is all invested in Treasuries and agencies. The spread to Treasury is quite opportunistic. In addition, as a common-holder you have essenstially a call on a to-be-announced IPO (of the merger target). You don't like it, you sell or redeem at trust. You like it, stay in and reap the upside. SPAC warrants are another matter, since they may expire as worthless, but they have tremendous leverage.

2008 Aug 23 03:08 PM