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Aharon Levy  

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  • Merger Arbitrage Forum (Though Any Arb Can Be Discussed) [View instapost]
    "Make" of all this what you will, that is.
    Mar 12, 2015. 10:46 PM | Likes Like |Link to Comment
  • Merger Arbitrage Forum (Though Any Arb Can Be Discussed) [View instapost]
    A few new potential arb opps in the microcap world:

    Mart Resources. So much hair on this one it might as well be Sasquatch, which explains why MMT.TO is trading for 52 cents vs. the indicated takeout price of 80 cents/share. MMT is a Canadian oil junior (strike 1) with assets in Nigeria (strike 2) which has received a dainty, preliminary, nonbinding indication of interest from its JV partner, which doesn't yet have funding lined up (strike 3?).

    MEA is a scrap yard operator which is possibly trying to ward off a hostile (and needless to say, conditional) bid from its largest shareholder. MEA management is arguably not terrible; they painted themselves into a corner by overleveraging but have managed to sell enough assets to remain solvent. It's an opportunistic buy but one that's hardly unsurprising, since MEA's price performance has been terrible. Management appears to be digging in, which explains why MEA is at 51 cents vs. the 78 cent/share offer price.

    JPST/HNH--niche industrials. At $9.75, JPST is just a hair below HNH's $10/share offer price, which failed to move JPST shareholders (only around 2% have tendered). There has been an acrimonious proxy battle. But now the sides are potentially making nice, since HNH is keeping its offer open past its previously-scheduled expiration "Due to continuing discussions with the company....regarding a potential negotiated transaction." This sounds to me like a higher offer is potentially coming.

    Maybe of all this what you will.
    Mar 12, 2015. 01:08 AM | 4 Likes Like |Link to Comment
  • CVRs – The Good, The Bad And The Ugly [View instapost]
    WMGIZ is another CVR of which you're no doubt aware. Most risk for reaching its first milestone has been eliminated (FDA has issued approvable letter for product in question), and it'll make an interesting purchase if its price continues to gravitate (downwards) toward the sum of that initial payout. A guy can hope...
    Feb 15, 2015. 07:27 PM | Likes Like |Link to Comment
  • Chris DeMuth, Jr. Positions For 2015: Banking M&A, Milestone Payments, Litigation Results [View article]
    You're welcome. Just to give the brief pitch/caveat list, which may result in an immediate pass: similar litigation (taking of a gold mine), less far along in litigation so potentially less to seize from Venezuela if it comes to that, somewhat precarious financial condition, controlled by a Russian family, limited investor communication beyond SEDAR reporting.
    Dec 22, 2014. 06:10 PM | Likes Like |Link to Comment
  • Chris DeMuth, Jr. Positions For 2015: Banking M&A, Milestone Payments, Litigation Results [View article]
    A name with which you're probably already familiar: Rusoro (RML on the TSX-V) is similar to Gold Reserve, though less far along in litigation and with potentially shadier ownership. It trades at a significant discount and may or may not be of interest.
    Dec 22, 2014. 05:56 PM | 1 Like Like |Link to Comment
  • Spending Each Month Like A Value Investor [View instapost]
    Well worth reading, as is everything you write. Always good to be reminded that the how of buying is at least as important as the what.
    Dec 12, 2014. 12:20 PM | 1 Like Like |Link to Comment
  • Calculation Of Remaining Whiting USA Trust I Distributions [View article]
    There is also a bit of uncertainty as to when the trust will terminate because of:

    1) The possibility of some production being curtailed due to lower prices
    2) Decline rates
    3) Some vagueness about how quickly after the profit interest is exhausted the trust ends--"soon thereafter" is the language

    Handicapping this, I still say that production is likely exhausted in Feb 2015. I'm less certain about what happens then; if the trust follows the standard quarterly schedule, then maybe it's not terminated until its Q1 2015 filing, in May ("soon thereafter" unfortunately has enough wiggle in it for that).

    So the June puts still seem like the only "sure thing," and are (nearly) priced accordingly. There is of course the chance of production being shut-in (or declining excessively) and the trust living beyond Q1, but that would almost certainly result in a much lower distribution and, one assumes (bad idea in the case of this security), a much lower trust price leading up to termination.
    Dec 6, 2014. 07:05 PM | Likes Like |Link to Comment
  • Repeal Day Recipes [View instapost]
    I'll drink to that! And also to all opponents of tyranny recalling that freedom is not an abstraction but something embodied in actions.

    And perhaps a chaser, or maybe just another quick pour (it's the holiday season!), to recall that, because freedom shows itself in actions in the real world, it's not always as simple as we'd wish--or as the many proponents of "more freedom" declare. By its nature, liberty is often more than one thing.

    Many government policies would work better were it not for behavior, incentives, and human nature. But all of these are mutable, albeit with extraordinary effort! This effort may be characterized, depending on where one stands, as the workings of freedom or the grinding of oppression.

    Incentives, behavior, human nature, yes indeed. Just as the law in its majesty prohibits rich and poor alike from sleeping under bridges, so too does it allow rich and poor alike to put their fund's carried interest in an IRA. And for every Son of Liberty, there's the possibility of a Bull Connor...
    Dec 6, 2014. 06:27 PM | 2 Likes Like |Link to Comment
  • Seven Fat Years Of Event Driven Investing [View instapost]
    A pleasure as always to read your thoughts, Chris. I'd love to hear more about lessons learned from losses and opportunity costs realized. If there are any!

    Separately, AOS.V, as suggested by jrb2000 above, is indeed very interesting--a small company with a potential cash settlement greater than its current market capitalization, uncorrelated to the market, unpredictable in its timing, and largely unfollowed.

    But unless there's some going concern value (as there is with RVP), these situations, as you well know, can be tough. There's the question of management's ability to allocate the influx of capital, of course (AOS is in arrears on some African exploration expenses, and a cursory reading of its filings show that potentially these African properties could consume the entire settlement), and of whether a tiny company with limited funding options can stay solvent to realize full claim value.

    Not directly comparable, but at least rhyming: Cline Mining (now delisted from the TSX, trading on the Pink Sheets with negligible valuation--though there's always hope for a company claiming its met coal properties support an equity value of C$57 million vs. an equity market cap of well under $1 million) sued the government of BC for $500 million for the cancellation of several coal mining license. Its valuation was NPV-based vs. expenditure-based, but after 2+ years of legal wrangling (and 4+ years post-cancellation), it settled for ~$10 million.
    Nov 29, 2014. 05:45 PM | 2 Likes Like |Link to Comment
  • The American Capital Party Is Just Getting Started [View article]
    What comps are you using to get that 10x fee valuation for asset managers? I ask because that seems potentially a bit rich to me going forward.
    Nov 10, 2014. 08:41 PM | Likes Like |Link to Comment
  • Payment Solutions Could Be A Threat To Bank Of Internet [View article]
    I've found BOFI too dear to buy and too scary to short, so I'm wondering what in the above article you find a compelling further argument for shorting. I'm familiar with the Kerrisdale thesis, but have struggled to see BOFI as anything beyond a valuation short which has to some extent already played out. Good management--which Kerrisdale notes BOFI has--is both cognizant of their premium valuation and has, I'd argue, shown a sustained ability to grow book value and earnings rapidly and over long periods. Sure, it's possible that they have fired all the arrows in their quiver, but at p/tbv of ~3 are they now so compellingly overvalued? I guess it comes down to whether you view things like their financial crisis securities purchases as lucky one-offs or as evidence of a skilled and opportunistic management team.
    Oct 4, 2014. 03:35 PM | 2 Likes Like |Link to Comment
  • Payment Solutions Could Be A Threat To Bank Of Internet [View article]
    I'm not quite sure you fully made the argument--vs. the assertion--that BOFI is purely a niche player. That said, even if it is a niche player, how large is the niche? They have been growing rapidly, so clearly it's not yet filled. If the TAM of disgruntled upper middle class professionals is, say, 15 million--5% of US population--they presumably have a very long runway. If they're approaching market saturation, then that's a concern. But just being smaller than someone else with whom they might compete in some way doesn't really make a thesis. And saying there are other online banks also doesn't really constitute a thesis. Maybe your thesis is that, in general, online-only banks are inherently limited to being relatively small players. But without an estimate of what "small" means--is BOFI a $1 billion company? A $5 billion company?--and some more numbers, this isn't a thesis so much as a musing.

    So what makes BOFI's offerings, culture, and financial structure distinctive? What gives it an advantage or disadvantage? Why has it been able to grow so rapidly vs., say INBK (not to mention community and money center banks) and is this advantage/growth opportunity now coming to an end?
    Oct 4, 2014. 03:06 PM | 2 Likes Like |Link to Comment
  • Payment Solutions Could Be A Threat To Bank Of Internet [View article]
    BOFI has long seemed too rich for my blood, but I'm not quite sure what your thesis is here. Over the past ~5 years, BOFI's revenue has grown 5-fold, and their tangible book value per share has increased 2.5x. Online mortgage brokers existed 5 years ago. So did Paypal. So did Green Dot. BOFI was smaller than they are 5 years ago, and is still smaller, but they have all grown. This speaks, at the very least, to BOFI's ability to grow in a reasonably profitable way.

    As for sustaining itself, what about providing actual vs. potential churn numbers? If you set up direct deposit and automatic withdrawal, then you don't have to think about these things again. That likely makes current banking customers significantly stickier than you seem to think. And even if the addressable market for bank accounts is in decline and relatively small vs. the population (because of stickiness at other banks), it's still vast.

    Though I can't pretend to have more than a passing acquaintance with behavioral economics, I'd think natural biases come into play here much more than you're giving them credit for: inertia tends to win, and psychological barriers to change are much more significant than practical barriers. Certain transactions tend to lend themselves to rational consideration of options and switching costs, and certain transactions don't. Bank accounts, I'd say, fall into the latter category.
    Oct 3, 2014. 04:46 PM | 4 Likes Like |Link to Comment
  • Whiting USA Trust I Worth No More Than $1.38 Per Share - Will Expire Worthless First Half 2015 [View article]
    No fundamental reason for the increase beyond confused retail buyers and greater-fool reason it couldn't increase further, of course, since its value is untethered from fundamentals. My guess is that the next distribution will be lower than the previous one, with modest production decline, modestly lower energy prices than in the last quarter, and greater holdbacks for windup, and that this will be a downward catalyst. But the only hard catalyst is trust termination!
    Sep 29, 2014. 02:44 PM | Likes Like |Link to Comment
  • Long New Canaan [View instapost]
    As you say, we'll see. New Canaan has plenty of appeal to be sure, but...

    We live in Brooklyn and receive postcards every week from brokers desperate for inventory. So far serious crime is down a bit overall since de Blasio took office. Plenty of time for all of that to change, of course.

    But if modest crime, infrastructure and school improvements continue--that is, if New York becomes a slightly nicer place to live as has been happening for the past two decades or so--its appeal will likely hold. And since a large part of that appeal is having relatively low-salary workers available for a large variety of tasks, some (only some!) "confiscatory" and redistributive policies which allow lower-income people to continue to live here actually benefit richer people as well.
    Sep 15, 2014. 05:26 PM | 1 Like Like |Link to Comment