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  • Keating Capital: Misunderstood, With Catalysts To Come In The 2nd Half [View article]
    We've owned KIPO since early 2013, upon stumbling upon the company while doing research on GSV Capital. We too received such a message, and although certainly understand the appearance of a conflict, we stand by the research. It would be one thing to simply hear Mr. Keating's view of the company and then publish that essentially verbatim. That would indeed present a conflict of interest, and wouldn't be worth reading (or publishing for that matter), since a recommendation based solely on the comments of the CEO is not really a recommendation at all. But, a recommendation based on publicly available financial data, analyzed in conjunction with input from the company's CEO to clarify certain points of possible contention could be valuable. An example would be the company's valuation process, which has been criticized in the past. Level 3 assets are inherently difficult to value; this is a fact of life for firms such as KIPO, GSVC, or SVVC, and there will always be detractors, who certainly have a right to criticize the model, given its inherent risks. Our conversation covered this area of contention. Naturally, Mr. Keating defended KIPO's valuation methods, saying they are as rigorous and accurate as possible. But are they? Alone, that statement from the CEO means little if anything. But the data does mean something. Embedded within the company's SEC filings is data that shows that to date, for all but one of the company's that have exited KIPO's portfolio, each company was valued below its IPO price in the quarter prior to going public. And Mr. Keating noted that the last company, Corsair, was essentially a victim of timing, having attempted its IPO after Facebook's botched offering froze the market. We also note that the bulk of the points in this article are based on publicly available data, either from KIPO's SEC filings, or various press releases, not on statements made by Mr. Keating that we simply parroted back with a blind belief in their face value.
    Sep 2 03:07 PM | 1 Like Like |Link to Comment
  • Keating Capital: Misunderstood, With Catalysts To Come In The 2nd Half [View article]
    The 2 and 20 model refers not to overall expenses, which include things like general and administrative expenses or legal fees, but the investment advisor fee structure, which is based only on base management fees and incentive fees. As we noted within the text, on this front, KIPO's advisor fee model is in-line with the averages for the externally managed BDC sector.
    Sep 2 02:48 PM | Likes Like |Link to Comment
  • Keating Capital: Misunderstood, With Catalysts To Come In The 2nd Half [View article]
    There are several nuances to SharesPost and Second Market (their chief competitor). The chief issue with these two sites is that because they exist to link buyers and sellers of the company in question, and there may very well be limited current and complete financial information for the company in question. As the article mentions, access to direct financial information is a must for KIPO, and it could be a requirement for many other investors as well, thus limiting their ability to use these sites. And from a user perspective, these 2 sites require investors to be accredited, meaning they need to earn more than $200,000 per year ($300,000 with a spouse) or have $1 million or more in assets. That limits the potential user base, given that not all investors can meet those thresholds, but still want to have exposure to privately held companies.
    Sep 2 02:41 PM | Likes Like |Link to Comment
  • Keating Capital: Misunderstood, With Catalysts To Come In The 2nd Half [View article]
    To our knowledge they are unrelated
    Sep 2 02:31 PM | Likes Like |Link to Comment
  • JetBlue: Double-Digit Upside As Takeover Prospects Highlight Undervaluation [View article]
    United and American use Embraer aircraft in their fleets as well
    Aug 23 12:20 PM | Likes Like |Link to Comment
  • U.S. Cellular And TDS: Buy The Milk, Get The Cow On The Cheap [View article]
    Based on our understanding, TDS is able to deduct the dividends it receives from US Cellular, due to the dividends received deduction (DRD) clause of the tax code. The DRD clause allows for a company to avoid triple taxation of the dividends it receives, depending on its ownership stake in the company paying the dividend. Because TDS owns more than 80% of US Cellular, it is able to deduct 100% of dividend payments (a stake of below 20% grants a 70% deduction, stakes between 20 and 80% get an 80% deduction, and stakes above that receive 100%)
    Aug 22 07:41 PM | 1 Like Like |Link to Comment
  • JetBlue: Double-Digit Upside As Takeover Prospects Highlight Undervaluation [View article]
    Perhaps, but what happens when American makes an offer? The board has a fiduciary duty to uphold to shareholders, and the attitude against a merger may not hold up when they offer $9 or $10 for the company.
    Aug 22 01:31 PM | Likes Like |Link to Comment
  • JetBlue: Double-Digit Upside As Takeover Prospects Highlight Undervaluation [View article]
    Paul, several points to make: First, although JBLU's management team is committed to preserving the comapny's culture, the board has a fiduciary duty to the company's investors. If American (or maybe US Airways) were to offer something with a meaningful premium, would the desire to preserve the culture be enough to overcome shareholders that want to see a good return on their investment? Second, a foreign company cannot buy JBLU; federal law bars any foreign entity from owning more than 25% of a domestic airline (http://slate.me/1d5LYVF), this is why Virgin America is only 25% owned by Richard Branson, with the remainder owned by domestic investors. At most, JBLU could sell a piece of itself to a foreign carrier looking for a deeper strategic presence in the US. As to the issue of costs, we believe that JetBlue's premium offering, if executed correctly, could provide for solid cost leverage. The spread between typical transcontinental premium fares and what JBLU charges is quite wide, and with proper execution, they can likely undercut legacy carriers, all while boosting margins above their present rates. We think that their Q4 results will shed some good light on this when they give guidance for 2014. As for CPA, we think they have a good position in the market, and they've been posting what we think are good results, with costs under control, a decent (for the industry) balance sheet, and good exposure to growth in Latin America.
    Aug 21 04:59 PM | Likes Like |Link to Comment
  • City National: Expanding The Franchise And Improving Its Quality [View article]
    Thank you, glad to see the piece was enjoyed
    Aug 14 11:01 PM | Likes Like |Link to Comment
  • U.S. Cellular And TDS: Buy The Milk, Get The Cow On The Cheap [View article]
    Yes, that was a special dividend paid by US Cellular to distribute the proceeds of recent asset sales to shareholders, but the net result is that almost all of that went to TDS
    Aug 9 12:39 AM | 1 Like Like |Link to Comment
  • US Airways: A Buy Before The Transformation Into American Airlines [View article]
    Thank you; we believe that US Airways' management team has learned from the America West years that it is essential to include labor in the process, and view them as an asset, not a liability. To date, they've shown this to be the case, and hopefully it will remain so once the new American Airlines is officially created
    Aug 2 08:42 PM | 1 Like Like |Link to Comment
  • US Airways: A Buy Before The Transformation Into American Airlines [View article]
    AMR's equity is a special situation; most Chapter 11 restructuring's don't include recovery for existing equity holders. AMR's old shares have risen due to the rally of US Airways' share price. The merger is structured as an equity deal: AMR's various stakeholders are entitled to 72% of the new American Airlines Group (the name of the combined holding company), and will all be receiving stock to satisfy their various claims. However, the dollar value of the AMR's creditor claims is fixed, as is the 72% due to AMR's stakeholders. Once those claims are paid, and everyone else is paid, whatever is left will go to AMR's old shareholders. With US Airways' stock up over 66% in the past year, AMR's old shares have risen as well alongside them
    Aug 2 08:40 PM | 1 Like Like |Link to Comment
  • MKS Instruments: Rebounding Profits And A Pristine Balance Sheet Will Not Be Ignored For Long [View article]
    It is easy to pick time periods in which MKS has underperformed or not moved. We could say MKS has fallen by more than half since March 2000, and while that statement may technically be true, MKS traded at well over $60 at that time, inflated by the dot com bubble. Since going public in May 1999 (http://yhoo.it/19rzKCs), MKS has risen more than 94%, while the S&P 500 is up less than 57% (http://yhoo.it/19rzKCs).
    Jun 22 09:48 PM | Likes Like |Link to Comment
  • Why We Bought Microsoft: Because 2013 Should Determine Whether Ballmer Stays Or Goes [View article]
    The question is how to define "eventually." At some point, if there is a disconnect between a company's financial results on paper and its stock price, someone needs to be held accountable. It would be one thing if Ballmer was a new CEO who needed time to reshape his company. But he has been CEO for over 13 years, and since then Microsoft has underperformed all its relevant comparisons. Arguments can be made that Microsoft was overvalued when Ballmer took control of the company, but so were the NASDAQ and S&P 500.

    As for Ballmer's behavior, we agree that it has a key influence onf Microsoft's revenues and profits. And it is precisely that behavior that has caused Microsoft to leave billions on the table, as the company continued to pour money into online services and R&D, with little to show for either.
    May 8 09:35 PM | 1 Like Like |Link to Comment
  • Why We Bought Microsoft: Because 2013 Should Determine Whether Ballmer Stays Or Goes [View article]
    We would hesitate to compare Microsoft's board to that of HP (but to be fair, there has been a great deal of turnover within HP's board, given the fact that the level of value destruction at HP far exceeds that of Microsoft. That being said, we do believe that the board has given Ballmer and his lieutenants too much latitude in managing Microsoft, and that it should take on a more vocal role in addressing the challenges facing the company.
    May 8 09:27 PM | 2 Likes Like |Link to Comment
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