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Jan Martinek
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Former investment banker spent 17 years in London covering CEE region. Now runs private family office.
My company:
Fit Investment Ideas
My blog:
Fit Investment Ideas
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  • Fondul Proprietatea – How To Make Money In Tender Offer

    Fondul Proprietatea, the largest closed end fund in the world, has been under pressure from its activist investors. The largest shareholder in the fund is Paul Singer´s Elliot Associates, who has 15.2% stake in the fund valued at USD 550 mil. It is Paul Singer´s third largest position.

    In September shareholders passed a resolution based on which the Franklin Templeton faces termination of the management contract if the NAV discount does not decrease to 15% (from current 25%) in two thirds of trading sessions between October 1, 2014 and June 30, 2015. To comply with this the Fondul share price needs to rice another 13% to 1.07 Ron per share.

    Templeton is working hard to achieve this mission. At the moment they have announced three steps strategy to increase the Fondul share price: (i) the fund started the tender offer in which it will buy 6.4% of its shares at 18% premium to the market price, (ii) after completion the fund will start 6th round of buyback in which it will buy 2% of its shares, (iii) the fund announced it will list its shares in London to promote liquidity.

    This is the second tender offer; the first tender offer was competed one year ago. It had a slightly smaller size (600 milion shares vs 750 milion shares), but was done at a higher premium to the market (38% vs 18%). The result of the tender was a significant gain for Fondul shareholders - they sold 5% of their stake at substantial premium to the market and saw their remaining shares appreciate by 19%. In total the tender offer delivered 21% return to shareholders over 2 months period. Below are the main data points:

    Summary of the First Tender Offer

    DATEActionShare price
    24/9/2013Pre announcement share price0.72
    25/9/2013Announcement of the intention to purchase

    600,000,000 through tender offer

    0.75
    10/10/2013Announcement of the regulatory approval and buyback details0.78
    15/10/2013Buyback starts0.78
    4/11/2013Buyback completed0.81
    3/12/2013One month after the buyback0.86

    Conclusion

    The current tender offer was announced on 20. 10. 2014. The pre announcement share price was 0.90. Since the announcement the share price moved to 0.94 - which represents 4.4% gain. During the previous tender offer the share price increased by 19%. Most of the increase came after the end of the tender - when the investors were buying back the shares they sold in the tender. Of course the terms of the tender offers are not identical and therefore magnitude of the share price growth may differ. If the situation would repeat again, there is still 15% on the table. Not bad two months return. Taking into account the other planned activities (buyback and London listing) I believe that it is very likely that Templeton will achieve its mission and will be able to retain the management contract.

    Nov 11 10:10 AM | Link | 1 Comment
  • Facts About Kerrisdale

    On Thursday 10/2 Kerrisdale started a rumor, that it is shorting GSAT. The stock went down by 30% that day. They announced that on 10/6 they will present their views on GSAT. Should GSAT investors be worried? We looked at Kerrisdale web site to check, how they did on their other ideas. Not great - see the last four transactions below. If possible, I would rather short Kerrisdale.

     Price on the dayPX 10/2Long/shortResult
    CATM$28,99$34,28Short18% loss
    BOFI$77,98$77,98Short7% gain
    JWG$16,92$12,29Long27% loss
    UNIS$4,86$2,09Short57% gain*
         
    * market cap is only 228 mln   

    Disclosure: The author is long GSAT.

    Oct 06 11:31 AM | Link | 1 Comment
  • Fondul: 4th Buyback On The Way

    Another positive news from Fondul Proprietatea, the Romanian energy fund that is under pressure from activist investor Paul Singer. The Elliot Associates managed by Singer is the largest investor in Fondul with 15.22% stake.

    The local FSA has approved the changes to the Fund's share capital after the cancellation of the 1.1bn shares bought in the second buyback programme. The cancellation opens the way for the fourth buyback programme in which the fund aims to buyback 990 million shares (8% of the shares). The fund manager said the buyback would start over the coming days. Accelerated buyback is also under consideration. At the current market price, the buyback would require RON 0.93bn. The Fund held RON 1.26bn on its balance sheet as of the end of August.

    As I wrote before, the fund manager faces termination of the management contract if the NAV discount does not decrease to 15% (from current 25%) in two thirds of trading sessions between October 1, 2014 and June 30, 2015. To comply with this the Fondul share price needs to rice another 13% to 1.07 Ron per share. Looks like the Templeton is working hard to achieve this mission.

    Sep 30 7:43 AM | Link | Comment!
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