Glorified Payday Lender City Holdings: A Wolf in Sheep's Clothing [View article]
We had two other items we wanted to highlight. First, we found plenty of lawsuits against CHCO for their overdraft practices. The below example appears to the exact customer Congress is seeking to protect: "SJ is 71 year old woman who lives alone and whose sole source of income is Social Security benefits of $565 a month. She has a checking account with City National Bank. Her account has a bounce protection plan with something called a sustained overdraft fee, in which the bank imposes a $5 per calendar day fee for every day an account is in overdraft. SJ forgot to record a check in her check register. The next check she wrote was for $124, but she had a balance of only $88.21. For an overdraft of $35.79, the bank charged a $30 NSF fee and, the next day, started charging her $5 a day for each day the account remained in negative balance. SJ did not find out about the overdraft until 11 days later when a letter arrived from the bank. SJ immediately deposited enough cash to cover the overdraft and fees. For a $35.79 loan of less than 2 weeks, the bank assessed bounce protection charges for $75, which was one-eight of SJ’s monthly income. SJ does not even recall receiving the notice that the bank allegedly sent stating it would begin imposing a $5 per day overdraft fee" www.consumerlaw.org/is...
Houston American Energy Corp. Set Up for Collapse [View article]
We find HUSA’s first quarter earnings highly disappointing. We continue to be surprised that these results and this “story” support a $350 million market cap that trades at over 100 times current annualized earnings. We continue to believe this is a highly speculative investment, especially given management’s history. We continue to recommend that investors avoid HUSA until they can provide tangible evidence of drilling success in Colombia (possibility in 2011 or 2012). We hope to be back with more (that we have recently picked up).
PCBC: Large Downside Remains as Shareholders Left With Little [View article]
Not all bank stocks are rational right now. For example, STSA is offering shares at $0.20 per share. If the offering fails, the shares could go to zero (after it fails). If it succeeds, we believe the shares will not trade much above book value (our guess is that book value would be $0.22 to $0.25). But the stock is at $0.80 today. The shares of PCBC are going to be highly volatile from here. The price on the stock is highly dependent on the assumed price of the stock after the rights offering. If a buyer believes the shares trade well above book value, there is inherent value in the rights offering (the ability to buy shares at $0.20 per share).
PCBC: Large Downside Remains as Shareholders Left With Little [View article]
On the blog, someone asked us if we overlooked the value of the rights. Here was our answer: Did not overlook: "By our math, should the stock trade at a $990 million market cap after the capital plan, exercising the maximum rights still produces substantial losses (greater than 45% by our estimate)." always possible it trades below $0.29 also (we messed up book value calc and should be $0.26). There will be 3.3 billion shares issued at $0.20. At $0.29, 99% of shares issued would be trading with a 45% gain
PCBC: Large Downside Remains as Shareholders Left With Little [View article]
Did not overlook: "By our math, should the stock trade at a $990 million market cap after the capital plan, exercising the maximum rights still produces substantial losses (greater than 45% by our estimate)." always possible it trades below $0.29 also (we messed up book value calc and should be $0.26). There will be 3.3 billion shares issued at $0.20. At $0.29, 99% of shares issued would be trading with a 45% gain.
PCBC: Large Downside Remains as Shareholders Left With Little [View article]
One follow-up, we may have been overly conservative on our book value calculation. We assumed PCBC would recognize zero taxes on its gains, but this is an aggressive assumption given the change in control. Applying a 37% tax rate, our pro forma book value drops to $0.26 per share.
Pacific Capital: A Violent Correction Could Be Coming [View article]
One final comment on STSA, which highlights some of the irrational trading in bank stocks (that we see at PCBC). According to STSA’s release, Thomas H. Lee will own 19.9% of STSA on a fully converted basis or 842 million shares. This means that if the capital raise is successful, Thomas H. Lee believes there will be 4.2 BILION shares (842/19.9%) after the recap. STSA is current trading with a pro forma market cap of $5 BILLION and greater than 4 times pro forma book value (by our calculation)! We feel terrible for retail investors currently invested in names like STSA and PCBC, which we believe are in position to lose substantial sums of money.
Pacific Capital: A Violent Correction Could Be Coming [View article]
We would direct PCBC shareholder's to STSA's potential recapitalization. If the recap is success, it will likely happen around $0.20 to $0.30 per share. This will leave the existing equity value of around $10 million to $15 million, or nearly worthless. With a new raise is successful, new book value would shake out around $0.20 to $0.30 per share. If the stock trades near book value, the existing shareholders face a 75% loss relative to yesterday’s close. While not to this degree, this is the type of dilution PCBC shareholders should expect.
Pacific Capital: A Violent Correction Could Be Coming [View article]
Two things I forgot the mention: 1) the board recently rewarded the long-time CEO who more or less ran the bank into the ground with a contract extension and a $600,000 salary. www.sec.gov/Archives/e... 2) I use to think bank stocks were difficult for pump and dump schemes given their tie to capital needs and price to book multiples. I guess I still do, but when this pump scheme ends it is going to be ugly.
Pacific Capital: A Violent Correction Could Be Coming [View article]
I forgot to mention: the board recently rewarded the long-time CEO who more or less ran the bank into the ground with a contract extension and a $600,000 salary. www.sec.gov/Archives/e...
Ritchie Bros. Auctioneers: Understanding the Material Downside [View article]
Orlando auction results much worse than expected, down 25% year-over-year ($138 versus $184 million last year). Very poor results. What is even more surprising, management stated in their press release that "this auction exceeded our expectations in pretty much every respect." Recall in December they expected the auction to run SIX days (and then they had to cut it back). How often does management change their "expectations"? This management is on the verge of losing all creditability (which will result a much lower multiple). As I stated in my original release, 2010 estimates need to come down.
Ritchie Bros. Auctioneers: Understanding the Material Downside [View article]
Commonsense, it is difficult to get visibility at the Orlando auction. If GAP results are down year-over-year, it will be a harbinger for a difficult 2010 (and estimates will need to come down). I am sure the promotional management team to find something to tout, like pricing or the number of bidders.
Ritchie Bros. Auctioneers: Understanding the Material Downside [View article]
Thanks for the feedback. Donald, I do not believe we will see a secondary wave of equipment come to market. With the amount of liquidity in the system, the strongest tightening in high yield spreads in multiple decades, and the large reduction in large corporate bankruptcies / restructuring activity, I believe the flush is over. I have been shocked at the ability of over-leveraged companies to refinance their problems; and this has created an opportunity at RBA (as a short candidate). Briar, the table says "average selling commission," the commission cost to the seller. RBA's model is dependent on willing sellers. I don't know exactly how much a seller pays at Northeast Auctions, etc, but believe it is typically 1-2%. Including the buyers fee, art could be above 10%.
Robert, sorry for the delayed response. Republic plans to cut its fees in half and both RBCAA and JTX claim to have no impact on their income, which is nearly impossible. I tend to believe RBCAA over JTX. JTX has more at risk (bk). JTX carefully worded their release with their "planned 2010 fiscal year income," which has not been disclosed. If it turns out that management's "planned" income level is below their covenants (which is suspect it will be), then I hope management paid their D&O insurance (because I believe the 8-k is a large misrepresentation and this release will be grounds for shareholder lawsuits).
Glorified Payday Lender City Holdings: A Wolf in Sheep's Clothing [View article]
"SJ is 71 year old woman who lives alone and whose sole source of income is Social Security benefits of $565 a month. She has a checking account with City National Bank. Her account has a bounce protection plan with something called a sustained overdraft fee, in which the bank imposes a $5 per calendar day fee for every day an account is in overdraft. SJ forgot to record a check in her check register. The next check she wrote was for $124, but she had a balance of only $88.21. For an overdraft of $35.79, the bank charged a $30 NSF fee and, the next day, started charging her $5 a day for each day the account remained in negative balance. SJ did not find out about the overdraft until 11 days later when a letter arrived from the bank. SJ immediately deposited enough cash to cover the overdraft and fees. For a $35.79 loan of less than 2 weeks, the bank assessed bounce protection charges for $75, which was one-eight of SJ’s monthly income. SJ does not even recall receiving the notice that the bank allegedly sent stating it would begin imposing a $5 per day overdraft fee"
www.consumerlaw.org/is...
Houston American Energy Corp. Set Up for Collapse [View article]
PCBC: Large Downside Remains as Shareholders Left With Little [View article]
PCBC: Large Downside Remains as Shareholders Left With Little [View article]
Did not overlook: "By our math, should the stock trade at a $990 million market cap after the capital plan, exercising the maximum rights still produces substantial losses (greater than 45% by our estimate)." always possible it trades below $0.29 also (we messed up book value calc and should be $0.26). There will be 3.3 billion shares issued at $0.20. At $0.29, 99% of shares issued would be trading with a 45% gain
PCBC: Large Downside Remains as Shareholders Left With Little [View article]
PCBC: Large Downside Remains as Shareholders Left With Little [View article]
Pacific Capital: A Violent Correction Could Be Coming [View article]
Pacific Capital: A Violent Correction Could Be Coming [View article]
Pacific Capital: A Violent Correction Could Be Coming [View article]
Pacific Capital: A Violent Correction Could Be Coming [View article]
www.sec.gov/Archives/e...
2) I use to think bank stocks were difficult for pump and dump schemes given their tie to capital needs and price to book multiples. I guess I still do, but when this pump scheme ends it is going to be ugly.
Pacific Capital: A Violent Correction Could Be Coming [View article]
www.sec.gov/Archives/e...
Ritchie Bros. Auctioneers: Understanding the Material Downside [View article]
Ritchie Bros. Auctioneers: Understanding the Material Downside [View article]
Ritchie Bros. Auctioneers: Understanding the Material Downside [View article]
H&R Block: Stars Are Aligning [View article]