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Ted Barac

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  • AMC Networks: Is This Really As Good As It Gets? [View article]
    Hey Alex, Thanks so much! I really appreciate the positive feedback.
    Jan 17 07:16 PM | 1 Like Like |Link to Comment
  • AMC Networks: Is This Really As Good As It Gets? [View article]
    Thanks for the kind words, BE. Very much appreciated. I agree that their programming successes are even more impressive when considering their more limited exposure as a network. I think that dynamic is changing and AMC is gaining a very strong reputation, which gives them an even better chance of success for subsequent offerings.
    Jan 17 02:43 PM | 1 Like Like |Link to Comment
  • Softbank Vs. Mr. Market On Sprint: Place Your Bets [View article]
    FYI: the article now reflects the, above, correction.
    Dec 26 12:56 PM | Likes Like |Link to Comment
  • Softbank Vs. Mr. Market On Sprint: Place Your Bets [View article]
    Correction: Note that the figures provided by Softbank at the close of the transaction ($3.124bn shares acquired for $21.6bn) include the exercise of the 55 million in warrants, but not the cost of exercising those warrants. So, according to my calculations, the true cost to Softbank would be just over $7.00 for the original transaction (versus $6.90, as stated in the article).

    Small difference, but worth clarifying that the valuation disconnect between the market and Softbank (at the time of the article) was even slightly higher than I had originally calculated.
    Dec 23 01:51 PM | 1 Like Like |Link to Comment
  • Sprint Favored In T-Mobile Buyout Due To Interest Rate Arbitrage And Better Capitalization [View article]
    It doesn't and it's not a big deal...let's move on. Also, I just realized that the numbers that I stated, excluded the cost of exercising those warrants (so the real cost/share is more like $7.01/share...a 39% premium).
    Dec 23 01:23 PM | Likes Like |Link to Comment
  • Sprint Favored In T-Mobile Buyout Due To Interest Rate Arbitrage And Better Capitalization [View article]
    OK, you've drawn me in for one last comment. When I say "weighted average", I mean weighting the different purchases by the amount of shares acquired and the prices paid (not just averaging them outright).

    In total (see link, below), Softbank acquired 3.124 billion shares for $21.6bn (paying just over $6.90/share...a 36% premium).

    It was a bit of a complicated transaction. In addition to the $7.65/share outright purchase from shareholders and the $6.25/share contribution of $1.9bn, there was a $3.1bn convertible bond that converted at $5.25/share and the issuance of warrants for 55 million shares (also at $5.25/share).

    http://bit.ly/1e5zSZU
    Dec 23 09:35 AM | 1 Like Like |Link to Comment
  • Sprint Favored In T-Mobile Buyout Due To Interest Rate Arbitrage And Better Capitalization [View article]
    The 53%, referenced in the press release, only refers to the portion of the shares acquired directly from existing shareholders at $7.65/share. Softbank was also given the right to purchase additional shares, diluting existing shareholders, at $6.25/share (this is also referenced in the press release). Their weighted average cost for the shares they acquired in the deal to give them an 80% stake in Sprint was about $6.90 or a 36% premium. I'm not finding this discussion to be very useful or constructive, so I'm done here. Best of luck.
    Dec 22 09:41 PM | 1 Like Like |Link to Comment
  • Sprint Favored In T-Mobile Buyout Due To Interest Rate Arbitrage And Better Capitalization [View article]
    Alex,

    Consolidating a subsidiary onto your financials and needing to transact on an "arm's-length" basis with that entity are two completely separate issues. If you own over 50% of a subsidiary, you will need to consolidate the subsidiary, but that does not mean that you aren't still required to consider minority shareholder interests and transact business at arm's length.

    Furthermore, just because a subsidiary is consolidated, it does not mean that the credit ratings of the parent and subsidiary become the same (though they will typically converge some from the implicit, albeit not legally binding, support of the parent). Case in point, Sprint and Softbank still have different credit rating even though Softbank now holds a majority position and consolidates Sprint onto their balance sheet.

    Shareholders do prefer cash over equity, in M&A deals, all other things being equal. However, if the equity consideration is of considerable more valuable than the cash that they would receive as an alternative, they may prefer the shares -- as they ultimately want whatever gives them the most value (whether it be shares or cash).

    DISH's $25bn market cap doesn't mean that's all they can pay for DISH. That's just the equity value that they would bring to the table in a merger. You would need to combine TMUS $22bn equity value (plus any value of synergies) to the equity value of the combined entity.

    Let's say TMUS/Dish is worth $50bn combined, $47bn + synergies. Simplistically, in that case, anything above 44% ownership of the combined entity would be value accretive for TMUS shareholders.

    Removing goodwill does not address the accounting issues and give you a fair value of assets and equity -- as the value of a business can be considerable more than what was paid for the assets. Again market value/capitalization is the best measure of what a business' assets and equity are worth (it's the actual market value).

    Finally, just to clarify a few errors. Softbank paid about a 36% premium for Sprint (a blended cost of $6.90 versus a $5.04 price before the deal rumors began) and far from having no liabilities, Sprint had $23bn in net debt at the end of the last quarter.


    Dec 22 04:02 PM | 1 Like Like |Link to Comment
  • Sprint Favored In T-Mobile Buyout Due To Interest Rate Arbitrage And Better Capitalization [View article]
    Alex, I will comment later. Heading to lunch and there are way too many factual inaccuracies and illogical conclusions in your last comments for me to even get started addressing them. Will get back later this afternoon.
    Dec 22 01:05 PM | 2 Likes Like |Link to Comment
  • Sprint Favored In T-Mobile Buyout Due To Interest Rate Arbitrage And Better Capitalization [View article]
    Thanks for the article, Alex.

    A few points:

    1.) Sprint, and not Softbank, would be the acquirer. These are two different legal and lending entities and, while Softbank is a majority shareholder of Sprint, there is a sizeable minority float. As such, interest rates will reflect Sprint's credit rating (which is similar to that of Dish at Ba3) and not Softbank's (as there is no recourse to Softbank for Sprint’s debt).

    Furthermore, because of the minority shareholders (i.e. the public float), I believe that financial transactions between Softbank and Sprint must be done at an "arm's length". In other words, any further capital contributions from Softbank into Sprint would need to be via additional equity (diluting the public float) or via shareholder loans (increasing Sprint’s, already high, debt burden). Softbank can’t just pay for Sprint’s capex and other expenses as if it were a wholly-owned subsidiary.

    2.) Book equity is not very relevant for tech. companies and you really need to look at market cap., which gives you the true market value of the company’s equity. Book equity reflects arbitrary accounting rules/timing and adds goodwill to the balance sheet when assets are obtained through acquisitions, but not when goodwill is realized through assets that are acquired organically (through capex). For these reasons, accounting/book equity can be very disconnected from the true equity value of a company (e.g. Apple has less than $125bn in book equity but almost $500bn in market equity/capitalization).

    Taking the market equity, Sprint is at $38bn versus $25bn for DISH –which is not that great of a difference when you consider Sprint’s much higher net debt load and resultant higher gearing (equity/enterprise value). DISH’s $25bn market capitalization is more than enough to allow for a pure equity deal, weighted in such a manner that it pays a nice implied equity premium to TMUS shareholders. Furthermore, DISH's balance sheet may actually be better able to absorb TMUS’ debt than that of Sprint.

    At the end of the day, it will come down to who’s willing to pay more. Sprint may be able to justify a higher price because of more synergies (more overlap -- being two companies in the same industry), but DISH may be more desperate to expand into mobile for the reasons that you mention (to find more growth).

    DISCLOSURE: Long both S and DISH.
    Dec 22 11:53 AM | 2 Likes Like |Link to Comment
  • One Piece Of Advice For 2014: Be Skeptical [View article]
    Thanks for the follow-up, DAG1996. It seems we were debating topics that we were more or less in agreement on. I do really appreciate the feedback. Thanks, again.
    Dec 15 07:01 PM | 2 Likes Like |Link to Comment
  • One Piece Of Advice For 2014: Be Skeptical [View article]
    I would say such disclaimers are good (albeit, obvious) common sense advice. Thanks for the article ideas.
    Dec 15 06:55 PM | 1 Like Like |Link to Comment
  • One Piece Of Advice For 2014: Be Skeptical [View article]
    Thanks for the comments, DAG1996. A few responses.

    First of all, my point wasn't that the author's of those recommendations should detail every conceivable anti-thesis. Rather, that readers should recognize that there is typically a bias and so they should their own critical research on the thesis.

    Secondly, when I say people should try and articulate the opposing view, I mean for them to do it for themselves (not in the comments of an article or anywhere else publicly). It can help to actually articulate the opposing view on paper (but again, just for yourself). It's a good exercise in critical reasoning.

    Finally, I disagree on the impact of recommendations. I think that Wall Street recommendations and rating changes often move stocks and it even happens with articles here on Seeking Alpha for small-cap stocks.

    Thanks, again, for the comments. Definitely no offense taken and sorry if I was initially unclear on some of those points.
    Dec 15 08:45 AM | 2 Likes Like |Link to Comment
  • One Piece Of Advice For 2014: Be Skeptical [View article]
    mmangen9, I would recommend reading "Security Analysis" by Benjamin Graham (Warren Buffett's mentor) and always remember that there's someone that thinks that the security that you're buying is too expensive (usually the person selling it to you). They often may be wrong, but try and understand their side of the story before you buy. Also, ask the people recommending the security to explain the bear case and the risks of the trade.
    Dec 14 11:08 PM | Likes Like |Link to Comment
  • Sell AT&T And Buy Sprint [View article]
    Thanks, Rob. Pleased that both sides of this call worked out: Sprint much more than doubled while AT&T fell slightly (despite the tailwinds of over a 30% return in the S&P over the period). Still long Sprint and see much more value with it compared to AT&T (despite it's massive outperformance over the past year and a half).
    Dec 14 03:36 PM | Likes Like |Link to Comment
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