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Chris DeMuth Jr.
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"It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a misplaced bet - that they can occasionally find one." - Charlie Munger I look... More
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  • Event Driven Q&A Forum 218 comments
    Jan 31, 2013 10:31 AM

    If you show up for a fair fight, you are not prepared.

    - Anonymous

    Any event driven/arbitrage questions?

    Where can an investor go that the price system cannot keep up?

    Certain event driven situations allow investors to exploit profits from securities where the price system itself fails. With many investors seeking to profit from the efficient, priced-in aspects of the market - from well-known, well-loved, often rehashed ideas about famous securities - what is left?

    What scraps have fallen beneath the floorboards such that we can underpay for value due to some aspect of a corporate event that the price system fails to properly discount?

    Please ask any question on your mind regarding specific tickers (especially M&A, spin-offs, conversions, litigation, rights, warrants, liquidations, and the like) that have substantial value that is mispriced by the capital markets. Alternatively, I would be happy to answer anything about risk, sizing, or research.

    I will make an effort to respond to any question in either the comments below this post or sent directly.

    If you want to learn more about these types of opportunities, you may want to read You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits. I apologize for the title, but the author of this book actually is a stock market genius, so he has earned the privilege of writing silly titles.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: Chris DeMuth Jr is a portfolio manager at Rangeley Capital, a partnership that invests with a margin of safety by buying securities at deep discounts to their intrinsic value and unlocking that value through corporate events. In order to maximize total returns for our partners, we reserve the right to make investment decisions regarding any security without further notification except where such notification is required by law.

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Comments (218)
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  • Joel Greenblatt is a genius, the book should be called "how to hedge fund". "You can be a stock market genius" is an extremely easy read but incredibly informative, i would rate it up with Intelligent Investor as one of the best investing books ever written.
    31 Jan 2013, 11:25 AM Reply Like
  • Author’s reply » I agree. By the way, I am starting book reviews on the weekends on Seeking Alpha and plan on reviewing that book in a few weeks. Here are the first five that I intend to publish:
    31 Jan 2013, 11:31 AM Reply Like
  • Chris- when do you sleep??
    31 Jan 2013, 11:42 AM Reply Like
  • Author’s reply » 12-2 AM and 2:30-4:30 AM
    31 Jan 2013, 11:58 AM Reply Like
  • What's the 2:00 AM to 2:30 AM time block for? Never not answer that....
    22 Sep 2013, 01:11 PM Reply Like
  • Author’s reply » Asia, mostly. As in, historically we've done quite a bit in Asia, so I typically am up working on this and that and get in a few calls then.
    22 Sep 2013, 01:38 PM Reply Like
  • Hi Chris,
    I'll kick things off. I've been reading Fortune's Formula (after seeing you write about it).
    I'm on the chapter that talks about how warrants are often overpriced so Ed Thorp used to short the warrants and buy the underlying stock. I think he further maximized value by having some sort of formula worked out to know how much of the stock to buy. The book didn't really go into detail on this formula.
    Anyway, I was wondering if you had any thoughts on the warrants space and whether it's still a good place to go fishing for similar shorting opportunities. Or, maybe things are different from when Ed Thorp was around.
    On a different note, my fav spinoff idea for 2013 is NWSA.
    31 Jan 2013, 12:44 PM Reply Like
  • Author’s reply » I'm glad you're reading Fortune's Formula; I think that it is a great book. My book notes on that one will be published on Sunday.


    Thorp is a master with warrants. We spend a lot of time and energy researching and analyzing warrants, especially when they are part of the consideration paid in mergers. We discussed a bit about our KMI warrant investment here:


    Warrant pricing can still be all wrong, but such circumstances are rarer than the era discussed in the book.
    31 Jan 2013, 01:50 PM Reply Like
  • There are some warrant prices out there that are still head-scratchers. Some of the TARP warrant have traded in the last 6 months for almost no or even negative time premia: HIG-WT and FFBCW come to mind, I'm sure there are others.
    1 Feb 2013, 10:14 AM Reply Like
  • Thanks for the head's up. My back of the napkin calculations show the time premium of HIG-WT to be about 57 cents. Crazy cheap given the company's bright prospects.
    1 Feb 2013, 12:49 PM Reply Like
  • I looked into HIG warrants about a year ago, around the time when Paulson was clammoring for the company to split into its two different insurances. I think the possibility of a spin off of one of its insurance lines was something that was a worry. I looked into the wording in the SEC docs on the warrants and the outcome of what happens to the warrants if the business changed like that seemed a little fuzzy/confusing if i recall correctly. That may have something to do with the time premium, i should look into them again.
    3 Feb 2013, 05:18 AM Reply Like
  • The warrants would adjust for your standard corporate actions like a spinoff. The TARP warrants in general actually have much more extensive protections for holders than your standard warrant or option. HIG's strike and shares per warrant adjusts for a quarterly dividend over $.05, for example. The strike has already adjusted down to $9.599 from an initial $9.79. Also some anti-dilution provisions. I'll link to the prospectus below - check out page s-40. These are fun little instruments.


    Regarding HIG itself: HIG is weighed down by variable annuities it wrote - especially in Japan. It guaranteed a rate of return, and rates in Japan are 0% and might be for a while. This is a big liability, and/or opportunity, depending how you view it. Note the liability floats somewhat with USD-YEN. Yen down, HIG's liability is less. And vice-versa.

    4 Feb 2013, 03:38 PM Reply Like
  • Thorp is a great place to start considering he developed normal value curves for pricing convertible securities. Noddings, Prendergast and Calamos wrote some excellent books on warrants and Messler and McHattie have written more recent books. Value Line still lists warrants in it's convertible survey and any old books by Sidney Fried (wrote the RHM Warrant Survey for years) are great reads. Hope this info is useful!
    5 Feb 2013, 12:54 PM Reply Like
  • Author’s reply » Great advice; thank you. More on Thorp, if you are interested:

    5 Feb 2013, 01:20 PM Reply Like
  • FF is a great book! Enjoyed your Q&A with Poundstone.
    6 Feb 2013, 09:54 AM Reply Like
  • Author’s reply » I agree 100% on Fortune's Formula. I am glad that you enjoyed it. I was honored that he would bother to have a conversation with me for my blog. More author conversations to come...
    6 Feb 2013, 09:59 AM Reply Like
  • Hi Chris,
    I keep hearing about "reverse conversion" option plays being an arbitrage situation when options are overpriced - something like you short the underlying stock then buy a call and short a put with the same month same $ amount. I'm not an options player but it seems this can be used as an arbitrage situation or a method to create synthetic shares to keep the lid on a particular stock. Any thoughts?
    31 Jan 2013, 04:12 PM Reply Like
  • Author’s reply » Sounds interesting, but not something that I know anything about. In fact, this is the first that I've heard of it.
    31 Jan 2013, 05:42 PM Reply Like
  • R.S. Analytics - It is a classical strategy, where one stays Delta Neutral by being Long & Short 100Delta @ the same time.
    Short Stock is -100 Delta.
    FREE Synthetic Long Stock with +100 Delta is created by buying call from premium obtained by selling the put of same $ amount & month. Strikes can be chosen in many different ways.
    Thanks a million for reminding me. I have not used it for long time, because I avoid trading unsure direction trades (some Arbitrage Situations). But will start using from this moment onwards, if I create an unsure Arbitrage/unsure situation Trade.
    Options are many times overpriced before Earnings or significant events & that is the best time to create this model IMO.
    Best example to create this trade was on AAPL, where I was unsure of AAPL movement following Earnings but created only Long trade & created a Loss. It was dum to use it on AAPL but I have done many dum mistakes in past. Fortunately my Dum mistakes have dropped by 80%.
    To feel better, I know that I had Many Earning winners in last month including IBM. I will use it in every unsure direction situation in future.
    2 Feb 2013, 09:55 AM Reply Like
  • Author’s reply » I learn something new everyday! Thanks for posting. Much appreciated.
    2 Feb 2013, 09:56 AM Reply Like
  • The conversion and reverse conversion (commonly just called reversals) are opposite sides of the same trade. The conversion is short synthetic stock (short call, long put) and long actual stock. A reversal is long synthetic (long call, short put) and short actual stock. R/C markets are priced based on the option prices, stock price, and cost of carry.(div payable, interest costs, rebates)


    R/C are referred to as "locks" by option market makers. As market makers trade they are buying options below theoretical values and selling options above theoretical values. If a market maker buys calls on his bid he will short stock on a delta neutral ratio. The mm will be hedged directionally (still holds volatility risk) until he can complete the reversal by selling the same strike put on his offer or even fair value and selling stock against the put delta neutral. This series of transactions should leave him long synthetic stock from a price below his actual short stock position and have "locked" in a profit. Option flows will dictate how easily a mm can enter r/c positions. Executing a reversal at one strike and conversion on another strike will cancel the stock positions and leave the trader with a "box" position. Executing a reversal in one month and conversion in a different month is called a "jelly roll".


    Basically, r/c positions are legged into by market makers over the course of trading by capturing the spread or vig. Put-call parity will keep prices in line for market takers and they would need to take directional risk to leg into the trade. R/C could be mispriced if expected dividend or stock borrow changes. The most common time to see r/c trades occur is at expiry. Market makers will have risk if a stock pins to a strike on expiration day. They will not know how many long options to exercise because they don't know how many short options they will be assigned on. This could leave a directional stock position for the first trading day after expiry. To limit risk a trader holding the reversal will look for another trader holding the conversion to cross with at even. The cross will eliminate both traders positions and pin risk.


    Hope this gives some answers and practical examples. Watch for an upcoming blog from me on options books.
    5 Feb 2013, 12:39 PM Reply Like
  • So... basically I'm getting that I just need to pay you to implement this if I ever want to use it!
    5 Feb 2013, 01:05 PM Reply Like
  • Not familiar with the "reverse conversion" either, but it does sound like you're making a synthetic long position



    which can be arb'd with mispriced options. I don't analyze these much though...
    31 Jan 2013, 07:00 PM Reply Like
  • Author’s reply » Interesting. Thanks for the link.
    31 Jan 2013, 07:09 PM Reply Like
  • Have you found the selling of puts on stocks that have received takeover proposals to be a long term viable strategy when the arbitrage spread is fairly high? Or do you stick with the old buy the takeover, short the buyer strategy better?


    Selling puts has worked out great for me on NXY, NYX, CLWR, SHAW, JEF and a few others over the past year but i'm not sure if it will continue to work over a longer period of time. I'm sure something like the Anheuser-Inbev/Grupo Mondelo lawsuit today could be semi-catastrophic but i was curious of your opinion.
    31 Jan 2013, 07:20 PM Reply Like
  • Author’s reply » Great question. We look at both ways to execute and our preference is deal specific. We wrote puts on NXY and SHAW. For various reasons we were positioned differently in both NYX, CLWR, and JEF.


    In the case of Mondelo, we thought that the chance of this suit was about 75%, which clearly changed how we structured that trade.
    31 Jan 2013, 07:32 PM Reply Like
  • What is the upside in GKK now that it is almost a pure CRE equity REIT? I feel like the stock, especially after today's AH run-up, is fairly priced, and the only catalyst left is the CDO equity being sold at a fortune.


    Other than that, it looks like they will deply $200m for 13% return over 54m shares for roughly 0.37/share of annual cashflow to common after preferred dividends but before expenses. SG&A will come down now that they don't manage the CDOs. Why do you like it Chris?
    31 Jan 2013, 11:51 PM Reply Like
  • Author’s reply » This is a good question that I will try to answer in an upcoming article. But for a preview of the conclusion, I invested over $10 million in this company and am not a seller here.
    2 Feb 2013, 08:04 AM Reply Like
  • Taxes were taken out when I participated in the AGU tender. Can you talk about the "deem dividend" clause for certain canadia tender offers?
    1 Feb 2013, 08:59 AM Reply Like
  • Author’s reply » This is outside my area of expertise enough that I will just say that I don't know. I’m an American tax payer and I have invested in Canada a lot and have found some of their taxes to be disadvantageous. I typically try to avoid as much of the complexity as possible, for example by selling Canadian positions that have low tax bases just before corporate events where distributions will be dividended out such that I get as much in capital gains with as little as possible in dividends (I was a Fording Coal Trust unit holder for one such example).
    2 Feb 2013, 07:57 AM Reply Like
  • HI endlessfin1te- I'm sure Chris will have a much more cogent reply than I do.


    However, off the top of my head- I look at the numbers the same way you do, but I'd add the property mgmt business ($9m/yr which offsets some SG&A). Also, I get a higher net equity figure than you do after the sale and the release of some of the CDO assets. Based on a price/FFO of 8 (average price/FFO of LSE & LXP) I'm getting closer to $4-$5/share.


    I'm looking forward to seeing their balance sheet on a deconsolidated basis with the CDO assets released to "check my math" though!!
    1 Feb 2013, 09:23 AM Reply Like
  • Author’s reply » That sounds about right to me. I am certainly in that direction. More to come.
    2 Feb 2013, 07:58 AM Reply Like
  • edgingcj, whereas you posit a FFO multiple of 8x in your valuation model, Chris DeMuth assumes 15x, which he mentions in the comment section of his article about GKK. That is a big difference, in fact almost a 100% difference. I respect both of your opinions, and I'd like to reconcile them if possible.
    2 Feb 2013, 05:05 PM Reply Like
  • Author’s reply » That is a key difference. I am in process on a new article, "Our Best Investment Idea For 2013: Gramercy Capital, Part II" in which I hope to clarify my thinking on this investment idea.
    2 Feb 2013, 05:07 PM Reply Like
  • I apologize for the time delay in this. Realistically, my opinion is that it will take quite awhile for GKK to converge to a 15 FFO. Regardless of whether it should or not, it certainly doesn't have the feel good vibe that "The Monthly Dividend Company" (O) has by generating dividends for 44 years and I think it's overly optimistic to think it will converge on a 15-20X FFO valuation in a month or a year.


    Also, by having half of it's assets being leased by BAC, there is some concentration risk. Even if you or I don't see it as a huge risk, there will be many that do.


    Just my $.02.
    15 Feb 2013, 03:40 PM Reply Like
  • I apologize for leaving out my disclosure: long
    15 Feb 2013, 03:41 PM Reply Like
  • Author’s reply » Me, too.
    15 Feb 2013, 03:45 PM Reply Like
  • Author’s reply » Fair enough. I think that by the end of this year, it will be closer to O than it was pre-CDO sale and pre-dividend.
    15 Feb 2013, 03:46 PM Reply Like
  • That's difficult to argue with!
    15 Feb 2013, 04:12 PM Reply Like
  • Where do you go about finding event driven situations?
    2 Feb 2013, 02:36 PM Reply Like
  • Author’s reply » Mostly from SEC filings. Other times from press releases. I search them for:
    •Mergers and acquisitions – One company purchases another
    •Spin-offs – A company splits off portions of its business into new, independent companies
    •Demutualization – A mutual bank or thrift converts to a public shareholder owned institution
    •Restructuring – When a company reorganizes its operations, ownership structure, etc
    •Litigation – Investing in a company based on the outcome of a legal proceeding
    •Legislation – A company is impacted by new or changing legislation
    2 Feb 2013, 03:12 PM Reply Like
  • sogreat - Chris DeMuth Jr. recommends 4 books for Investors & one of the 4 is Bible on this subject - You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits by Joel Greenblat.
    Until the book arrives - Look inside for FREE for some details to get the feel. For extensive Details $495/yr (Sign up for FREE membership. Please do not pay for annual membership without finishing Greenblat's Book described above)


    For Mergers and acquisitions look @ M&A Insider (4th column in top bar). When you open the column - 5 categories exist (Merger News, Rumor News, Merger Arbitrage, 2013's Top Deals, Top 10 of Top 50 Takeover Targets (remaining 40 need membership)


    Column 2 in top bar is SI Premium - when you open the column, vertical Column is seen on left side of the page.
    1. Company News section has subsections (Hot Corporate News, Litigation, Hot Management Changes, Management Comments etc)
    2. Dividends subsections (Hot Dividends, Hot Stock Buybacks)
    3. EPS subsections (Hot earnings, Hot guidance)
    4. My favorite-Insiders/Hedge Funds subsections (13Ds,13Fs, 13Gs)
    5. M&A subsections (Hot M&As, Private Equity)
    6. Market Movers (your preferred choice is here- in Insider's Blogs as Options, Options EPS Action. Trader Talk)
    7. Rating Changes with many subsections.


    To understand the concepts, you must complete the book, cover to cover. Then you will get better & better with Time, in finding VALUE in the events & create 50%/yr profit in future (Book is written for anyone to create 50%/yr profit) but it will require a lot of work. Greenblat speaks very clearly that Market rewards the hard work (reading in great details, to find value of profit creating wisdom inside the events, >40 hrs a week work) of the person, as 50%/yr profit.
    2 Feb 2013, 05:51 PM Reply Like
  • HI Chris- I didn't expect an answer re: your sleep schedule, but now I've gotta ask: What's on the schedule from 2AM-2:30AM every morning?
    2 Feb 2013, 02:44 PM Reply Like
  • Author’s reply » Busy with this and that investment in Asia and check in around then typically...
    2 Feb 2013, 03:09 PM Reply Like
  • I was just wondering if anyone had considered the forthcoming spin-off of Corner Stores from Valero, scheduled to be done by the end of 1Q. Retail is beyond my normal areas of interest as is refining, but conceptually this spin-off seems intriguing. I doubt Corner Stores valuation is implied much in the parent company Valero's, so it seems that this spin-off has the potential to liberate some real value for shareholders.


    Here's a link to the preliminary information statement:

    4 Feb 2013, 02:50 PM Reply Like
  • I've looked at it; but like you the industry is not something I have a lot of history with. But, since Murphy's is thinking of doing the same, it's probably something I should get up to speed on. What are the relevant comps for earnings multiple? I can't think of any off the top of my head; nothing else seems to be pure play retail (I'm sure I'm forgetting somebody). Also, what are your thoughts on the depreciation figures? I'd guess that depreciation might be a good estimate for cap-ex, it seems that they line up relatively closely.
    Do you see anywhere management options/stock grants? I haven't been able to find any.
    4 Feb 2013, 03:35 PM Reply Like
  • VLO management gave a presentation late last year about the spin-off, and they filed an 8-K of the slide show:



    They're offering Casey's and Couche-Tard as comparables. There's a chart of the EV:EBITDA ratios of those two companies in relation to VLO's, but I'm confused about how to interpret it. If anyone thinks they know how to read the chart, please let me know.


    I found an updated information statement filed 1/6/2013 as an exhibit to a registration statement:



    From the IS about capex:


    "Our cash flows have been strong over the three years and nine months ended September 30, 2012, and we have generated positive cash flows from operations during this period. We have used some of the cash generated from operations to invest in our business, incurring capital expenditures of $90 million and $78 million in the first nine months of 2012 and 2011, respectively, and $130 million, $105 million and $64 million in 2011, 2010 and 2009, respectively. (p.64)"


    Here's a comparison of capex and depreciation for 2011, 2010, and 2009 with the depreciation figures in parentheses:


    2011: 130 (113)
    2010: 105 (105)
    2009: 64 (101)


    2010 the were equal, but there was a significant variance in 2011 and 2009. I don't if the years in which there was a noticeable differential resulted from store growth, but I would suspect it. I haven't gotten far enough into it to have a sense of CS's history of maintenance capex versus growth capex.


    There's a discussion of executive compensation beginning on p.87. Hope this helps.
    4 Feb 2013, 04:08 PM Reply Like
  • Author’s reply » Excellent; thanks.
    4 Feb 2013, 04:09 PM Reply Like
  • I keep trying to interpret that relative valuation chart with EV:EBITDA comparables, and I'm not getting it. I called IR at the company and was told that the people who can help me are traveling and won't be back for a week or so. So goes life.
    4 Feb 2013, 04:20 PM Reply Like
  • Conoco spun-off Phillips 66 last May 1, and this may have been VLO's inspiration. Phillips 66's stock price has doubled since it came public. PSX is not a good comp. for Corner Stores though because it is also engaged in upstream and midstream businesses.
    4 Feb 2013, 04:33 PM Reply Like
  • Thanks for that presentation, I hadn't seen it before.


    Am I oversimplifying the graph by just thinking that the "differential" is just trying to show how Valero's multiple is too cheap for the retail? Looking at TTM (i know I'm mixing these up); Casey's EV/EBITDA is 8.7 vs. Valero's of 4.4 makes a "differential" of 4.3; which is close to that graph.


    With 2011 EBITDA at $280M (and assuming no growth) and $1.05B of debt and an EV/EBITDA of 8, and assuming they stick with 100M shares, I'm getting a valuation of around $12/share. Should be a bit higher due to higher 2012 EBIDA presumably. thoughts? Their $.25 div/share gets us to a yield of about 2%, which seems reasonable.


    Thanks for pointing to the comp. section. I had read that with glazed over eyes before. So, it doesn't show me that they're getting significant options/stock grants in this spin at this point. Perhaps more info later??
    4 Feb 2013, 04:49 PM Reply Like
  • Clint, CST Brands began trading on a when-issued basis today and has been trading around $27.75. Fully diluted shares outstanding has been set at 76M. Appears to be valued at an approx. 11.2x multiple to EBITDA. Disappointingly high so far.
    17 Apr 2013, 01:13 PM Reply Like
  • Yikes- I haven't looked at this for awhile, but I seem to agree with you that's pricey. But...I feel like a lot of things are pricey.
    17 Apr 2013, 03:09 PM Reply Like
  • I managed to get my hands on some research as I was having trouble w/comps also. Competitor SUSS sells for 6x ev/ebitda, and the WI at 27$ would be at 7.5x. Its now over 28$ so def at the higher end of the valuation. Couple other factors: they own 61% of their RE and did very little growth past few years. Possibly a reflection on corporate orphan status?
    Aside from the research what attracted me to CST is the 'red-headed stepchild' nature of this spinco:


    CST is 'retail' not 'refiner' category so lots of CFA types think its toxic waste and will be ejected from many portfolios asap. Its also going to be sold without regard to value by SP/Vanguard/Ishare funds. Possibly 3mm+ shs will hit the market, quickly. Finally, with the ratio of 9:1 distribution it will be a rounding error in many porfolios and sold quickly, esp if the price erodes.


    It throws off lots of cash and VLO did them a favor with a sweetheart bond to give them cheap debt for 10 years. There are probably growth opportunities via purchase or remodeling of existing stores. The SEC filings hint around that but were not explicit.


    So my conclusion is its relatively expensive right now esp with no growth strategy articulated yet. down 5$ or so it would get interesting. This is a stable business that throws off a lot of cash.


    Rgds, AT.
    18 Apr 2013, 11:52 AM Reply Like
  • Sounds reasonable. I'll wait for those silly CFA types to dump the toxic waste...
    18 Apr 2013, 12:11 PM Reply Like
  • LOL- no offense! I enjoy your work immensely.


    18 Apr 2013, 01:04 PM Reply Like
  • None taken. I'm the one who categorized us as silly!
    18 Apr 2013, 01:14 PM Reply Like
  • What's the when-issued ticker symbol?
    18 Apr 2013, 01:34 PM Reply Like
  • With IB it's CST (space) WI. Last sale at 28.40
    18 Apr 2013, 01:40 PM Reply Like
  • Your interpretation of the graph makes sense. I've figured out that I was using an erroneously high EV:EBITDA figure for VLO, which is why I couldn't make sense of the graph. Your calculus about the per share value seems right. I would expect that they'll disclose more about executive options grants prior to the spin-off though I have no idea what reporting requirements are. Thanks for your help.
    4 Feb 2013, 05:14 PM Reply Like
  • The amount of value to be released does appear to be rather small compared with VLO's present market cap. of $25B. Perhaps the Murphy Oil spin-off will be more compelling. Depending upon what multiple Corner Stores begins trading with, there might be opportunity.
    4 Feb 2013, 05:27 PM Reply Like
  • Hopefully all the large cap funds will have to dump it en masse and it'll come under pressure...
    4 Feb 2013, 05:33 PM Reply Like
  • Hopefully! Also Chris DeMuth mentioned in another article that the when-issued shares of AXLL were trading at a $.50 discount to shares of Georgia Gulf the day before the spin-off/merger even though the distinction was to end by the next day. I hadn't known about this when-issued phenomenon. It may not turn up with Corner Stores, but it'll be worth checking to see if it does happen when the shares begin trading when-issued. I wonder if this spin-off will attract any arbitrage activity. I doubt it because of its relative size.
    4 Feb 2013, 05:44 PM Reply Like
  • Author’s reply » The when-issued market is worth following closely for this reason. It is how we added substantially to our KMI warrants. It worked well as a way to expand upon AXLL exposure too.
    4 Feb 2013, 06:16 PM Reply Like
  • Has anyone taken a look at the ERA spinoff from Seacor? It's moved to $21 after the spin last week and I can't value it more than $14/share-I've got to be missing something. I'm using Bristow and PHII as comps. Are they depreciating their helicopters down faster than everyone else??
    4 Feb 2013, 09:57 PM Reply Like
  • Author’s reply » I have not focused on it. I took a whack at it, but like so much in this market, it looked pricey.
    4 Feb 2013, 10:06 PM Reply Like
  • Yeah I agree. Took a 15-minute look this morning and I can't tell how it's not overvalued. And that was dinging it $0 for its deferred tax liabilities. I also used 2011 numbers to avoid dinging it for one-time issues at its JV it took a writedown on.
    5 Feb 2013, 09:19 AM Reply Like
  • Crimson Wine is scheduled to be spun-off LUK on Feb. 25. There's little about CW in the merger prospectus for LUK-JEF except that CW is being valued at book, which is approx. $197M, or $.81/share of LUK. Perhaps there'll be some selling post-distribution that will bring the price to a meaningful discount to BV. I have no idea if LUK's institutional holders would be inclined to keep CW.


    Incidentally, Fairholme was a forced seller late last year of the participation warrants related to the SHOS spin-off from SHLD for some reason. They were dumping on the open each morning. I was preoccupied and not paying attention at the time, but I did know someone who was buying hugely discounted blocks from Fairholme's price insensitive selling. Rumor was that Fairholme wanted to avoid having to make a 13-D filing for the rights. Who knows.
    4 Feb 2013, 11:01 PM Reply Like
  • Author’s reply » These spin-offs can be great opportunities. I am re-reading You Can Be a Stock Market Genius this evening and plan to write it up in a book note later this month. I am impressed how they have continued to outperform on average decade after decade.
    4 Feb 2013, 11:05 PM Reply Like
  • I will be reading that book shortly inspired by your enthusiastic recommendation.
    4 Feb 2013, 11:14 PM Reply Like
  • Thanks SteveCostanza and TheCompleatAngler for checking into ERA. Maybe someone knows more than we do, but at least I'm not crazy.
    6 Feb 2013, 10:09 AM Reply Like
  • Sure! Here's another discussion on the subject:
    7 Feb 2013, 09:03 AM Reply Like
  • Not crazy at all. You seem quite sane.
    7 Feb 2013, 10:31 AM Reply Like
  • I'm looking forward to Crimson wine as well.


    SevenCostanza- Thanks for your input. You make me feel 'less' crazy.


    TheCompleatAngler- Have you looked at ERA? It's bothering me that I'm missing something- beyond just being pricey there has to be something more to the story that I've overlooked...
    5 Feb 2013, 10:27 AM Reply Like
  • I hadn't looked at ERA until this morning after you mentioned it. I've been puzzling over it, and I don't understand the valuation either. They increased their capex dramatically during 2009-2011 acquiring new helicopters. I didn't find any financial info. more recent than 2011, which inspires me to wonder if there's something that occurred in 2012 that we don't know about. The prospectus does say that ERA has only two competitors. I don't know who they are or if they're publicly traded. Perhaps there's a scarcity premium implied in the stock because of its industry sector. I doesn't seem like a very attractive business from an investors standpoint. Even Seacor thought that being disassociated from ERA would boost their own stock valuation. I can't make any sense of it.
    5 Feb 2013, 12:55 PM Reply Like
  • Hi Chris. Thanks for the great discussion. I was wondering if you have looked at Crostex Enegy as a potential investment. I know that you like stocks with yields that have the potential to rise significantly in the future. This fits right in that mold.


    XTXI manages the Limited Partnership XTEX. XTEX is in the process of a significant expansion that will enable it to significantly increase its distributions to investors. The higher its distribution is, the larger Crostex Energy's cut is as a General Partner. And XTXI's cut is supposedly set to soar in the future.


    Both Credit Suisse and Eugene Robbin of Cove Street Capital believe that XTXI's dividend yield cold rise from today's 2.8% to over 6% in the not so distant future. We're that to happen it would mean great things for the company's stock price in today's yield hungry environment.


    Anyhow, I'd love to hear your thoughts on XTXI if you've looked at it.


    Thanks and have a great weekend.
    5 Feb 2013, 11:52 AM Reply Like
  • Author’s reply » You are welcome.


    We know it well.


    This was a sensational opportunity at the end of 2008. It traded as if it were in distress without it being particularly distressed. While it has largely recovered, it is still somewhat of a bargain. Good assets. Good growth potential. Fine investment. It knocked my socks off when the distribution was >50%, but it is still okay today. Cash flow is stable. Pipelines are natural monopolies; pricing power is always good.
    5 Feb 2013, 12:01 PM Reply Like
  • What happens from 2am-2:30am?
    5 Feb 2013, 12:52 PM Reply Like
  • Have you looked into Auction Preferred Shares. I have seen news about tender offer for those, but am not sure how to buy it.


    What about investing in SPAC?
    9 Feb 2013, 06:34 AM Reply Like
  • Author’s reply » I have not focused on the auction preferred shares, but will take a look.


    We have owned SPACs at discounts to their cash value. We have also shorted quite a few of the companies with origins in SPACs once they buy operating companies.
    9 Feb 2013, 08:41 AM Reply Like
  • How about debt tender offers?
    10 Feb 2013, 06:35 AM Reply Like
  • Author’s reply » These can be great. We have been involved in quite a few.
    10 Feb 2013, 07:09 AM Reply Like
  • Can you give an example of successful debt tender?
    12 Feb 2013, 05:21 AM Reply Like
  • Author’s reply » CIT in 2009
    12 Feb 2013, 05:59 AM Reply Like
  • Hey Chris, what is your preference in analyzing a spinoff? Im assuming your doing most of your work once its been announced? Also, what valuation models do you perform for spinoffs?


    12 Feb 2013, 04:15 AM Reply Like
  • Author’s reply » The best description of spinoffs that I've read is this: So I would start off there. But yes we generally do most of our work once a spin-off has been announced (although sometimes, such as with CVR Energy, Inc. (NYSE:CVI) we owned it as a pre-arbitrage opportunity, as a deal target, as non-tendered minority holders, before the spin-off). What valuation models do we perform? It is our typical look at valuation -- which emphasizes cash over accounting earnings and emphasizes intrinsic value over near-term quarterly reporting. What is particular to the spin-off process itself is more analysis on counterparty behavior and the spin-off dynamics so that we can seek out situations where there are likely to be non-economic counterparties to be found.
    12 Feb 2013, 06:05 AM Reply Like
  • What are your thoughts of the post merger spinoff's of the NYSE-ICE merger? I had read about them recently announcing they would spin off the Matif Wheat Futures which are the European wheat benchmark and that they had always planned from the beginning to spinoff Euronext. Any idea if these will be all together in one single company or several different ones? Also spinoff to shareholders or IPO on the open market? If spun-off to shareholders do you think those units have alot of value and does this make ICE a compelling buy (or shares of NYSE since they will turn into fractional ICE shares).


    Sorry for the multi-faceted question and I realize some of this may be to early to know.
    18 Feb 2013, 03:59 AM Reply Like
  • Author’s reply » Good questions all, but not something that I have looked at carefully enough to respond, other than by saying that UBAA is a super cheap way to gain exposure to this deal.
    18 Feb 2013, 09:28 AM Reply Like
  • It's hard for me to buy because it is up so much already, but I think NCT could appreciate 20-30% over the next couple months as it splits itself into two parts (expected in March), and those parts are valued on a standalone basis.


    -New Residential will be to NSM as HLSS is to OCN. It will own MSRs initially, and may branch into other residential-focused investments. It will pay a $.56 a year dividend. If it gets priced to a 7% yield like HLSS, that's an $8 share price.


    -Newcastle will own the CDOs and senior housing portfolio. It will pay a $.50/year dividend. Its assets are ~90% CDO-related and 10% senior housing-related. The senior housing portion deserves a ~5% yield based on comps, the CDO part probably deserves a 8-10% yield. A weighted average would be somewhere in the 7.7%-9.5% range. This gets you to a price range between $5.25-$6.50. (On an asset basis, I get to just under $5/share - $800m in recoverable CDO principle, $76m in the senior housing, $112m debt, and $30m cash versus 172.5m shares.)


    -The sum of the two upon the spinoff and subsequent repricing would be $13.25-$14.50, versus a most recent share price of $11.20.


    This analysis was mostly spoon-fed to me by the company here:



    The options look quite cheap...
    19 Feb 2013, 12:00 PM Reply Like
  • I'll throw out one more: BFCF.


    It trades in the pink sheets and it's closing on BXG for $10 in cash at some point in the near future. BFCF already owns 54% of BXG.


    Interesting thing is that BFCF trades at $2 and change but it has book value of about $4.


    The purchase of BXG has several moving parts though so I'm not sure how to value the post-transaction BFCF.


    Anyone know anything else about this one?
    20 Feb 2013, 01:12 PM Reply Like
  • I remember briefly reviewing, and then passing on it as I couldn't get comfortable with the CEO of BFCF, Alan Levan. My recollection is that he had butted heads with shareholders in multiple entities, to a point where it looked like a pattern.


    Would be interested in learning more if you've done any analysis.
    20 Feb 2013, 02:06 PM Reply Like
  • Crimson Wine has begun trading when-issued with the symbol CRSWV at prices near book value.
    21 Feb 2013, 12:12 PM Reply Like
  • My recollection upon analysis was that they were good assets that had abysmally low returns (which is my take on vineyards generally). Management even stated something to the effect that-- those grapes weren't for profits, they were for an inflation hedge--. There was some capacity coming online that wasn't reflected in the past financials (a vineyard they had to trim back due to a frost in 2011 or 2012, extra processing, etc.).


    I'll knock the dust off of it if it drops below $7.50. (Obviously it will now proceed directly to $20/share). Anybody else take a look? No position.
    21 Feb 2013, 02:53 PM Reply Like
  • I gave it a cursory look but can't claim to know this company well. Here's something to think about from the prospectus:


    "Prior to the distribution, Crimson relied upon Leucadia for debt financing and equity contributions for all of its liquidity needs. These needs included $86,018,000 for the acquisition of Seghesio Family Vineyards in May 2011 and $19,200,000 for the acquisition of Chamisal Vineyards in August 2008. As of September 30, 2012, the aggregate amount payable by Crimson to Leucadia and its affiliates was $151,874,000, all of which will be contributed to capital before the distribution. As a result, in future periods Crimson will not record interest expense relating to this borrowing. Crimson’s positive cash flows from operating activities have improved during the last three years as a result of growth through winery acquisitions, increased sales from new product launches, improved brand recognition of its existing portfolio and increased higher margin direct to consumer sales. Crimson would have reported greater cash flows from operating activities for certain periods presented in this information statement if the interest expense paid to Leucadia were excluded."
    21 Feb 2013, 03:59 PM Reply Like
  • My 5 minute glance:


    There's probably seasonality in the business, but as a shortcut let's take the 9 months of 2012 out to a full year. Using their pro-forma numbers (i.e. adding back in that interest expense) you get $.25/share in net income. They record about $5m/yr depreciation. Ignoring maintenance for now, that gets you to ~$.45/share in FCF. PE of ~35, P/FCF ~19. Doesn't really get me too excited. Incidentally - this trades about the same valuation of TSRRY - so it seems the market is at least consistent in valuing these wine growers.
    22 Feb 2013, 09:36 AM Reply Like
  • Crimson now trading as CWGLV: $7.50/share and still dropping. Still not cheap enough to spend the time to do a real analysis, but getting closer!!
    25 Feb 2013, 03:11 PM Reply Like
  • Here's a dirt cheap stock due to a recapitalization: Cheap, not pretty-


    Hat tip to Warren's Alter Ego on some info... I'd be interested in any of this groups thoughts...
    5 Mar 2013, 12:44 PM Reply Like
  • A competing bid has emerged for OUTD valuing the stock at $8.75. OUTD's merger partner has until March 12 to improve its offer or else the BOD will terminate the deal and engage with the interloper. The stock has been trading around a dime or so higher than $8.75, so if a higher bid doesn't emerge, the downside is that dime or so, but the potential gain ought to be much higher than a dime if the bidding escalates.
    8 Mar 2013, 12:26 PM Reply Like
  • Author’s reply » What a great topic. We apparently share taste in investments. OUTD is a gem. It is an auction with a put. Heads = $8.75 and tails = considerably > $8.75. If you hate losing money and enjoy making some, this is kinda as good as it gets.
    10 Mar 2013, 12:34 PM Reply Like
  • Here's an article published in the NYT on March 4 that reports about the two parties involved in bidding for OUTD and the politics that are being imputed to a deal with Intermedia:



    Of note, the NYT report quotes the president of an investment firm UTR, which is a 2% holder of OUTD, asserting that he made a bid for the company that placed a higher value on it than Hindery's did, but the BOD nonetheless rejected it. UTR has also asserted that OUTD's BOD rejected other offers for the company that were superior to Intermedia's in price and deal simplicity. I subscribe to the notion that there are multiple parties who would be eager to pay a higher price to purchase OUTD than either of the publicly disclosed offers that have been made. The market for cable channels is very strong as larger content providers and cable networks have been widely reported to be desirous of augmenting their content portfolios to gain leverage with distribution partners or to gain more value out of their distribution infrastructure as the case may be. Deal making in this regard has already begun heralded by Comcast's purchase of GE's minority interest in NBC Universal, OUTD's deal with Kroenke, etc. Now that the BOD has signaled that it is receptive to other bidders, perhaps they will appear. I think that OUTD's management had a bias towards doing a deal with Intermedia because of their long familiarity with Intermedia and its management based upon their six year history of mutual flirtation. I presume that Kroenke's proposed break-up fee of merely $1M indicates that Kroenke is making its bid as a defensive tactic because it views Intermedia's offer as being unacceptably low and not because it has strategic long term interest in ownership, as Intermedia does. Also, Kroenke's bid was not preemptively sized. In exceeding Intermedia's bid by just shy of 10% and given the cost saving synergies and other value an industry player would benefit from by acquiring OUTD, my estimation is that Kroenke's bid creates a low hurdle for Intermedia or anyone else to pass over to acquire OUTD. The hurdle is just high enough to change the BOD's judgment about which bid is superior and just low enough to make the economics of a deal with a higher bid still tantalizing to Intermedia.
    10 Mar 2013, 09:04 PM Reply Like
  • Chris, I appreciate your input as I 've learned a lot. I was wondering what your thoughts, if any, were on the potential Pace, Charger Energy, and Avenex merger.
    12 Mar 2013, 07:07 AM Reply Like
  • I'll add one more here for this group: TFSL


    Small Ohio-based bank. Growing nicely in Ohio and Florida. They were under two MOUs but they've gotten out of one in December and expect to be out from the other any time now.


    Management has talked about re-instituting a dividend once that happens. Also talk of a possible tender offer.
    15 Mar 2013, 11:18 AM Reply Like
  • Author’s reply » Thanks. I know it well and used to be a shareholder.
    15 Mar 2013, 11:20 AM Reply Like
  • Used to? Is there anything I should know about this company? Looks like a pretty good one.
    15 Mar 2013, 11:22 AM Reply Like
  • Author’s reply » I'm not in love with the management and I'm not a fan of their loan portfolio.
    15 Mar 2013, 11:28 AM Reply Like
  • Got ya. I appreciate the feedback.
    15 Mar 2013, 11:30 AM Reply Like
  • I have been following patent and patent litigation plays for sometime now and have noticed when Hudson Bay/Iroquois jump in with funding things change for the IP companies. I was wondering if you have any thoughts on WDDD or what appears to be a shell company for those boys, SPEX.
    15 Mar 2013, 12:51 PM Reply Like
  • Author’s reply » I know and like the team at Hudson Bay, but can't really comment on SPEX/WDDD.
    15 Mar 2013, 12:55 PM Reply Like
  • If AB InBev were to be allowed to acquire Grupo Modelo under the proposed terms, do you have any opinion what Constellation Brands's stock price would be fairly valued at?
    15 Mar 2013, 03:37 PM Reply Like
  • Author’s reply » We expect BUD to be allowed to acquire Grupo Modelo under the proposed terms and think that STZ is worth around $47-50 if the deal goes through. So not tons of upside, but much better than the value without the deal (closer to $35).
    15 Mar 2013, 03:39 PM Reply Like
  • Thanks!
    15 Mar 2013, 04:10 PM Reply Like
  • Author’s reply » STZ After Hours: $46.88 +$1.13 / +2.47%


    Constellation Brands Statement Regarding Discussions with DOJ


    VICTOR, N.Y., March 15, 2013 - Constellation Brands, Inc. (NYSE: STZ and STZ.B), Anheuser-Busch InBev (Euronext: ABI; NYSE: BUD), Grupo Modelo, S.A.B. de C.V. (BMV: GMODELOC), and Crown Imports LLC have made substantial progress in their discussions with the U.S. Department of Justice toward resolution of the Department of Justice's litigation, relating to AB InBev's proposed acquisition of the remaining stake in Grupo Modelo it does not already own, based on the terms of the revised transaction announced on Feb. 14, 2013.


    Today, the companies and the Department of Justice jointly approached the Court to request an extension of the stay on their current litigation, currently due to expire on March 19, 2013, to April 9, 2013. The parties agree that an extension of the current stay will likely enable the parties to complete their discussions. If the parties reach an agreement, they will file a proposed consent judgment and related documentation with the Court. There can be no assurance that the ongoing discussions will be successful.


    About Constellation Brands


    Constellation Brands is the world's leading premium wine company that achieves success through an unmatched knowledge of wine consumers, storied brands that suit varied lives and tastes, and more than 4,400 talented employees worldwide. With a broad portfolio of widely admired premium products across the wine, beer and spirits categories, Constellation's brand portfolio includes Robert Mondavi, Clos du Bois, Kim Crawford, Inniskillin, Franciscan Estate, Mark West, Ruffino, Simi, Estancia, Corona Extra, Black Velvet Canadian Whisky and SVEDKA Vodka.


    Constellation Brands (NYSE: STZ and STZ.B) is a S&P 500 Index and Fortune 1000® company with more than 100 brands in our portfolio, sales in about 100 countries and operations in approximately 40 facilities. The company believes that industry leadership involves a commitment to our brands, to the trade, to the land, to investors and to different people around the world who turn to our products when celebrating big moments or enjoying quiet ones. We express this commitment through our vision: to elevate life with every glass raised. To learn more about Constellation, visit the company's website at
    Angela Howland Blackwell: 585-678-7141
    Cheryl Gossin: 585-678-7191
    Investor Relations
    Patty Yahn-Urlaub: 585-678-7483
    Bob Czudak: 585-678-7170
    15 Mar 2013, 04:28 PM Reply Like
  • So far so good with the April 40 and 42.5 put options I sold this afternoon after news of the delay was reported. It seems portentous that they're only asking for two more weeks instead of, say, a month.
    15 Mar 2013, 04:36 PM Reply Like
  • Author’s reply » Yep. The chance of a consent decree here is very high.
    15 Mar 2013, 04:38 PM Reply Like
  • Author’s reply » STZ After Hours: $47.20 +$1.45 / 3.17%. I'm glad that I could come through with the $47-50. Sorry about the 1 hour wait! -C
    15 Mar 2013, 04:40 PM Reply Like
  • Chris, since you can't comment(?) on the patent plays I asked about, do you have any thoughts on 3D Bioprinting company ONVO.PK? Their balance sheet is horrible but they just completed conversion of warrants to reduce their liability. They are a developing stage company with an incredible product. Do you feel this emerging platform has merit and are they under valued at this time? I do enjoy your POV.
    19 Mar 2013, 12:50 PM Reply Like
  • What are the longest and shortest amounts of time that you've spent researching a new and novel investment idea before deciding to do it?
    27 Mar 2013, 12:35 AM Reply Like
  • Author’s reply » Good question. Odd lot tender offers, such as small banks going private and cashing out small holders, can be analyzed in a few hours. But I like to read so probably have never really spent less than the time between two meals, say four hours, researching a simple idea.


    For a $110 mil single investment into a complex pharma company that involved an unusual security and a lot of variables, that was about a whole quarter of a year, spending half of my time.


    I think those two examples bracket my research. Most are somewhere in between. But I can go eighteen hours on a topic, so part time is still nine hours five days a week and a couple on the weekends. The ratio of research input to investing output is easily 10,000:1 in terms of our focus/time/energy. Even our money -- we spend a lot on research. If I want to know anything about a subject, I want to know everything about it.
    27 Mar 2013, 12:40 AM Reply Like
  • Given your willingness to spend on research, my curiosity has been piqued about what types of research expenses you incur. How do you spend your research budget? On what types of things can expenses mount? I would expect legal, but beyond that I wouldn't know what to anticipate.
    27 Mar 2013, 01:20 AM Reply Like
  • watch a David Einhorn presentation. i recall when he made his short case on St. Joes with his 100+ slide presentation, he and i believe his father drove all over Florida to all of St. Joes locations, took extensive photography, filled out their own charts and graphs so they could compare it to company numbers. Boots on the ground research can be pretty expensive. He did the same with Green Mountain, surveying employees about inventories and company practices (and probably paying them well for their time and risk).
    27 Mar 2013, 03:25 AM Reply Like
  • Author’s reply » We use a lot of lawyers. While I spend much of my time reading SEC filings, we get a lot of help with that too. Lawyers can be helpful on regulatory and antitrust issues as well as on corporate transactions, especially in unsolicited situations. They can be expensive.


    Bloombergs are pretty helpful. Their terminals are addictive and expensive, though.


    Occasionally, we hire investment banks. We are not that excited about doing so and prefer to do our own valuation and strategic thinking, but they can be useful for their relationships.


    Industry-specific consultants are helpful at getting me up to speed. If it is pharma or tech, a PhD or two around can help on IP issues and can speed up the process of getting smart on products. Survey data can be $25-50k per pop.


    We subscribe to every conceivable research service and publication. I am not enamored with sell side research and prefer one-off, for-pay independent research. I really like trade publications, which I get for about every industry (the wife raised an eyebrow regarding my "Women's Wear Daily" at one point but was pretty sure it was investment related).


    Travel and industry conferences take time and money too.


    We love data. If I'm going to know anything about something, I want to know everything about it. One of the funny things about using people to help on the investigative side is that we end up knowing all of this stuff about management teams by the time that I meet them. So, when we are meeting, I try to not mention anything that would look too strange to know... but we probably know.
    27 Mar 2013, 07:46 AM Reply Like
  • Author’s reply » Einhorn was pretty great on both of these and there was a ton of research that went into them.


    For me, my research is also sort of like Dumbo's feather: I start by getting all of the data that one could conceivably get. So when positions move against us, we can be comfortable enough in our own thinking to stick it out where appropriate.
    27 Mar 2013, 07:48 AM Reply Like
  • Chromcraft Revington (CRC) has announced they have rec'd a LOI for a management buyout for $5m; equating to a $.99/share price. Shares are currently trading hands at $.64 as I write this. The Press Release ( is light on details of the LOI and gives us no insight as to whether financing is set up or not.


    This toad has some warts on it (negative Free Cash flow, questionable management), but I'd be interested in any of your views. I've initiated a small long position.
    22 Apr 2013, 10:21 AM Reply Like
  • Why's it selling off today? No faith in management?
    23 Apr 2013, 01:28 PM Reply Like
  • Good question. Unfortunately my answer isn't as good- I have no clue. My guess: Some larger long time shareholders that have been annihilated in the past are happy to get some liquidity to get out.
    23 Apr 2013, 01:57 PM Reply Like
  • Clint- How do you get the $.99/share? Am I looking at a different share count that you.


    Based on my math - there are 8,170,000 shares less than 1,683,000 shares in ESOP = 6,487,000 shares. $5M / 6.487 = $.77/share.


    The balance sheet looks good enough that he should be able to borrow the $5M. I expect the deal to close.
    23 Apr 2013, 01:57 PM Reply Like
  • update on CRCV: The 2012 10K shows total sharecount of 6,490,311 shares ($.77/share). It looks like most options are underwater.


    More interestingly, their Delphi warehouse is now empty and they are "considering various options" for it. It's 519k square foot. At $25/sf it gets to a value of almost $13m. I assume management will "consider options" until after they sell the company to themselves.
    20 Jun 2013, 05:25 PM Reply Like
  • Another great question, another poor answer:
    I got the 5.06M shares from the 9/2012 quarterly financials ( on page 4.


    But now that you say that I do see the ESOP's Year end 13G show a total of 6.5m on the footnote of page 2


    The press release is a little unclear to me whether the $5m is inclusive or exclusive of the ESOP's shares, although it's clear that it won't be buying those shares. So, on 6.5m total shares at $5m; the 5m outside shareholders will get $.77. If I'm reading the Press release incorrectly and the $5m is exclusive of ESOP holdings, we could get the $.99.


    I'd be interested in others views
    23 Apr 2013, 02:19 PM Reply Like
  • Value of 69% CONE stake that CBB still owns is worth more than CBB's entire market cap. This implies that CBB stake after spinning off CONE is worth at least negative 300 + million. The risk is that CBB may truly be worth nothing to shareholders as they are highly levered while at the same time trying to aggressively expand by lacing fiber-optics in the Cincinnati region which is what has led to downgrades by several ratings agencies. They have been relatively successful in expanding beyond their land-line business and into wireless. The big one though is that insiders (CEO & CFO) have bought hundreds of thousands of dollars worth of shares at $3.33.
    6 May 2013, 08:20 PM Reply Like
  • Author’s reply » I'll buy anything with limited liability for a negative price. Thanks for the great idea! -C
    6 May 2013, 09:17 PM Reply Like
  • If CBB would really need to raise more cash as is implied then they would probably need to sell off shares of CONE; possibly taking whatever price they can get. Wouldn't that potentially erode the value? Is there a margin of safety here that I am missing?
    10 May 2013, 12:07 AM Reply Like
  • CBB market cap = $705M


    CONE market cap = $521M


    Am I missing something?
    6 May 2013, 09:35 PM Reply Like
  • i believe this has to do with the fact that CBB only spun off 31% of CONE. Also the structure of the company matters. CBB owns both common shares of CONE but also the Limited Partnership of CyrusOne. If i have read the old press releases correctly, the units of the LP can be directly converted into common shares. In this way i think you have to actually go into the SEC filings to find the actual value of CONE and the marketcap seen on most websites is deceiving as it only refers to common shares.
    6 May 2013, 10:57 PM Reply Like
  • Thank you for clearing that up Safis, much appreciated.


    6 May 2013, 10:59 PM Reply Like
  • here is original press release from business wire on marketwatch:

    6 May 2013, 11:03 PM Reply Like
  • Chris- Let's say you are a buyer of AAPL at 400. Instead of just sitting around and waiting, why not sell puts. If it goes down, you get it. if not, you collect your premium. Same with selling at your price. Why ever buy or sell straight if you have your price targets clear in your head?
    6 May 2013, 11:55 PM Reply Like
  • Author’s reply » I agree 100% and that is largely consistent with how we set up positions and how we exit.
    7 May 2013, 08:58 AM Reply Like
  • In the '70's, Buffet said he would have had no hesitation putting his entire net worth in Washington Post... none whatsoever. Do you have any positions with that kind of conviction? GKK? Ocean Shore? PRXI? Or are they just , on average , great risk/reward tradeoffs?
    19 May 2013, 11:31 PM Reply Like
  • Author’s reply » Not today. No to GKK/GPT, no to PRXI, no to OSHC. Nothing has hit that level of conviction since early 2009. But in theory, L would have been tempting as would LBTYA. LBTYA at $10 was my favorite equity idea at the time and was as convincing as anything I've seen. It is also "cheating" so say I would put my entire net worth in it, since it contained several different securities and different risks. BRK.A / BRK.B during the tech bubble would have been okay too. I never have and never will, but those were the closest moments.
    20 May 2013, 06:49 AM Reply Like
  • Very valuable comments, as usual
    20 May 2013, 09:41 AM Reply Like
  • Chris,


    any thoughts on two other stocks which have been in the news lately? (CLWR and ELN)
    20 May 2013, 09:57 AM Reply Like
  • Author’s reply » I own neither. CLWR is a particularly tricky one to value. It could be an interesting dissent.
    20 May 2013, 11:07 AM Reply Like
  • thanks....I agree on CLWR.....S may be the safer play here and with a chance at some more upside I think
    20 May 2013, 11:33 AM Reply Like
  • has anyone given a good look at the FCX MMR merger? there is going to be a trust that will be spun off in the closing of the merger that sounded interesting although my expertise in oil numbers is kind of lacking.
    21 May 2013, 06:09 PM Reply Like
  • Author’s reply » Yes, we had a substantial PXP position but no MMR position based on price.
    21 May 2013, 09:02 PM Reply Like
  • you must be pretty happy then with those dividend announcements yesterday then
    21 May 2013, 09:30 PM Reply Like
  • Author’s reply » Yes, extremely.
    21 May 2013, 09:38 PM Reply Like
  • Chris, I was wondering if you--or anyone--have taken a look at the upcoming spin-offs involving News Corp and Covidien and found them of more than passing interest. Covidien's situation seems intriguing--the spin-off of a slower growing, less profitable company from a much larger parent. In such a circumstance, one could look for a bargain price post-spin-off of the spin-off company and also a valuation increase of the parent. I don't know much about Covidien, but I've decided to begin to investigate. Purchasing near-the-money calls whose duration spans the spin-off date might be the way to go with this one if it seems like the case for the spin-off is compelling. Another strategy might be just to wait and see what happens with the spin-off company.
    22 May 2013, 02:37 PM Reply Like
  • Author’s reply » I would be very interested in anyone else's answer, but I don't have one myself. We used to be large shareholders in News Corp, but are no longer for various reasons.
    22 May 2013, 02:40 PM Reply Like
  • I think that both newscorps fox and time warner minus time magazine look interesting as long as the price doesnt get out of control. Cable content and movie distribution lines have such pricing power currently and as we have seen over the past year or two they have rocketed higher... disney, amcx, viacom, cbs. On the otherhand the newspaper and magazine portions of the spinoffs could be great too because they are hated and probably levetaged pretty good. Greenblatt talks about this in stock market genius in his Marriott case study. I think the biggest question is buy pre or podt spin.
    22 May 2013, 05:39 PM Reply Like
  • I used to own News Corp and rode the wave up over the last few months but I don't like it long term because I'm not sure what's what with the future of media companies. The so-called 'hated' assets of the newspaper side will be spun off along with Murdoch's Australian cable operations. That's the kicker here. The Aussies don't yet subscribe to cable in the same numbers that Americans do and that's where the growth will come from, according to theory. I like the entertainment side of News Corp also, especially the new ESPN-like channel they plan to launch but only if they can somehow contain the spiraling royalty costs associated with broadcasting live sporting events.
    I currently own and really like COV. I believe they are leaders in most of the medical areas where they compete. The small pharma spinoff is interesting but I don't know much about their pipeline. It's interesting to note that the spin, which will be called Mallinckrodt Pharmaceuticals, is the sole legal source for cocaine in the United States. Talk about a high moat business! That said, COV apparently tried to sell the pharma business at one point but couldn't find a buyer.
    This post on stockspinoffs has more info:
    22 May 2013, 04:11 PM Reply Like
  • Any thoughts on Clearwire?
    30 May 2013, 12:46 PM Reply Like
  • Author’s reply » Worthless as a standalone going concern. Optimized spectrum could be worth $10/share. Ends up somewhere in the middle.
    30 May 2013, 12:50 PM Reply Like
  • CLWR just announced that Sprint has offered $5/share. With CLWR trading at just several cents above Sprint's bid, this seems like another asymmetric risk/reward scenario as the odds seem to me significant that DISH will outbid again. If they don't, I'll lose a couple cents per share.
    20 Jun 2013, 03:28 PM Reply Like
  • Chris I saw you commented on SFD so it led me to ask some arb questions. With the fairly big spread do you feel like SFD is a good risk/reward?
    Same question for CTB. The spread there is 17 percent or so.
    And with the selloff in the market taking a lot of stocks down AM is back at 18.35 meaning no premium having to be paid for a shot at a higher bid (18.20 plus 15 cents div= current market price). Thanks
    20 Jun 2013, 04:48 PM Reply Like
  • Author’s reply » I think that SFD is a terrific risk/reward. There are probably three bidders and one activist. CTB is okay, but I feel less strongly about it. AM probably doesn't work, but it is worth it at $18.35. You asked about these three names in order of my enthusiasm. I have a large position in SFD, small in CTB, and am out of AM.
    20 Jun 2013, 05:35 PM Reply Like
  • CTB is interesting and am building a small position. However it's going to suffer from the damaged goods/foreign discount till it closes. The selloff the past couple days has been ugly. Big discounts on foreign deals typically never recover till the close, IMO.


    In both CTB and SFD you have to consider that the 'tide is going out' for easy money (to paraphrase buffett). A concern is they don't fund if things continue to deteriorate in the junk market.


    I'm also very concerned about the informal china funding networks. They are the no-doc loans for the country. We saw here how fast that rippled up to investment grade product which would impact the spreads if not the funding of developing world loans.


    For SFD both JBS and CP Foods have reasons to walk away: CP is highly levered in the Thai market (ground zero for asian leverage) and JBS just announced a 2.75bb buyout on 6/10. JBS also told the WSJ on 5/29 'no offer'.


    In a contracting market the SFD offer looks better than the spec offer to break up the company with some pro bono investment banking work. We shall see on 6/27 when the go-shop expires.


    That's the bear case. SFD is one of my top 3 positions. I'm just highly doubtful it gets a bump in any way, shape or form.


    ARB blew out this week as desks de risked. BMC and GDI, IN, NBG pfd, CTB, lots of great places to put money if you can tolerate risk.


    Rgds, AT.
    20 Jun 2013, 10:17 PM Reply Like
  • Thanks Chris. I am in all three. Should the market sell off turn into a larger correction or even a bear market stocks such as these and GDI, LIFE and BMC become interesting in my opinion. In the 2011 sell off the highest quality arbs were offering really high AR's. It was a case of sell what you can and not what you want to for many. Of course this only works if there are no EBIX's on one's buy list.
    20 Jun 2013, 07:26 PM Reply Like
  • The WSJ has just reported that ONXX is expecting approx. five companies to participate in its auction, including Amgen and Pfizer. This seems like an intriguing situation. There is a professor at Oxford who wrote a paper a little over a decade ago I remember reading who concluded that three parties are what it takes to maximize an auction price. Have you any thoughts about this one, Chris? Such as the most likely buyer and where the price ought to end up?
    16 Jul 2013, 12:51 PM Reply Like
  • Author’s reply » We have a large exposure to ONXX. One of my favorite cancer research philanthropies is the Multiple Myeloma Research Foundation ( through which I originally learned about multiple myeloma, Kyprolis, and Onyx. By the middle of last year, it was pretty certain that ONXX would be acquired. I am only surprised that it took this long to get the process going. We have 5% of our equity allocated to this opportunity. We believe that the standalone company is worth about $120, that a deal will be struck around $150, and that there is a 75% chance of a deal closing by 10/1/2013. AMGN remains the most likely buyer, but there is still a bid-ask spread. AMGN would like to pay under $140 and ONXX wants $150. Solvable, but yet to be solved.
    16 Jul 2013, 01:15 PM Reply Like
  • Bloomberg has reported that Amgen has raised its offer to $130/share:



    Pfizer, Novartis, and Astra Zeneca have been reported to have expressed interest enough to get beyond the first round of bidding, implying that Amgen has competition. No word yet on how ONXX's BOD judges the offer, but I am guessing that they will reject it. I would be surprised if $10 more per share is enough of an increase to change their opinion.
    6 Aug 2013, 08:31 PM Reply Like
  • Author’s reply » I think that the original bid-ask spread was $30 and is now closer to $10.
    6 Aug 2013, 08:41 PM Reply Like
  • Coles said on the CC this afternoon that Amgen has company:


    "The process is ongoing with multiple parties currently engaged in discussions and with the outcome, timetable and end date dependent upon the actions of interested parties and the board's review of its options."
    9 Aug 2013, 01:32 AM Reply Like
  • Author’s reply » We'll know more over the course of the next few weeks.
    9 Aug 2013, 10:38 AM Reply Like
  • When you say 75% chance of close by Oct 1 do you mean a definitive price is agreed upon or the deal closes?
    16 Jul 2013, 03:28 PM Reply Like
  • Author’s reply » In my position data sheet, our premises are listed as "upside", "downside" and "probability" meaning that the chance that it is $150 before $120 by 10/1/2013 is 75%. We may have to move this date back if there are any delays. This has been in our sheet for some time now.
    16 Jul 2013, 05:03 PM Reply Like
  • Thanks Chris. Very interesting method. Are you using options with ONXX or just stock?
    16 Jul 2013, 06:09 PM Reply Like
  • Author’s reply » Both; we were indifferent to ONXX around $140, so we wrote some $135 puts.
    16 Jul 2013, 06:38 PM Reply Like
  • Any other biopharmaceuticals you guys particularly bullish on right now Chris? Thx
    17 Jul 2013, 02:16 PM Reply Like
  • Author’s reply » Not really, not generally an area of focus other than in deals or potential deals.
    17 Jul 2013, 02:53 PM Reply Like
  • Chris, do you have any thoughts about the Belo-Gannet situation?
    4 Sep 2013, 01:37 PM Reply Like
  • Author’s reply » I think that the price is low, good for Gannet and not so great for Belo. However, they are underpaying by an amount that is probably not enough to elicit the kind of organized shareholder revolt necessary to get it bumped or voted down.
    4 Sep 2013, 02:22 PM Reply Like
  • Author’s reply » Someone -- Gannet, someone else, or Delware -- will probably have to come up with what it is worth or at least enough to make us lose interest and that number is high enough as to avoid violating the statutory age of consent.
    4 Sep 2013, 02:45 PM Reply Like
  • BTW Chris- any update on your AUTO appraisal? I know you're an avid writer, I'd be an avid reader of any information you have as an eyewitness to the costs/benefits of going to Delaware for appraisal rights...
    4 Sep 2013, 02:54 PM Reply Like
  • Author’s reply » Clint,


    I do not have any update on any topic involving ongoing litigation that I am directly involved in. The problem is that it would create a constant disclosure cycle which would be too labor intensive to be worth it.


    4 Sep 2013, 03:02 PM Reply Like
  • Totally understand.
    4 Sep 2013, 03:46 PM Reply Like
  • Out of curiosity, how many positions do you usually have in your portfolio? And how many people in your fund are in the role of keeping track of these positions or analyzing new positions?
    21 Sep 2013, 11:51 PM Reply Like
  • Author’s reply » We typically have about twenty to twenty five positions. However, at least some of those require a hugely disproportionate amount of research effort at any one time, so that much of our time seems to be spent on five to ten active research projects with open issues. We have an alerts system that tracks anywhere from 250-500 securities that are in our event driven universe that we are interested in but for the price and are awaiting prices that we find attractive. I focus on asking the question, "where might value be hidden?" and look at event probabilities and what the value would be of corporate resources put to their best and highest use. My partner focuses on valuing the standalone going concern value, which is typically how we look at downside values. Two more colleagues "track" the positions in the sense of monitoring how they have done in specific types of corporate events and compiling our statistical record, which is an input into how we assign future probabilities for similar situations.
    22 Sep 2013, 07:49 AM Reply Like
  • What are some of the useful databases/alert services for event driven investments?
    23 Sep 2013, 04:54 PM Reply Like
  • Do you see a bump on the BBRY horizon? Does anyone besides Prem see value here?
    23 Sep 2013, 03:52 PM Reply Like
  • Author’s reply » Great question; as far as I know, our Canadian friend is on his own here. He has seen many things before I have... including BBRY. I don't see it.
    23 Sep 2013, 03:58 PM Reply Like
  • I thought that you might find interesting that the the buyout offer is 9$ a share, and the stock is trading at 8.82, implying that Prem may just walk away. I don't see that happening either. Sounds like heads I win , tails I win less, and if the coin stands on it's edge, I may lose everything.
    23 Sep 2013, 08:14 PM Reply Like
  • Author’s reply » My only caution would be that this is a letter of intent. The best way to think about this is that Prem has an option to buy it at $9 but one with many, many outs.
    23 Sep 2013, 08:27 PM Reply Like
  • Chris,
    Am getting a wee bit concerned about your sleep habits. "12-2 AM, 2:30 to 4:30 AM". (the 2:00 to 2:30 block for Asian calls) That's 4 hours of sleep. Then get up at 4:30 in Vermont, run your a** off, drive to Maine the next day and do the same thing.....reading and posting here on SA all the time.


    That's not human.


    Don't want to see you go "down in flames" (Top Gun reference) Please tell me you have a relief valve....some where.


    What does your wife say?


    You give us so can safely back down one notch.


    The PITA,


    P.S. and what did you think about Diedre?
    23 Sep 2013, 04:37 PM Reply Like
  • Author’s reply » This is my relief valve! Been felling/limbing/splitting wood today with primitive tools. Getting dark... so time to get the headlamp. What does the wife say?


    Wife: "well at least I have lifetime tenure as there isn't a long line of women who would put up with this".


    Deirdre is great; I'm getting together with her later this year to come up with plans for another show around the end of the year.
    23 Sep 2013, 06:03 PM Reply Like
  • Oh...."lifetime tenure" ..that's cruel! But...true to a wife. Just remember she is the mother of your children.... and you will be fine.


    The stacking of firewood is an art. One must use only cob house ends for the stacking of rows so as not to offend the firewood gods. The use of supports on ends for any row less than 6' high is forbidden. Child labor is most appreciated by those same gods. If you have a kid that say's "I want to help" are on the right path in life.


    So, a Deirdre redux is in the works? Good luck with that.........grin
    23 Sep 2013, 07:15 PM Reply Like
  • Any interest in any of the upcoming spinoffs? There have been alot announced recently:
    National Oilwell Varco is splitting off its distribution business
    Noble Corp (NE) is splitting in two drilling cos... standard and high spec
    Newcastle Investment just announced another spinco for its media assets
    Penn National Gaming finally got approval for its reit spinoff


    Anyone find any of these interesting? Still early to tell for some of them.
    28 Sep 2013, 05:34 AM Reply Like
  • Author’s reply » We've been involved with HBIO, which we think is somewhat inexpensive.
    28 Sep 2013, 07:55 AM Reply Like
  • i am currently in Newcastle since before the NRZ split, will likely hold through the media split in january. Also own SAI which just split in two today, less conflicts should be a good thing.


    the noble split sounds interesting. will put the higher earning rigs in a separate company which will give it a higher multiple, i might be biased towards ocean drilling companies though as i always seem to win on those trades
    28 Sep 2013, 09:15 AM Reply Like
  • Thanks for those ideas SatisKusai. I love spinoffs and I'm always interested when one is announced.


    Speaking of which, Agilent Technologies announced the spinoff of their electronic measurement (called EM in the note below) division earlier this week. I have not done a deep dive yet but here's what S&P had to say:


    We view the proposed spin-off of the EM busi-
    ness positively. EM and the new Agilent are
    two distinct businesses with limited synergies,
    in our view. We believe the new Agilent should
    be able to grow sales faster, and with a sole fo-
    cus on life sciences and diagnostics, its valua-
    tion should trade more in line with its life sci-
    ence peers. Agilent shares had been trading
    below peers due, we think, to uncertainty and
    the declining sales within the EM business. We
    also see Agilent pursuing additional acquisi-
    tions within high growth areas such as se-
    quencing and molecular diagnostics to supple-
    ment its organic growth. Sales within the cycli-
    cal EM unit are volatile and expected to remain
    soft over the next several quarters, particularly
    reflecting the loss of a major wireless client in
    the second quarter, sequestration and the
    weak Japanese yen.
    28 Sep 2013, 02:52 PM Reply Like
  • Ant thoughts on RDA? Stock is not terribly expensive, and their is legitimacy to the buyer. If this follows the same path SPRD did, I am looking for a 9% bump.....Thoughts?
    30 Sep 2013, 10:49 AM Reply Like
  • Just stumbled onto this board and hope that it isn't dead because I've really learned quite a bit from the commentary here. My question is how possible it is to do some portion of event-driven investing in the way that Pabrai describes as "cloning" (i.e., generating a list of investment ideas by copying from established/successful investors before going on to do your own research). I have used this idea successfully from a long value perspective, but have doubts about its applicability to event-driven. If the catalyst is near term, the trade may have come and gone by the time it appears on a 13F. And of course there is no way of knowing if there is a short being held in conjunction with a long showing up on the 13F.


    Are there any investors worth following through the SEC filings that generate a consistent source of good event-driven ideas? If not, is there some other way (besides the SEC filings) for an investor to streamline his research time by generating a source of ideas to look through by cloning guys who are more experienced in the event-driven area?


    Part of the genesis for this question was that as I've come to appreciate Chris's thinking on some of the investments he's written about I have tried to track Rangeley through the SEC filings. There are some valuable 13G and 13D filings, but no 13Fs. (That is to say, there is the possibility of garnering individual stock ideas when Rangeley is a significant enough holder of a particular issue, but no regular quarterly filing describing the long portfolio as a whole.)
    21 Nov 2013, 06:42 PM Reply Like
  • Author’s reply » Here is an article regarding some of the 13fs I follow:


    Here is who I follow. They tend towards some event driven and they have a value bent:


    Arbiter Partners






    Berkshire Hathaway






    Clarium Capital










    Eton Park




    Glazer Capital


    Gramercy Capital












    Hudson Bay


    JD Capital








    Mohnish Pabrai








    Pershing Square








    Third Point








    21 Nov 2013, 07:31 PM Reply Like
  • Since you own OSHC, another hedge fund that might interest you is "PL Capital".
    22 Nov 2013, 02:15 PM Reply Like
  • Author’s reply » Thanks for the suggestion. -C
    22 Nov 2013, 02:33 PM Reply Like
  • Away from SEC filings several of the activists get 'long and loud' after they are done buying. The summaries of investment conferences are available online in different places including SA, MarketFolly, WSJ, Dealbook, BBerg, Reuters, etc. I read all of those daily for leads.


    Nice thing of reading another's analysis when they go public- you can check the thesis, recent pricing, competitors, related commentary, etc. I heard an absolutely ridiculous short idea from an otherwise brilliant mind. I fact checked and clearly the guy just threw out the idea with zero research and dinged the stock for a few days.


    I'm a history nut with a decent memory of what happened 15-20-25 years ago. I remember who is right and wrong over time. Who is a good thinker/writer/tv interview and who makes money. Those are _quite often_ NOT the same guy/shop. Hint: who was on the GS arb desk with Rubin in the late 80's-90's? Figure that out, check their track records.


    So beware of jumping on the train, esp short ideas. (see:HLF) Don't be afraid to disagree w a guy you respect. I probably see 10-20 positions taken by funds I respect a month and really dig into 1-2 max. All this is JMO and good for you for researching and asking questions! Best, AT.
    21 Nov 2013, 10:15 PM Reply Like
  • Author’s reply » So many good ideas here. Rubin ( was able to put together and educate such an amazing group. Additionally, I think that arbtrader's ratio is quite reasonable. It is nice to get a lot of input but only reasonable to be able to dig deeply into a few each month.
    22 Nov 2013, 06:16 AM Reply Like
  • I love spinoffs and have owned several...I'm just commenting here so I can track any future comments :-)
    22 Nov 2013, 12:25 AM Reply Like
  • Author’s reply » I love spinoffs too; there are few enough that it is not too much bother to do a quick analysis of each to determine if any are worth working on in detail. Since the topic raised by mdleraris is cloning, I will mention CSD, which I don't own, but could be useful in terms of tracking its holdings here: You can even click on the Excel link in the upper right corner for a spreadsheet with tickers.
    22 Nov 2013, 06:21 AM Reply Like
  • Yes I also evaluate each new spinoff that comes out. CSD is nice but I prefer buying immediately after each spinoff rather than waiting 6 months as CSD does. I wonder whether spinoffs will continue to outperform or whether more people will discover them and arb away the advantage...
    22 Nov 2013, 11:17 AM Reply Like
  • This was great guys. Thank you so much for sharing.
    22 Nov 2013, 02:14 PM Reply Like
  • Chris, have you any thoughts about TWC and what its take-out value might be?
    2 Dec 2013, 11:24 AM Reply Like
  • Author’s reply » We own it and like it and expect something good. However, happily we bought it well and don't come up with numbers massively above where it is trading now (I'm having that problem in every large company we've invested in).
    2 Dec 2013, 11:29 AM Reply Like
  • Sir--


    Any early thoughts about how Dow's announcement today might impact AXLL? I don't know the industry well enough to have a well informed assessment, but I'm guessing that capacity rationalization and hence better pricing for chlorine related industries are in the offing. There will be another round of industry consolidation, and I'm wondering if AXLL will be involved.
    2 Dec 2013, 02:44 PM Reply Like
  • SA has a good summary just up:


    Also, check out the Domtar chart when a major plant closure (recently) effectively removed the % of overcapacity in another low-margin business (paper).


    Given the amt it was up pre-market, taking it as really positive news here. AT.
    2 Dec 2013, 03:23 PM Reply Like
  • The possibility does seem to exist that a failure to disclose a related party transaction in an IPO prospectus occurred with a Chinese company that has received a lot of attention recently here on SA and elsewhere. The time period at issue for the possible related party transaction not reported is a couple years prior to this company's IPO. THE BOD has formed a committee with outside counsel to investigate this and other recent allegations of impropriety made about the company. If the BOD were to determine that such an omission had occurred, what would the consequences be? I'd appreciate any thoughts anyone might have about this issue. I have no position in this company's stock and am waiting to see what the BOD concludes.
    10 Dec 2013, 11:11 AM Reply Like
  • CD--have you any thoughts about the SIRI squeeze out by LMCA? There's a lot of speculation that Malone will have to raise the bid in order to get enough shares, but Malone is no pushover. I don't know enough about his deal making history to assess if this is likely or not.
    13 Jan, 12:37 PM Reply Like
  • Author’s reply » I am not involved, but it is reasonable to expect some sort of modest bump.
    13 Jan, 01:57 PM Reply Like
  • Oneok's spin-off is coming up on the 31st, and ONE Gas has begun trading on the when-issued market. Management has provided a clear and simple rationale for the split: separated, the twain will be better able to chart their own courses and self-actualize, and they ought to be worth more in aggregate as the business simplification will enable each to find its natural shareholder constituency: one investors in MLPs and the other in utilities, each constituency with a slightly different set of values than the other. It looks like OG will be rather small for a pipeline company. I'm guessing that the spin-off will likely be in preparation for OG to be sold, as the spin-off, once done, will allow for a tax efficient transaction.
    17 Jan, 10:24 AM Reply Like
  • Thanks, Angler. I will look up Oneok.


    Just based off of your comments above, I'm wondering if you are involved with SIRI or LMCA? I'm long both and looking forward to the Malone drama playing out this year.
    17 Jan, 10:44 AM Reply Like
  • I've thought about those two, but I'm currently not involved.
    17 Jan, 11:11 AM Reply Like
  • Not sure if this is good or not: Lilis Energy ( to acquire Shoreline ( by issuing 6.7 million shares. No further details. But i found that Shoreline has 9 million shares outstanding, which comes up to ratio of something like .74 Lilis shares issued for each Shoreline share. Which looks like about a .54 cent profit on arbitrage if current prices on both equities stay the same. Direction with either could increase or decrease the spread. Thoughts?
    24 Feb, 05:55 PM Reply Like
  • Nice arb in the JOSB merger - uncapped tender offer paying 65 per share closes on March 19.


    1.2% profit in 7 days! - Load up!
    12 Mar, 03:08 PM Reply Like
  • Author’s reply » Unfortunately, it will not get done until sometime around October or so due to conditions such as the antitrust review.
    12 Mar, 03:13 PM Reply Like
  • Does that mean the tender period ends March 19th, but cash is not distributed until the target closing date (I saw 9/30)?


    I was expecting to be paid a couple days after 3/19. I may be unclear on the process.
    12 Mar, 03:37 PM Reply Like
  • Author’s reply » Unfortunately, you will not be paid in a couple of days. I am a large holder of both MW and JOSB and expect the deal to close sometime when it is cold out again.
    12 Mar, 03:44 PM Reply Like
  • Thanks for sharing your analysis.


    Greenblatt warns that merger arbitrage is no place for an amateur!
    12 Mar, 09:03 PM Reply Like
  • Thanks, Chris. Glad to have that sorted out!
    12 Mar, 09:18 PM Reply Like
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