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Chris DeMuth Jr. is the founder of Rangeley Capital LLC. Rangeley is an investment firm that focuses on event driven, value-oriented investment opportunities. Rangeley Capital and his value investing forum, Sifting the World (StW), search the world for misplaced bets. Rangeley exploits them for... More
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  • Reading Between Between The Lines From Loral & Telesat 9 comments
    Apr 25, 2014 11:40 AM | about stocks: VSAT, LORL

    Reading Between The Lines

    From Telesat

    OTTAWA, CANADA, April 24, 2014. Telesat has scheduled a conference call on Thursday, May 1, 2014, at 10:30 a.m. ET to discuss its financial results for the three months ended March 31, 2014, and other recent developments.

    From Loral

    In addition, under the terms of the purchase agreement, following a change of control of Loral, the indemnification liability of Loral for damages in the case is subject to a $200 million cap.

    Disclosure: I am long LORL.

    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.

    Stocks: VSAT, LORL
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Comments (9)
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  • Special Situation News
    , contributor
    Comments (297) | Send Message
    Hi Chris. LORL certainly has been a great call on your part. How much upside do you think is left in the stock if an announcement is imminent?


    Thanks. Have a great weekend!


    25 Apr 2014, 01:06 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (11759) | Send Message
    Author’s reply » The announcement is probably not imminent. We will hear more next month, though.


    Upside = $100 or so.
    25 Apr 2014, 01:29 PM Reply Like
  • Spidron
    , contributor
    Comments (27) | Send Message
    Of course we already had some idea of that cap from "sources" who spoke to the press a little while ago.
    25 Apr 2014, 02:29 PM Reply Like
  • Special Situation News
    , contributor
    Comments (297) | Send Message
    Hi again Chris. Thanks for all of your great posts. I just did some back of the envelope calculations. If you wouldn't mind. Perhaps you can tell me if I'm on the right track.


    LORL's current market cap is $2.2 billion.


    The company owns 62.8% of Telesat.


    In 2011 LORL rejected a $6 billion offer for Telesat. One would think that any offer for it today would have to be in excess of that. So that could serve as a floor for a rough estimate.


    $6 billion x 62.8% = $3.7 billion.


    Doesn't this mean that the value of LORL's stake in Telesat is worth 40% more than what its stock currently trades for? Even if one was to take another $200 million out for the potential penalty if the company loses its appeal LORL's stock should be trading MUCH higher than it is today. What am I missing here? It seems like picking up lost money off the ground.




    28 Apr 2014, 02:13 PM Reply Like
  • Mike Arnold
    , contributor
    Comments (2387) | Send Message
    Jason: I replied to your Q on my article, but wanted to respond here too. You need to back out (~$3 billion) net debt from the calc.


    I'm coming up with FV in the low $90's for $LORL (after backing out the $200 mil in patent damages liability).
    28 Apr 2014, 02:31 PM Reply Like
  • Special Situation News
    , contributor
    Comments (297) | Send Message
    Thanks Mike. That makes much more sense. I appreciate the response.


    28 Apr 2014, 02:47 PM Reply Like
  • bazooooka
    , contributor
    Comments (3688) | Send Message
    Does anyone know what happens to October call options if a deal closes above strike before then?


    Can one hold options all the way till deal close or must you sell/close your option position in the options market?
    28 Apr 2014, 10:13 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (11759) | Send Message
    Author’s reply » bazoooka, the exchange typically clarifies the treatment, but in my experience there has never been a problem: options just become an option on the deal at the given consideration (in this case, becoming an option on the new stock at the deal ratio). In a recent example, I had written puts on SWY, which are now SWY1, a basket of securities following a transaction. The only problem lies in non-tradable securities (which is not at issue here).
    29 Apr 2014, 05:14 AM Reply Like
  • Mike Arnold
    , contributor
    Comments (2387) | Send Message
    I'm a little disappointed there wasn't a discussion regarding "other matters" on the Telesat conference call.
    1 May 2014, 10:42 PM Reply Like
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