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Donkey Kong

Donkey Kong
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  • PDL BioPharma: Panning For Dividend Gold [View article]
    "I don't like where it is now and will await and see if we'll see pps as we witnessed in April14, if not I'll chalk it up as a missed opportunity."

    I assume therefore the current market price of $9.60 is at or too near your estimate of intrinsic value for PDLI and why you are not a buyer. To date, it looks like your sale in the $10s was fortuitous. It's great that you were able to catch that one-day window on 12/2/13, hours before Ruerd Heeg posted his negative article about PDLI on SA.
    Jun 16, 2014. 05:19 PM | Likes Like |Link to Comment
  • PDL BioPharma: Panning For Dividend Gold [View article]
    I'm surprised you sold out at $10 per share given the $12-14 price target you provided back in early December 2013.
    Jun 16, 2014. 02:24 PM | Likes Like |Link to Comment
  • Questcor's 'Buyout' Could Fall Through [View article]
    Officer Rat - I believe that your tax liability (capital gain) will be the lesser of (i) FMV of the merger consideration received ($30.00 cash plus 0.897 shares of MNK stock) minus your current per share tax basis in QCOR (i.e. < $7.00), or (ii) $30.00 (cash component of the merger consideration). In your case, the capital gain (I assume long-term given your low cost basis), would be $30.00 per share.

    Disclaimer - I am NOT a tax accountant nor do I play one on TV and I didn't stay at a Holiday Inn Express last night.
    Jun 15, 2014. 08:50 AM | Likes Like |Link to Comment
  • PDL BioPharma provides Q2 revenue guidance [View news story]
    My screen says +0.8% post-announcement....
    Jun 10, 2014. 05:19 PM | Likes Like |Link to Comment
  • Questcor's 'Buyout' Could Fall Through [View article]
    I guess it's time yet again for me to provide "The Birdman" with another tutorial in corporate M&A. Yesterday's news from Cigna was fairly benign in my opinion and under no circumstance would it trigger any out under the the MAC (materially adverse change) clause in the merger agreement (by way of background, I spent 18 years as an M&A banker and worked on a countless number of transactions). It's not "adverse change" but a "MATERIALLY adverse change" which is the threshold. It's similar to understanding the difference between "negligence" and "gross negligence" in an indemnification agreement. FYI - MNK would owe QCOR $131.45 MM if the board of MNK pulled the plug on the transaction so just walking away comes with a real cost.

    On a side note, you need to stop this obsession with the word "buyout" (see my post on your 4/8/14 article). Only you and other uninformed members of the MSM have used the term buyout. The word "buyout" does not appear in any of the press releases or presentations issued by both MNK and QCOR.
    Jun 6, 2014. 04:37 PM | 22 Likes Like |Link to Comment
  • New LTE Deals Could Bolster Nokia's Declining Networks Sales [View article]
    You're more than half way to a $10 payday.....
    Jun 2, 2014. 05:55 PM | Likes Like |Link to Comment
  • Time To Sell Enterprise Products [View article]
    Bikerguy: Thanks for pointing out the errors in my calculation. I clearly have overestimated the tax impact from any potential sale of my various MLP holdings (by simply looking at the ending tax basis on my K-1 and assuming that the gain is 100% ordinary income) though it's probably a moot point given my investment horizon for EPD, ETE, ETP, etc., which is basically forever unless things radically change at these companies.

    Also, is there a link to the "tax estimator" you referenced or did you make your own calculation by flexing those CPA skills? :)
    May 25, 2014. 03:10 PM | 6 Likes Like |Link to Comment
  • Time To Sell Enterprise Products [View article]
    Interesting analysis. While you never want the proverbial "tax tail to wag the investment dog", investors need to focus on after-tax returns when it comes to performance measurement. Since you have held EPD since 2005, I would assume your current tax basis is $0 so the difference between the current market price and your tax basis ($75 per share) will all be taxed as ordinary income. At a 35% marginal tax rate, your after-tax proceeds would be about $47.75 a share so the tax impact of exiting are significant.
    May 25, 2014. 12:47 PM | 6 Likes Like |Link to Comment
  • 3 Reasons Why You Should Buy Yelp [View article]
    With respect to high-growth, emerging technology stocks, we prefer to use tried and true valuation methodologies like customers per click and page views in order to arrive at fair value.
    Apr 10, 2014. 04:48 PM | Likes Like |Link to Comment
  • 3 Reasons Why You Should Buy Yelp [View article]
    YELP is clearly in the sweet-spot for "GAAP-style" investors (Growth At Any Price).
    Apr 10, 2014. 08:40 AM | 2 Likes Like |Link to Comment
  • DigitalGlobe sells off following Google-Skybox report [View news story]
    An interesting rant, but your comment about the CFO being fired is incorrect. It was the former Controller and Chief Accounting Officer (CAO), Susan M. Fox, who was replaced (see Form 8-K filed, 3/3/14).

    Remember, facts do matter.
    Apr 8, 2014. 09:54 PM | Likes Like |Link to Comment
  • Mallinckrodt Transfers Questcor's Risk Onto Its Shareholders [View article]
    I'm not sure why you are obsessing over semantics with respect to "buyout" vs. "merger". The only people that used the term "buyout" were the idiots in the financial and MSM media. The headline in MNK's press release used the word "acquisition" which is absolutely correct since MNK is the legal acquirer in this cash & stock merger transaction with QCOR. Current MNK shareholders will own 50.5% of the combined company while current QCOR shareholders will own 49.5%. The components of the merger consideration (as well as the word "merger") and the respective pro-forma ownership percentages are outlined in the text of the press release. There is nothing misleading in the press release and it would appear you are tying to make something out of nothing.

    In addition, you imply that QCOR is selling at a low price (contradicting your whole short thesis) which also raises red flags. I would concur that $86.10 is too low if the merger consideration was 100% cash. With MNK-QCOR, 65% or $56.10 of the value received by QCOR shareholders will be in the form of MNK stock and allows them to participate in the future growth prospects of Newco (combined MNK-QCOR). The question you should have asked, but didn't is whether an existing QCOR shareholder would rather own 100% of QCOR or 49.5% of Newco.
    Apr 8, 2014. 01:18 PM | 14 Likes Like |Link to Comment
  • Why Jacobs Engineering Will Probably Beat The Market [View article]
    Why Jacobs Engineering Will Probably Beat The Market --

    Premise #1: the U.S. stock market will be higher on a nominal basis 3 years from now.

    Premise #2: JEC current beta = 1.69 and remains fairly stable into the future.

    Conclusion: JEC should probably beat the market on a non-risk adjusted basis assuming premise #1 and premise #2 turn out to be true.
    Mar 8, 2014. 12:37 PM | Likes Like |Link to Comment
  • A Short Case For PDL Biopharma: Why The Company Is Worth Less Than $5 A Share [View article]
    Thanks for providing more detail with respect to your statement that management spent an incremental $30 million in conjunction with the recent convertible bond offering. I'm not sure the $10 million underwriting fee is an "incremental cost". It would be great for issuers if investment banks would underwrite debt & equity offerings for free, but I'm betting that will not happen anytime soon. Also, a 3.00% underwriting fee is pretty standard for a sub $1 billion convertible bond offering for a non-investment grade issuer.

    I'm not sure why you are also lambasting management for spending $20 million to put a hedge in place for the newly issued convertible. The hedge for the 4.00% convertible notes effectively increases the initial conversion price from $9.17 to $10.36 and seems like a prudent course of action. You were critical of the dilution incurred by PDLI by effectively paying a 55% premium to retire $130 million face amount of the 2.875% notes due 2/15/15 so I'm curious why you are not more positive on the hedge transaction (Note - with a current conversion price of $5.48, the 2.875% bonds are deeply in the money hence they trade at a dollar price of approximately $155. These bonds also have a mechanism that downward adjusts the conversion premium with each quarterly dividend payment. The initial conversion premium at issuance was $6.59. The new 4.00% convertible notes do not contain this feature which is a big plus from a dilution standpoint).

    Given you bearish outlook, I would think a pair trade of long the 4.00% convertible notes & short the equity would be much more economical than simply long puts + short the equity. Maybe you have another offsetting long position to your PDLI short.
    Feb 19, 2014. 01:36 AM | Likes Like |Link to Comment
  • A Short Case For PDL Biopharma: Why The Company Is Worth Less Than $5 A Share [View article]
    I'm not sure you really covered any new ground with respect to the bear case thesis, but at least you provided some quantitative support to your analysis. Most of the recent PDLI articles on SA are sorely lacking in this respect (e.g. Queen et al patents expire in 2 years so intrinsic value is well below current market price is NOT quantitative analysis). A couple of questions for you:

    (1) What is the average cost of your short position?

    (2) What is the strike & expiration of your PDLI puts?

    (3) How did you come up with your $30 MM incremental cost figure for the recent PDLI convertible bond offering?

    I agree with your statement that most of the PDLI short interest is driven by hedge funds. However, I question your use of the descriptive term "smart money". Zero Hedge published an article last week that referenced an FT article about hedge fund performance since inception. It showed how the top 20 hedge funds have made about 43% of all the money made by investors in more than 7,000 hedge funds. Unless Ray Dalio, George Soros, or Seth Klarman are currently shorting PDLI, I would argue that "smart money" is nothing more than a self-anointed title in most instances.
    Feb 18, 2014. 05:25 PM | 4 Likes Like |Link to Comment