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  • Seacor Holdings: Capital Allocator Of The Seas  [View article]
    Seacor reported on the recent 8k: SMH will be run as a standalone entity with a discrete balance sheet. As of September 30, 2015, the offshore group on a standalone financial reporting basis had $1,095.1 million of assets and $389.2 million of liabilities.

    If i simply applied the high end comps multiple to this asset value of 60%, this would imply an equity market valuation for SMH of 1,095.1 * 60% - 389.2 = $267.8 mm.

    Maybe Carlyle knows something I don't about the global oil market, but it seems very surprising that they agreed to a conversion price that implies an equity valuation of $935mm (they would acquire 18.7% of the fully diluted shares of SMH for $175mm if converted). Indeed, the current market cap of all of SEACOR is $967mm currently. I think there is an alterior motive here - most likely Carlyle's attached right to observe SEACOR board meetings. I would guess they are interested in possible other future investments and gleaming some insight directly from Fabrikant who is normally quite reclusive. Either way, good luck to them. If you are current shareholder of SEACOR, I wouldn't get too excited by this.
    Dec 2, 2015. 05:05 PM | Likes Like |Link to Comment
  • Seacor Holdings: Capital Allocator Of The Seas  [View article]
    Seacor is now contemplating spinning off its offshore marine business. All I can see this doing is crystalllizing a lower value for that business line. Offshore oil and gas is going to be impaired for the foreseeable future, maybe forever when you consider how cheap it's getting to produce onshore. The rest of the business is going to still have a conglomerate discount considering there are 3 different business lines. Can someone please instruct me as to how this is going to produce substantial value for the company when the comps are trading like this? Seacor has older vessels and is global, so the best comp is probably TDW.

    TDW (older ships, global): 4.6bn of assets, 2.2bn of liabilities, 440mm mkt cap = 57% of balance sheet asset value

    HOS (newer ships, US): 3bn of assets (300mm of cash), 1.5bn of liabilities (400mm is deferred taxes), 440mm mkt cap = 65% of asset value. If you net out the cash and don’t consider the deferred taxes and then it is 800mm net liabilities vs 2.7bn of assets not including cash. That’s 1.24/2.7 = 46% of asset value.

    NAO (brand new ships, North Sea): 340mm of assets, 50mm of liabilities, 130mm mkt cap = 53% of asset value

    GLF (US/Europe mainly, small Asia, mix of vessel ages): 1.4bn of assets, 700mm of liabilities, 160mm mkt cap = 61% of asset value
    Dec 2, 2015. 04:46 PM | Likes Like |Link to Comment
  • Seacor Holdings: Capital Allocator Of The Seas  [View article]
    This is a very misleading article. The price to book value is at a huge premium to peers HOS (0.34x) / TDW (0.24x) / GLF (0.17x) / NAO (0.47x with only 10% debt/assets) and Seacor's assets are mostly old and being pushed out of work by new vessels such as those operated by HOS. NAO assets, as a comparison, are entirely brand new ships that the market currently values below 50% of build cost! Despite Chairman/CEO Fabrikant's past track-record of asset allocation (he's 70years old mind you - so not exactly a spring chicken and he had to fire the old CEO last year because of the poor shape the company was in), you have to wonder how much that is really worth. After all, the lion share of Seacor's current assets are in a sector - offshore oil and gas services - that is directly in the cross hairs of this energy sell-off because offshore drilling is costly and complicated (just look at RIG or SDRL) and the rest of their assets are in commodity related businesses - not exactly a strong place to be. In my opinion, if you look at the true earnings potential on the business going forward and where comps trade, you have to wonder why you should not be running as far away from this stock as possible.
    Oct 27, 2015. 05:11 PM | Likes Like |Link to Comment
  • BGC Partners And GFI Group: The Deal Is In The Details  [View article]
    Your point about CME not having cash to pay for this is really stupid. CME is an A+ rated credit with debt trading in the market at 70bps over treasuries. They could instantly raise billions of dollars in the investment grade credit market should they choose. BGCP (BBB-) has only one outstanding bond that trades at 450-500bp spread to treasuries, and will not even have the firepower to do an early pay out of the GFI Group high yield bond that has an 8.375% - 10.375% variable coupon. The CME deal gives investors the option to receive cash, and the stock portion is decided over an averaging period, meaning that you can short shares of CME over each of those days and receive a fixed amount of cash. Institutional investors recognize that this is exactly the same as a cash takeout. I believe CME simply wants to maintain low leverage currently and this is the only reason the deal was structured the way it was.

    To me there are 2 more important considerations here: 1) the top producers at GFI do not support the BGCP deal and won't work for Lutnick and 2) Lutnick is highly incentivized to keep bidding up Jersey partners because they not only don't like Gooch et al, but they also own 17% of GFI, so any additional bump by CME/JPI is extra cash in BGCPs pocket. Just look at how small each bump by BGCP has been, it's only motivation has been to get CME/JPI to increase, not to actually win the bid.

    Shareholders should vote for the CME deal because the deal is more certain to win the shareholder vote. Why hold out for the extra $0.25? Jersey Partners will never sell to BGCP and at least BGCP has made sure that shareholders have extracted their pound of flesh from JPI.
    Jan 20, 2015. 03:29 PM | 1 Like Like |Link to Comment
  • BDC Rankings: May 2014  [View article]
    Could you please add TSLX to your analysis? I look at this company and I would value your opinion.
    Aug 14, 2014. 08:16 AM | Likes Like |Link to Comment
  • How Easy Is It To Create A Scandal?  [View article]
    Yeah there are countless examples like it. Until there is a real extradition treaty between China and other countries to punish fraudsters like this, there is an enormous incentive for company management to perpetrate frauds, in fact, as the arcticle I linked to above suggests, there were 20 that were discovered in Singapore after the financial crisis alone. So the point that I saw someone make above that MW should have already caught this this one... I think it takes a lot of time to do the necessary research to prove a fraud and for every one you find you will probably find several that aren't frauds... by that logic it takes MW a long time to build a case against a new company. I say Kudos to MW for exposing criminals, they should be encouraged rather than attacked.
    Oct 30, 2013. 03:43 PM | Likes Like |Link to Comment
  • How Easy Is It To Create A Scandal?  [View article]
    Actually, just furthermore to my point, Lin Yu has only about $12mm of stock at current prices, which is peanuts compared to the $165mm sitting in an account in HK from the recent convert issue. He just has to buy enough time to get that to some on-shore bank accounts under an alias and he'll be resigning pretty promptly, never to be heard of again. If you've lived in Asia like I have you've unfortunately seen this numerous times. Do some reading on Singapore-listed China Sun Biochem Technology for an example where the management basically decided to steal convertible investors' money because they frankly couldn't be held accountable.
    Oct 30, 2013. 02:17 PM | Likes Like |Link to Comment
  • How Easy Is It To Create A Scandal?  [View article]
    My 2cents, which aren't worth much... It seems pretty clear that there is some degree of fraud going on at NQ (the easiest one to point out is that NQ's story of YDT changed between their last explanation that I have seen posted on a blog here and the recent one to MW). I'm not sure it should matter whether it is a small fraud or a "massive fraud" because at the end of the day, can you really believe anything you hear from a company like this in the future? There is a *huge* incentive for the management of the company to misappropriate funds in a situation like this, because quite frankly there is not a lot that anyone can do to prosecute the perpetrators of a fraud across borders in China. What is stopping NQ from selling the whole business to YDT for $1 before doing that?
    Just read this article about some of the problems they were having in Singapore with fradulent Chinese companies listed there:

    If NQ executives are smart, they will steal all convertible money and delist the company, it would be a lot easier than trying to regain investors' trust. Omar Khan can probably claim ignorance in the US and find a way to get some money moved out of China to get his cut.
    Oct 30, 2013. 01:35 PM | 1 Like Like |Link to Comment
  • GM CEO Dan Akerson has created a small team to study Tesla (TSLA) and the potential threat it poses to the auto giant. Vice chairman Steve Girsky: "[Akerson] thinks Tesla could be a big disrupter if we’re not careful ... History is littered with big companies that ignored innovation that was coming their way." Akerson has been busy trying to speed up the pace at GM implements new technologies, and promised in March GM would launch an EV with a 200-mile range. Meanwhile, Tesla is working on lowering charging times at its supercharging stations to 5-10 minutes from 20. CTO J.B. Straubel cautions "it’s not going to happen in a year from now."  [View news story]
    "the only reason that Tesla "isn't making money" is because they are plowing their profit right back into the infrastructure"

    Cassina, you obviously don't understand the difference between capital expenditure and operating expenses on a company's financial statements. Infrastructure spending does not immediately affect a company's profits, it only shows up over time as an expense via depreciation.
    Jul 18, 2013. 05:16 PM | Likes Like |Link to Comment
  • Shorting U.S. Steel  [View article]
    They did the convertible deal to prepay a portion of their existing convertible, I don't think they raised a lot of additional money from that.

    I personally think that the market is overall far too bearish on US Steel right now.

    If you want to be bearish on the US steel market, short AK Steel as they and Thyssen Krupp will be the next ones on the chopping block after RG Steel folded. Thyssen is desperately trying to sell their Alabama plant and of course is finding no buyer for it. My guess is that will shut down soon and relieve a bit of the oversupply problem as according to this weekend's WSJ they are undercutting everyone else in order to run at as high a utilization rate as possible. Moreover, AK Steel is crippled by their enormous annual cash pension payments and their high production costs. The credit markets are pricing AKS as the next to go in the US, which would ultimately be a huge benefit to US Steel.

    As for Chinese producers, yes they produce cheaply, but in order to send their goods to the US there is about a $100 / metric ton (= 1.1 short tons) slippage cost they need to make up for, which includes shipping, fees, timing risks, etc. Almost all Chinese producers are operating at a loss currently and the prices over there aren't too different than in the US, i.e. imports are not the problem currently. The government will force a good deal of consolidation in China soon as well, that will hopefully eliminate a lot of the oversupply problem in that country.

    Moreover, I do believe in the coming commerical construction upswing, corporate earnings have been outgrowing the economy, and the business cycle is finally reaching the point where companies have the confidence to invest in their businesses.

    Beyond that, natural gas prices have rebounded nicely, which should benefit steel demand from the oil and gas sector which was supposedly much lower than expected in the first quarter. US Steel's tubular business is one of its biggest contributors to earnings and it is directly positioned to benefit as the US continues to expand its annual output of oil and gas.

    Yes, 1Q will suck, but the expectations are sooo tremendously low at this point that it's priced into the stock. I think it's a very tough short here. Best trade? Sell long-term puts on X to buy puts on AKS. The credit market's are telling you there's a very different likelihood of these 2 making it through the cycle and if AKS defaults while Thyssen Krupp exits the US, it's sure to benefit the remaining players like X.
    Apr 28, 2013. 09:29 PM | 2 Likes Like |Link to Comment
  • Sirius XM: 390 Million Shorts Should Join The Long Side  [View article]
    Hi Stephen, thanks for publishing another useless observation on Sirius short interest.
    Apr 9, 2013. 06:30 PM | Likes Like |Link to Comment
  • Sirius XM: 400 Million Shorts Still Playing With Fire  [View article]
    The buy back is just offsetting Liberty's sales into the market. Agree I don't see a point in being massively short Sirius because the busines works but I don't see anything in your analysis that suggests it's a tremendous value proposition to investors either.
    Mar 26, 2013. 05:51 PM | Likes Like |Link to Comment
  • Sirius XM 406 Million Shorts Are Only Fooling Themselves  [View article]
    A lot of the short is associated with the convertible bonds and the arbitrage investors that hold them. They convert into 300mm shares. As bonds change hands between investors that hedge and don't it can explain some of the variation. Additionally, some investors are short SIRI and long LMCA to play for the Liberty monetization. Clearly it doesn't explain it all, but I fail to see any conspiracy or imminent short covering rally here when probably outside of the convertibles the short interest is somewhere around 5% of float. To give you an idea, the short interest in Coinstar (CSTR) had to rise to around 50% of float before borrow became impossible and short sellers were forced to cover positions.
    Feb 27, 2013. 05:37 PM | Likes Like |Link to Comment
  • Not All Data Center Stocks Are Created Equal  [View article]
    This is a very detailed analysis and thoughtful to provide us with a different angle.

    I am ignorant about this space, so I was hoping you could explain how maintenance cap ex can be so low when technology in most cases requires substantial ongoing updating and investment to stay relevant. Won't much of the current data center hardware be obsolete within 5 years and require reinvestment?

    Could you also explain in better detail how Equinix locations provide it such huge advantage with high barriers to entry? Is this location in the virtual sense or in the physical sense and why aren't competitors able to replicate it? Why does it make sense for these businesses to be converted into REITs?

    According to what I see, EQIX is priced at 13x EV to forward EBITDA based on analyst estimates for 2013. That seems high but not as high as some other growth stocks I've seen people gushing over in articles here, like Sirius, for example. Or, of course, the nose bleed valuations for Amazon. I'd be curious to hear what other readers think about it.
    Feb 26, 2013. 05:37 PM | 1 Like Like |Link to Comment
  • Sirius XM: Explaining The Share Price  [View article]
    I would comment that a lot of the increase in short interest and indeed a large portion of overall short interest of 379mm shares is due to the delta of the options embedded in the convertible bonds which convert into a total of 300mm shares. Any hedge fund that owns the convertible will be short stock against it and will sell more when the share price rises to adjust delta exposure. Also, when the company did a dividend in December, that increased the shares attributable to the convertible by over 5mm due to a conversion price refix. From the June share price of 1.85 to the current price of 3.13, I estimate that delta for the convertible increased from about 60% to 90%. This would account for an increase in delta exposure of about 90mm shares. Of course the convertibles can't all be owned by hedge funds so maybe only 50% of that was actually shorted, but still, it shouldn't be ignored considering short interest has increased by about the same 90mm shares over the same time period.
    Jan 30, 2013. 08:37 AM | Likes Like |Link to Comment