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port4545

port4545
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  • Destiny Media's Problem Child [View article]
    I thank the author for spending the time and effort into this piece. Whether side of this folks are on, research like this should make us all more aware and dig in deeper on this name as well as others we own or are considering.

    However, all should at least be aware that preventing a Nasdaq listing is a short strategy, as are well timed articles such as this that feed into the fear forcing out the weak-handed longs.

    As far as Destiny is concerned, the selling seemed to intensify in early January, pretty much on queue with the announcement of the proposed 1:5 reverse split (an event solely for the purpose of meeting Nasdaq listing requirements). The selling took a break around the earnings conference call amid some renewed optimism, then technical selling appeared to resume. The idea is if shorts can pressure shares low enough, then even a 1:5 is going to be a questionable approval decision by Nasdaq (usually an average trading price of at least $2/sh is required). However, from the other angle, I've seen Nasdaq stocks get pummeled and hold below $1 for some time and not get de-listed.

    In my opinion, at some point soon, shorts will cover, and cover hard based on enough gain had and enough fundamental upside "potential" left for DSNY.

    Shares traded north of current levels for over half of last year, hardly the characteristics of a pump and dump. Speculative? Yes. Pump and dump, no.

    Also of note for longs, the Dec-12 buyback plan (wonder if this will be updated given the decline) called for buying up to 1,000,000 shares at a price at or lower than $1.00/sh.

    Though a significant insider purchase by Mr. Vestergaard personally would be much preferred.
    Feb 20, 2014. 03:50 PM | 1 Like Like |Link to Comment
  • Graphing Performance of Put-Write and Buy-Write [View article]
    Arbitrage should dictate that, approximately: Put time value - Dividend = Call time value, correct? Changes in implied volatility effects both call and put prices in the same direction.

    Might the extra return from PW come from investing the cash in T-Bills? The performance spread seems to widen when Greenspan began raising rates in '04 which would provide more return on cash.

    Also, the slight ITM or OTM of call vs. put at exactly the wrong (downturn) or right time (upturn in stocks) could add up over enough time. I would consider this a random event though, that may not replicate in the future.
    Jan 15, 2014. 07:56 PM | Likes Like |Link to Comment
  • Secondary Shanghai's Seaspan Longs [View article]
    What's different this time around?
    1) Simple share offering (no convertibles or lending provision)
    2) No selling shareholder (previously Tiger was selling, but was only a relatively insignificant 300k shares).
    3) Pricing wrapped up very quickly with the investment bankers already taking the full option for an additional 525k shares (per this afternoon's filing)

    It's important to understand that the investment banks underwriting the deal bought the shares at $22. This is independent of the open market price. Based on the swift closing it appears they already had an understanding this is where they would be buying unless something crazy happened, like if it had traded up in after hours yesterday, or something. Importantly, the ibanker's took all they could get in exercising the 30-day option for additional shares immediately. So the fact that the current price is below $22 tells us the price is currently undervalued based the ibanker's analysis (which likely includes a nice margin of safety for now wanting to float these shares onto the market, perhaps gradually).

    Also, it's important to note this is not dilution unless Seaspan cannot earn a return on the capital above the cost of issuing it. Clearly management thinks the low 20's represent a cost similar to issuing the recent $50 mm in preferred D stock. The equity capital only need cover a down payment on vessel acquisitions, so I wouldn't expect massive share issuance to follow.

    I've long said that if Seaspan wants to mitigate dilution fears from these offerings in the future they'd improve the situation by raising the dividend payout. But how could they they pay more out if they need more in? Because a higher payout means a higher share price to issue more shares at. They used to operate on this logic before the financial crises, however, they remain very cautious about giving up greater financial flexibility and have said they're not likely to change the current dividend policy anytime soon.
    Nov 20, 2013. 08:08 PM | Likes Like |Link to Comment
  • Secondary Shanghai's Seaspan Longs [View article]
    This sounds like it might have been a case of investment bankers trying to pitch to the board what looked great on paper, while not understanding the history of market structure for this industry (i.e. you'd better be hiking the dividend, decreasing the share count, or both for a highly levered leasing business).
    Oct 10, 2013. 07:48 PM | 1 Like Like |Link to Comment
  • Secondary Shanghai's Seaspan Longs [View article]
    Seaspan Announces Termination of Public Offerings of Common Shares and Convertible NotesMarketwired(Thu 7:12PM EDT)

    "will no longer proceed with its previously announced public offerings of common shares and convertible notes as it would not be in the best interests of our shareholders."
    Oct 10, 2013. 07:29 PM | 1 Like Like |Link to Comment
  • Secondary Shanghai's Seaspan Longs [View article]
    Adding to this, I think the board understood correctly at the time of IPO that given the high debt load incurred to make the return on the chartered vessels attractive the company needed to payout a significant amount of capital each quarter to minimize cost of equity/ maximize share price. You also have a high level of insider ownership on the board that may have preferred the liquidity aspect.

    I looked back and even when SSW was in the 30's/sh prior to Sep-08, it still yielded ~8% (due to the near full payout strategy). The crux to this was the company had to rely on the volatile nature of the equity markets for funding via issuing new common shares for the down payment on new contracts.

    The financial crises changed all of this. Now management keeps with the so called "progressive dividend policy", which has tried to find a happy balance with the long-time dividend investors who saw the dividend get cut by 79% in April '09 while maintaining greater financial flexibility and growing the dividend more or less in-line with cash flow.

    Currently you have a payout somewhere around 30% of distributable cash with the stock price yielding a 6.0% dividend. That's not easy to find from a growing industry leader on solid financial footing.

    So it seems the latest issuance should have been coupled with a hike in the dividend payout to offset the dilutive tone in the market. They probably could have issued equity at a higher price and ended up with more $ to cover the hike in the payout.
    Oct 9, 2013. 07:10 PM | Likes Like |Link to Comment
  • Secondary Shanghai's Seaspan Longs [View article]
    It was my understanding from the filings that the borrowed shares are to be made available to hedge the stock price and for convertible arbitrage. If they are borrowed shares they are already in effect short, so no selling onto the market, correct?

    On the surface, a secondary offering can cause a sharp sell off if the market thinks management sees the shares as overvalued. I think in this case its more of a relative value play by management vs. their other capital raising tools like the preferred stock. The market value of the business is still undervalued in my opinion, based in part on several of the factors you mention above.

    Having said that, I'm not a fan of the more complex capital structure brought on in recent years. I think the capital markets are in good enough shape for the company to return to the near full payout model and simply issuing common at a more adequately elevated share price like many MLP's do.
    Oct 8, 2013. 08:25 PM | Likes Like |Link to Comment
  • 3 High-Yielding, High Growth Small Caps Currently In Uptrends [View article]
    Screeners don't do justice to Seaspan. EPS is distorted from currency swaps. Focusing on non-GAAP distributable cash flow you'll find the payout ratio and valuation multiples are even lower.
    Sep 27, 2013. 02:50 PM | Likes Like |Link to Comment
  • Margin Debt: Another Equity Market Crash Signal [View article]
    Would like to see the first chart as a percentage of total invested
    Mar 20, 2013. 07:08 PM | 1 Like Like |Link to Comment
  • Why Low Volatility ETFs Are A Sign Of The Times [View article]
    I would agree that utilities have much of the interest rate risk that long bonds do, but consumer staples (XLP) have shown to have superior risk-adjusted returns over longer time periods, in part due to strong brands which can pass through inflation to the consumer.
    Nov 28, 2012. 09:43 AM | 1 Like Like |Link to Comment
  • The Biggest Lie On Wall Street: Higher Risk Equals Higher Return [View article]
    I've also observed lower volatility portfolios beating higher volatility ones. I beleive this to be due to the fact that most people who choose security selection over broader index or mutual fund investing select a relatively limited number of firms to make up their portfolio to differentiate from the market as well as save on analysis and turnover. In this case it is usually better to have a portfolio of a lot of modest winners than a portfolio containing a few home runs and a few disasters.

    When measuring risk though, one needs to look at both stdev and beta. You can have a low beta - high risk stock if stdev is high (think education stocks), simply because it has low correlation with the S&P 500.
    Nov 5, 2012. 06:42 PM | 1 Like Like |Link to Comment
  • Hedging Against A 4,000 Point Drop In The Dow [View article]
    The other reason to choose the longer dated options is to lock in the implied volatility you pay. The shorter maturities are cheaper based on an IV basis, currently, but if the Dow at least began its decline before it was time to roll your options, you'd likely be paying up more IV to put on the next hedge.
    Jan 30, 2012. 02:05 PM | Likes Like |Link to Comment
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