ActOfWill

An "illiquidity-doom-loop" would definitely be a great future buy opportunity on the underlyings of the ETF; on buying the ETF itself, you need to be certain of some ultimate money printing by governments - which is always easier to see in retrospect. This March the loop lasted 3 weeks until the FED flooded the market, ~6% discounts on some of the large IG/HY ETFs at the peak (18 March). https://www.bloomberg.com/news/articles/2020-03-20/mizuho-charts-roadmap-for-an-illiquidity-doom-loop-in-etfs

Thanks for highlighting. During my travails to buy listed forms of US/EU CLO equity earlier this year I found the following interesting: https://www.guggenheiminvestments.com/perspectives/portfolio-strategy/collateralized-loan-obligations-clo Which shows that AAA CLOs have not suffered any defaults (impairment of principle) since 1994. Don't worry I don't work for a rating agency... As to the "risk" / opportunity side of the equation; the market clears via Bids Wanted In Competition (BWIC or "BWICs") which are an OTC form of organising an ad hoc auction, typically between dealers and hedgefunds. Data is available but only of the "cover" i.e. the best non-winning bids. Second picture shows you how the repo/cash crunch in March this year drove prices around (source: Creditflux). Flashback to Amsterdam listed Apollo Alternative Assets LP

Pabrai is effectively saying that he is 80% directionally right on each investment. Now the comparison does not hold fully when you consider varying time horizons. But that would be the gist.

He mentioned bj21.com so I think it has perhaps to do with some rule variations that differ per table that are exploitable. Perhaps some side bet rules. But the way he speaks about it "51% edge vs 80% in stock markets" (later on) seems to be slightly inconsistent as that are card counting odds to me. Have to say he exploits it quite well for personal marketing as he latches on to the Ed Thorpe bandwagon. Personal opinion: virtue signalling.

Hi Dave, I think the best way is to look at the tax record ad the county deed records show the movements in real time under the loans but not the resulting plots that are left - say after release of some finished lots.

That's me - how can I help Thanks for posting, your VIC write up is very good work. I can't speak for "Sugar", but I have a few questions: 1) What do you think about yesterday's UDFI response letter? 2) Any thoughts on why UDFI still hasn't filed any financials with SEC? They state in the letter that doing so is a "pressing concern", but outside of saying that their failure to do so is a "direct consequence of the short and distort scheme"* provide no reason why they haven't already done so. * It is unclear to me how the short attack continues to prevent the financials from being filed. Thanks for the compliment, still looking for that elusive 3-5x return... I searched for the connection of Nexpoint to Highland across all exhibits and I attach a picture for all to assess what the linkage is that UDFI is referring to in their 8-K and inspiring their cross-examination. It's a significant one for the long thesis as Kyle Bass is admitting there is value whilst being uncomfortable at being short. LEGEND: "Andy" = "Andrew Jent" (mentioned in 8-K by UDFI), "Jim" = James Dondero and I understand that Nextbank is an affiliate of Highland. So the way I read it is that NextBank would "broker" senior loans that other banks had provided to UDF ("non-UDF bank loans") backed by UDF assets - which on balance is probably innocent as Hayman reached out to Highland. But in conclusion it's right to clarify any relationship that Nexpoint had with Hayman before continuing with the transaction discussion, it would be embarrassing if something would come out later. Qualifying / staggering the board however, is OTT and reeks to me of incumbent rent seekers extending their duration. As to the financials - I will repeat the explanations of UDFI first: 1) some documents were seized by the FBI 2) difficult to find new auditor as Hayman was sending misleading materials to all local auditors, first wasted time with Grant Thornton 3) once appointed, EisnerAmpner demanded the non-scienter settlement with the SEC to be concluded first so UDF's representations would be clear and reliable (I can see that you want to limit your own liability here) So I think it's fair to say they only really started auditing mid 2018. But then UDF missed the H1 2019 deadline they put themselves in the SEC admin proceeding. My working theory as to why we still don't have accounts: The relevant (but still not admitted) allegation of the SEC here would be that the Buffington loan was not appropriately provisioned. The nature of UDF's loan product however, is to have a generally higher interest that allows for flexible extensions, especially for land/early stage developments where milestones are lumpy due to the municipal red tape processing. Standard bank loans would be inflexible and would use the mechanism of amendment fees which is more cumbersome. Hence, for a new auditor looking at UDF's financials the crucial element seems to overlay a consistent loan loss provisioning framework retrospectively, which can systematically distinguish between "extend and pretend" vs the benign extensions. Getting this right, for multiple years, with heightened scrutiny (SEC/PCAOB) can take time, even though being futile from a current forward looking shareholder perspective. Speculation: Perhaps the accountant came up with the framework and showed some chunky loan provisions to be applied in previous years. UDF decided to stall and enter into discussions as maybe it would hamper their case with Kyle Bass, being "slightly" right on some points. So that's my best theory why it's taking time. It does not take away the perverse incentives of both UDF (or accountant: fixed fees) to delay as much as they can as recently illustrated. Does it justify the current share price? Don't think so.

That's me - how can I help

Some one informed me that a Spanish fund "True Value" announced they had unwound their position 2 months ago. That news has caused some selling from some people that track their portfolio: https://www.rankia.com/foros/fondos-inversion/temas/2607169-true-value?page=281#respuesta_3781597 Nothing has changed fundamentally IMO.

None of the resolutions passed. The countermotion as I heard needed 5% more to pass at 75%. The quorum was met. The notary is exceptionally slow as per last time and Publity is waiting for a signed certificate to publish on their website. I told Publity that deleting documents from a website as they did without update is not a thing you do to inspire confidence. But apparently there is a technical issue with the website at the moment that they are trying to resolve. Next step is to speak to one dissenting voter and aim for a meeting in January... that hopefully will pass on the countermotion.

Yes we will. Preparing docs shortly - probably be out in the next 1-2 days.

Hi - if you click on the voting link you will find the latest prospectus - hopefully to be amended next week ... : http://www.publity.de/en/investor/investorrelations/convertible-bonds

Important Upcoming Bondholder Vote ** We recommend Publity AG convertible note holders to VOTE YES ON THE COUNTER MOTION submitted yesterday for the note holder vote taking place the 13th to 15th of November. ** On the 3rd of November Publity posted a resolution to amend the terms of the convertible. This initial proposal was quite drastic as it proposed to remove most important credit protections: the pari passu language, the negative pledge, the debt covenant and EUR 5m limit and the dividend stopper. Apart from the fact that under statutory protections bondholders can not be forced to vote in favor of “chopping off their own legs” the market reacted badly and the bond price dropped to low 90s. We ascertained that the vote in current form would be extremely likely to fail based on expected common sense behavior of bondholders and we decided to enter a dialogue with Publity to see what the story was. It seemed their intentions were quite modest compared to the initial amendment proposal posted - which could be ascribed to stuff being lost in translation between management and lawyers. In essence, we understood Publity would like to have more cash at hand for co-investments and other opportunities than that their current earnings can organically provide. We believe these opportunities to be genuine. Based upon this we negotiated a counter motion that: 1) would preserve all the protections for bond holders, 2) except for an increase of the additional debt limit from EUR 5 to EUR 30m (so max EUR 80m in total including the convert), and 3) the note holders would waive Publity having to cure an over payment of dividend that occurred for the year 2016 (note that this dividend payment already lowered the strike price of the convertible), and 4) in return the note holders would get a strike adjustment to EUR 39 (with existing anti dilution mechanisms preserved) from the current strike price of EUR 41.58, or 5) failing a strike adjustment (due to a failure to get shareholder authorisation, which is unlikely as management owns +50% of the stock) the coupon would be increased to 5% from 3.5% currently. This counter motion was subsequently endorsed by management and the bonds traded up to the 96-98 level. We think this counter motion represents a balanced approach where Publity can pursue more and quicker growth whilst convertible holders get a significant strike adjustment in return for the additional credit risk resulting from the extra leverage. We would encourage other bondholders to vote in favor of the counter motion as well, especially given that proposals needs 75% of voters to vote yes. The details of the vote can be found here: http://www.publity.de/en/investor/investorrelations/convertible-bonds Please be aware NOT to vote earlier than Monday the 13th of November, as any votes submitted too early will be invalid. We happy to discuss and help out with any questions.

Apologies – I see my wording across the posts is confusing and that’s because I am clearly not an expert. It’s the “Gewinnvortrag” + “Jahresüberschuss” only that can be paid out as dividend at the end of the year. So only profits earned in the past or the current year, basically. Kapitalrücklage is the amount at which shares have been issued above par value (which is EUR 1) historically. That amount can not be paid out as dividend. I understood this from IR as cash waiting to be co-invested. All properties have individual LuxCos. During bidding these LuxCos are loaded with cash so from memory this is cash dropped down into these LuxCos until transaction consummation. Given that only retained earnings can be paid out, technically the convert was raised to fund working capital (i.e. receivable balance) + co-investments of a fast growing business with a CEO committed to dividend pay outs. I see no issue with that given the statutory protection, seniority and full strike adjustment of the convertible. Receivables at Dec'16 should convert to cash by Dec' 2017 - if that does not happen I would start to get concerned. Agree with Spekulatius here – quick scan shows these are the years that capital was raised which I think is the only external event that can create this imbalance.

"German corporation law binds any distributions to owners to the existence of profits available for distribution in a company's individual accounts." See: https://www.ifk-cfs.de/fileadmin/downloads/publications/wp/03_16.pdf For H1 2017 its on page 29, EUR 7.7m under "Gewinnvortrag": http://www.publity.de/de/investor/investor-relations/finanzberichte/item/download/525_f50dce431c8f3d0d2ff3c1e594fbeaaf

Yes we do hold the convert ourselves In Publity we decided to leave after being unable to solve some relevant doubts. What do we mean? In the results of 2016 there was a surprising increase in the accounts receivable that with the June results had not been corrected. This is a business in which there should be no relevant receivables and, if there are, there should be something temporary. So this is a fast growing business. So that explains the uptick. The fact that there should be no receivables is wrong. Performance fees are billed upfront for example and collected later (at the point when property transactions consummate) - I confirmed this with IR - in fact they are billed only at periodic times in H2. I think similar happens for the lumpy NPL carried interest. So the persistency is a good thing as it means performance fees are being realised. I would be worried if the revenue 1y forward from the receivable balance would be lower - at the moment it puts a generous floor on cash coming in. The company told us that the semiannual results would be published in German and English, but they have not. We have tried to talk to the company repeatedly in recent months without success. Yes investor relations can be improved but remember this is a start-up on an OTC exchange that suddenly went mainstream - they are getting used to media attention and dealing with institutional shareholder inquiries (vs initial retail base). I use the following for translations - it works fine: https://www.onlinedoctranslator.com If you get through to IR though you will get to an English speaking person that has helped out quite a bit. The CEO speaks basic English, so you will not speak to him unless you put AUM down and you are doing DD on the company for that purpose. Clearly, this is one of the reasons that the company is cheap. I am happy to forward details of the IR person (who works on a contract basis BTW) if so required or make an intro. We established that Elliott invested with the firm - which is a huge positive on management. And then lastly, from an Anglo-Saxon/Mediterranean perspective, Germans can come across as weird and stand-offish... does not deter from the underlying business though. In addition, a convertible bond of € 20mn was issued in June just before the dividend payment (about € 18mn). Both things (accounts receivable and bond issued without a specific destination before the dividend) along with the inability to speak with the company have begun to give warning signals. We do not know if our doubts are true or there is an explanation behind them, but our Rule # 1 is not to lose money, and we always say that we prefer to lose big investments rather than take risks of losing a lot. Publity has an easy-to-understand business and an overly cheap valuation that made it too interesting not to analyze and invest it. However, we are giving more and more importance to the quality of the management team, and this does not give us the confidence we need to be comfortable investing in value." They don't publish a cash flow statement as German GAAP does not force you to do it. But if you try to infer the CF statement from the b/s movements you can see that roughly 12m of that 20m went to other co-invesments and the rest to working capital. Remember that they HAD to raise the convert to co-invest alongside Elliott. The extra 20m is no surprise as they were authorised for EUR 50m in the first place. The CEO has a strong dividend policy: however he can not pay out anything more than the statutory reserves (here is where German GAAP COST accounting helps you out quite a bit) and lastly, the convertible is fully dividend protected through several anti-dilution clauses. So raising a convert and then use part of that to pay out dividends gives pro-rated equity upside to the convert holders (even more so given the strike is very close to the current stock price). IN SUMMARY Nothing said here worries me and in fact strengthens the thesis by way of explanation of the undervaluation of the company. Fascinating to see where value investors throw in the towel...