Rabbitisrich

I remember an old CNBC interview where one of the Freddie Mac directors stated that the BOD held fiduciary responsibility to the conservator. Bill Ackman sat next to him, and received confirmation that the director would subordinate equity and preferred interests.

From what I understand, after the Washington Mutual seizure, the FDIC sent in staff to allow depositors access to their covered funds almost immediately. Similarly, Indymac shut down for a weekend and reopened under conservatorship. If you are within the coverage amount, then it's a pretty seamless transition.

It's strange to read Parsad describing an empty Holiday Inn at the 2002 Berkshire Hathaway AGM. Interesting comments from the meeting: http://msnbrkboardarchive.multiply.com/journal/item/9709/BRK-AGM-Notes

Keep them coming! Super interesting series. By the way, do you visit any real estate investing blogs or message boards?

Unhappily, you are likely right. I had hoped that you exercise by paying the strike per warrant, and then receive adjusted shares + cash in lieu, but then the stock split adjustment wouldn't make sense. Does anyone have an opinion on the exercise procedure? The main reason why I think that Xazp is correct is that the split adjustment wouldn't also reduce the strike if you only pay the warrant strike, and if the purpose is to maintain the economics before/after split.

Ragnarisapirate is too modest to post this, but he has a very interesting series called "Walking Away From A Few Million Dollars". I have been tempted by a glut of condos that trade for under $250,000 despite comparable floor plans renting at ~$1,500 monthly. These articles helped me to remove the dollar signs from my eyes and to look at the mysteriously low HOAs, low owner-occupancies, and special assessments histories. http://ragnarisapirate.blogspot.com/2012/05/sometimes-its-best-to-take-pass-40.html http://ragnarisapirate.blogspot.com/2012/06/walking-away-from-few-million-dollars.html http://ragnarisapirate.blogspot.com/2012/07/walking-away-from-few-million-dollars_18.html

Let's say somebody bought the stock at $13.30 (same price as the warrants' initial strike price), and later the stock dropped to $8 per share at which dividends were paid (and reinvested in the stock). The investor would then have an average cost basis somewhere between $13.30 and $8. Now, with the warrants in the same scenario the adjusted strike (and adjusted shares) would wind up being the same as that of the average cost basis the common shareholder in my prior paragraph enjoys. I think -- please tell me if the calculations do not wind up the same. It depends on the price of the warrants. Do you mean that the dividend is issued at $8? So at an $0.80 dividend, you get 1.1X shares at $14.10, or $12.18/share. The warrant receives a strike reduction to $11.97 strike for 1.11X shares, or $10.78/share. Edit: If the strike applies to adjusted shares, then it's just $11.97 per share for the adjusted warrant.

The warrant holder also ends 2018 with a 29% increase in shares per warrant at a $10.29 strike (ignoring the $0.01 threshold). So the common holder starts with $8 and ends with +$12 in addition to whatever you did with the $5. The warrant holder starts with $3 and ends with +$15.56. Without the dividends, you arrive at +$12 for an $8 common purchaser versus +$6.70 for a $3 warrant purchaser. Ignoring taxes, it only works out better for the common if you can reinvest the dividends at a higher rate than what is provided by the strike adjustments. Edit: Accounting for the strike price of new shares issued, the warrant holder ends at +$9.55 after dividends.

In an earlier post, I wondered whether the appropriate strike to look at is the expiry strike. If the stock is at $8 and issues a $0.40 dividend, then the common can get 1.05X ownership assuming a skeptical market, whereas the warrant gets 1.05X ownership at $12.64 (ignoring the $0.01 threshold). Let's say the stock trades flat and keeps the 5% yield for nine more payouts until the strike is below the market price. At this point, the common reinvestor has increased his share by 55%, and the warrant holder increases ownership by almost 59% and the strike is similar to the common. The interesting thing about the warrants is that you don't average down or up. The adjustment applies to your whole inventory, not simply the reinvested yield.

It depends on the stock price relative to the strike price. Ericopoly's point is that you would be better off simply reinvesting a dividend into the stock price if it's below the strike.

Maybe even better than reinvestment because the adjustment refers to the full holding, not just the marginal shares issuable (each subsequent reinvestment). Perhaps the best comparison is between reinvesting at market versus the expected ending strike. But look at this risk factor from the prospectus: SDo any FFBC warrant holders want to chime in? Those warrants have a similar tax provision and have paid dividends above the threshold.

Unfortunately, I don't think that the strike adjustments are tax deferred. There are a few mentions of warrant holders being liable for taxes. Check the risk factors portion.

And when common gets the $0.50, they have to reinvest at the market price. Warrant holders are reinvested at strike, mwahahaha (the benefit of this is reduced because the adjustment is %, not $ for $.) One thing that I am not clear on is the exact calculation of payment at expiry. These warrants are a "net" exercise, so you just receive shares + cash payment for fractional shares. The language regarding the payment is a bit confusing.

The exercise price is multiplied by the end of day before record date price [market price] minus the dividend, then divided by the [market price]. Then the shares issuable per warrant is multiplied by the old strike divided by new strike.

To what extent does having a small fund support his returns? He doesn't hold a lot of small/micro caps. By the way, Business Insider mentioned the Lee Munsen character: http://articles.businessinsider.com/2011-04-01/wall_street/30024477_1_drug-dealer-rome-closing-bell

Seems like the author is knocking down the strike $ for $. The adjustment is based on the last trade price the day before the record date of the dividend.

Margins don't look low to me at 37.5% gross margin and 20% ROC. Asset turnover is 3x+ and they can safely raise more debt even if sales fall to 2008 levels at 7% operating profit. Is this a clothing retailer? The numbers look similar to GPS but with Rue 21 asset turnover.

Plan, I think that Berkowitz always held a liquidation value thesis first, and only looked at the operating cash in so far as it covered expenses and allowed for breathing room. The March 2009 OID has a good interview [pdf file]: http://www.grahamanddoddsville.net/wordpress/Files/Gurus/Bruce%20Berkowitz/OID%20-%20Bruce%20Berkowitz%20-%203-17-2009.pdf

I just saw this name on MFP Investor's recent 13f-hr. It looks like a potential name for a financials basket. They are still struggling with their commercial real estate portfolio, but they have bulked up their balance sheet to weather future losses. Non-performing assets to net loans stands at 7.6%, but net loans is 48% of earnings assets. Loans are 58% of deposits. 29% of deposits don't bear interest. They reported a 2Q12 efficiency ratio of 72%. Non-interest revenues are not large. The bank is based in Sacramento, which experienced huge overinvestment in certain commercial real estate segments. Office vacancy stood at 23.5% in an April-June survey. You wouldn't want to make this a large position unless you know the area well. Management seems committed to moving the portfolio towards securities despite a 2%-4% difference in yield. This looks like a case of scarred management trying to figure out what to do with a bulked up balance sheet in a difficult geography during a low rate environment. Given that you are mostly paying for positioning, rather than current profits, I would like to purchase at a lower multiple to book. Table Ten: Capital Ratios Capital to Risk-Adjusted Assets At June 30, 2012 At December 31, 2011 Minimum Regulatory Capital Requirements Leverage ratio 12.8% 13.1% 4.00% Tier 1 Risk-Based Capital 21.7% 21.5% 4.00% Total Risk-Based Capital 23.0% 22.8% 8.00%

Yep, I like this thread. Even if you, understandably, don't want to arrive at a valuation from the financials alone, it's still good practice to attempt to match scenarios to the available data. ENR was a particularly good choice because of the swings in debt/equity, share count, and asset turnover.

Decent quarter http://www.sec.gov/Archives/edgar/data/888919/000110465912052726/a12-17391_1ex99d1.htm Net written premiums increased by 5.3% yoy. Book value per share up by 11.9% yoy. Low leverage, good ROE, low expense ratio.

EJ's errors were so easy to catch that it was likely just a mistake. It was a rare opening to push his company to the big three.

Klarman sometimes talks about his longs. He thought that NWS was cheap on a sum of parts analysis. MSFT BBEP and PDLI had hedges and royalties, respectively, worth more than the market cap. His larger positions typically generate large amounts of cash relative to market cap. I think that he acknowledged RHI as a mistake, but these small positions are best viewed as a basket.

Yeah, it can be frustrating reading Yves Smith or Chris Whalen, but that same bias drives them to collect as much negative information as possible. Just take a skim approach and pick out the facts, while controlling annoyance with a cup of peppermint tea.

http://blogs.wsj.com/deals/2012/07/26/wells-fargo-architect-kovacevich-says-big-banks-are-safer/ Some good points raised, although I disagree with his overall point.