samwise

Then you need 100% more shares, which raises 1B @ current price, which tiddman also thought was enough "to get over the hump". Now ESL (the man) hates issuing shares (except maybe to himself). So lets see what happens here. @tiddman why do you think they have done 40% of their redevelopment? That would leave very little upside isn't it?

No in-depth research (hey I'm a spectator here), but seemed reasonable to me because: Its the cheapest form of financing but they haven't used it. They could do it with BRK approval. BRK keeps approving asset sales, so why not allow a mortgage to finance Capex? My only explanation is that they mostly have partially leased assets, almost none that could be financed as stabilized. So your comment made me check here: http://s23.q4cdn.com/949579163/files/doc_financials/2021/q1/v3/Supplemental-Ex-99.2-Final-(1).pdf By my count they have 21 properties (of various sizes) > 90% leased. +1 (only!) in the JVs. Presumably these could be mortgaged. They have 79 properties at 0.0% leasing, presumably emptied to redevelop. Or dead. Their balance sheet in the AR shows Mortgage loans repayable of 34.6M. I couldn't make out what those are, but not enough to move the needle of financing needs. I also found the reason they haven't been able to raise much cash via mortgages. Its in the annual report. BRK requested all the mortgages as part of the term loan in 2019 and the rest in 2020 as SRG failed its covenants. see commentary on page F-30. http://s23.q4cdn.com/949579163/files/doc_financials/2020/ar/Seritage-Annual-Reportv5.pdf So this looks like half of a good business (ignoring price): lots of places to reinvest at 15% ROE, but no funds to reinvest and no-one who will give you those funds, except BRK. The mortgage option seems off the table. Seems there will be dilution for shareholders, or whatever else BRK decides is best.

Agreed Gregmal, that seems like the most likely way out. Like previous BRK deals it could be a convertible preferred. Isn't that the same effect as the cash raise that pupil wants? (except for the likely 9% coupon, or PIK terms). Not sure why pupil thinks that makes the company more attractive.

What would BRK do if SRG can't pay back when the loan comes due? As the experienced real estate investors here have said, SRG hasn't yet stabilized a single asset and raised a low rate mortgage in the normal RE market (possibly the JVs were stabilized, but those were sold). If WEB is dead in three years(~45% chance per actuarial tables) , who makes this decision? The assets they have sold so far have all been at prices which would not cover the 1.6B. Here are some things they could do, but not sure what they will do. With BAM and Oaktree, this would be much more predictable, since there is such a history of their behaviour with debt. 1. BRK could force default, own the land and develop it themselves. The capital problems of SRG disappear along with shareholders equity. Or sell the debt to BAM/Oaktree and let them do the dirty work. But does WEB like the optics of this and the effect on his folksy image? This also hits his own equity position in SRG(if he still owns it, but I feel he would be restricted and locked into the position if he gets MNPI from SRG as a lender?). 2. BRK could extend the loan, and might even need to give them more money. Probably not a big risk if SRG can really invest the money at 15% IRR. So eventually they would get a payback, and SRG shareholders will see the upside, but its not clear to me how much that upside is. 3. BRK extends the loan but dilutes the shareholders? warrants or convertible preferred shares perhaps.

Some history, just showing that these people are pretty smart, and opaque, at least to me.

AngloZurich: On the future of car retailing: https://www.motortrader.com/motor-trader-news/automotive-news/genesis-to-sell-cars-online-and-studios-no-dealer-input-05-05-2021 Decent report from CAMB: almost 16% ROE, and they are trying o buy it at book. I saw some articles speculating on other dealers considering bidding on it, but can't find those now. http://www.cambriaautomobilesplc.com/resources/Interim_Results_2021_statement-Final.pdf

Financial Times published an article after the merger of Athene (insurance) and Apollo (Private equity), asking "Is this the new Berkshire?". Of course there were lots of protests in the comments. This was the most liked comment: " This is like saying Dracula is the same as the Red Cross , just because they both deal in blood."

Add me to list of confused people. I see the following: B shares $77 (10 votes) A shares $44 (1 vote) C shares $36-37 (0 votes) Are votes this valuable?

The recent selling seems to be the textbook definition of uneconomic sellers. So should we expect a rebound as selling pressure eases? Or is this the unwind from earlier uneconomic buyers (I saw a post on the shorts buying back)?

If that happens, all three companies will do really well and margins will be very high. Theoretically, I guess they could all increase price until just below CXMT costs, even as node development produces cheaper bits. So they could get huge margins with increasing revenue and reducing costs. Supposedly DRAM demand is inelastic so price increases should be possible. Les see if it happens. Thanks for the interesting discussion.

Yes I don't dispute that. But will MU earn more or less than what it currently earns? IF earnings stay constant at $6 mid-cycle, then I am happy to sell at 15x P/E. Only reason to hold on (for me) would be growth in earnings, which I have no confidence in. of course P/E could go to 25 and you could do very well in the stock, or underlying EPS might be higher. I don't have answers, but happy to share my confusion below about incremental returns on capital. For growing EPS you need one of the following 1. Book value is constant and ROE keeps rising. unlikely. 2. Book grows at 15%, so depreciation grows at 15%, for constant ROE, EBITDA should grow at 15%. Now I don't know what 15% book means in terms of bit growth, but if I assume 15% bit growth, then you get 15% EBITDA growth by keeping ASP constant a constant margin (unlikely that ASPs don't drop). Or you could get 15% EBITDA growth by constantly increasing EBITDA Margin (also unlikely). Maybe I just don't understand the industry in enough detail. But to believe this is a compounder with bits growing at 15%, you need to know how much Capex is required above depreciation and how much of cost decreases need to be passed on to customers. I don't think this is purely a boardroom decision. Yes the industry is better than before, but I am not sure it is that much better, since the oligopoly only lasts if the players maintain their lead on nodes. A lot of MU's increased earnings have come from catching up with Samsung, so it can be done.

RadMan, I decided to sell my MU position a while back, as I think the compounding scenario is going to be hard. MU needs to thread a needle o achieve any compounding 1. Invest enough Capex to stay ahead of China 2. Invest at the same rate as competitors like Samsung 3. Invest slowly enough to get good ROIC. This can also be thought in terms of price decreases passed on to customers. MU needs to 1. Pass on cost decreases to customers , enough to stay ahead of China as they decrease their costs. Also enough to make customers switch to the lower cost bits. 2. Keep enough of the cost decreases to ensure that MU earns enough incremental EBITDA to cover the new CAPEX. All this while managing a cyclical end market with Capex controls, inventory buildup etc as they did in the last cycle. The more I thought about this, the harder this seemed to achieve. Now China is still many years behind, and maybe the tech is hard enough that they never catch up. But it seems the incumbents have to run as hard as possible to stay ahead, and also run at a measured pace where they earn great ROIC on incremental capital. Coke and cornflakes is a much easier business.

Retroranger, What’s common in all those cases? A possible conflict of interest. One set of shareholders own the Yieldco , another company manageCo makes decisions on acquiring assets, then earns based on amount of assets owned or sold. The manageCo has incentives to buy marginal assets which help its earnings but may not be the best for Yieldco. Not saying it is happening here, but it’s the same setup with similar incentives. Similar to what jemn describes for individual investors, but at institutional scale.

I've been buying on the following thesis. 1. Worst Case: Rhymes with history: Growth, operations not so good. Then I haven't overpaid by much. 2. Best case: Rhymes with Boyd. Growth, great operations. Cheap. Alternate scenario: They sell to private equity with scarcity value as the only at-scale platform in Australia. They just sold off the bothersome subsidiary which prevented the Blackstone buyout a couple years ago. Seems ready to sell now. the CEO scandal: Lots of people have investigated this company, so I doubt big cockroaches are hiding here. 1. Five months of forensic investigation has revealed 1M over-expensing by the ex-CEO. Thats not a risk to the business, but probably means there are weak internal controls. 2. Blackstone had done diligence on the old business. AMA might have overpaid for the Suncorp acquisition, but its probably not a fraud either. 3. Mittleman is also buying, making this a >10% position, probably from their AMX winnings. So they must have done some investigation as well. New CEO has promised to focus on operations and basics of the business and controls, appropriate for a large company. Reasons to think that the future will not be like the past. We should know in three years which scenario actually happens.

Interesting, yes maybe there could be a value bump. I've got my popcorn and I won't tender either. Wouldn't mind being the leftover 11% shares in an illiquid stock (see Schuff). Management has rarely paid goodwill, so not sure they start now. Their discipline is part of the value. I do not think a competing offer is possible. 1. management own 40%, so no one can really win against them. 2. The value is in management, not the business itself. So what would be the point of buying them out. Aim could become one of the private parties as they did with 100HK, but I don't think this trades enough.But most public investors would not be able to do that.