SYTE - Enterprise Diversified

[Tim Eriksen]

A lot of the it book value growth came from issuing stock above book value.

 

Your comment is very misleading.  On a dollar basis yes, but the letter was clearly noting a per share basis.  Only a small amount came from issuing stock at .05 when book value at year end was .0482.  It amounts to about $166,000 of the $2.3 million increase.

[Spekulatius]

A lot of the it book value growth came from issuing stock above book value.

 

Your comment is very misleading.  On a dollar basis yes, but the letter was clearly noting a per share basis.  Only a small amount came from issuing stock at .05 when book value at year end was .0482.  It amounts to about $166,000 of the $2.3 million increase.

 

Yes, you are correct, the secondary was only slightly above book at that time.

[gfp]

I noticed this morning the proxy was released, I guess last week.  New name for the company is "Enterprise Diversified."

 

https://www.sec.gov/Archives/edgar/data/1096934/000156459018007801/syte-pre14a_20180406.htm

[InelegantInvestor]

I noticed this morning the proxy was released, I guess last week.  New name for the company is "Enterprise Diversified."

 

https://www.sec.gov/Archives/edgar/data/1096934/000156459018007801/syte-pre14a_20180406.htm

 

They should adopt new corporate slogan:

Enterprise Diversified

"Fees never sleeps!"

 

Steven Kiel got a lovely bonus this year.

[frog03]

Steven Kiel talks like Buffett but there are definitely some not so Buffett-like behaviors:

1) Large management compensation (especially relative to the small size of the company and the fact is he doubly collecting with his hedge fund fees...)

2) Change in name

 

 

 

[Tim Eriksen]

Steven Kiel talks like Buffett but there are definitely some not so Buffett-like behaviors:

1) Large management compensation (especially relative to the small size of the company and the fact is he doubly collecting with his hedge fund fees...)

2) Change in name

 

Seriously.  Name change concerns you as non-Buffett like.  A 120k bonus?  That is 2% of the market value increase for the year (excluding the portion due to increased share count).  For the 2 years and a half month SYTE had a 215% return.  Kiel received 300k total for that.  Great deal for shareholders.  I guess some people just need to bitch about something.   

[CorpRaider]

It's 20% of increase in book value in excess of a 5% hurdle, computed annually, right? 

[InelegantInvestor]

Steven Kiel talks like Buffett but there are definitely some not so Buffett-like behaviors:

1) Large management compensation (especially relative to the small size of the company and the fact is he doubly collecting with his hedge fund fees...)

2) Change in name

 

Seriously.  Name change concerns you as non-Buffett like.  A 120k bonus?  That is 2% of the market value increase for the year (excluding the portion due to increased share count).  For the 2 years and a half month SYTE had a 215% return.  Kiel received 300k total for that.  Great deal for shareholders.  I guess some people just need to bitch about something.   

 

Gosh, I really didn't want to dredge this argument back up, but, here we are.

I don't care at all about the name change, as long as he's not changing it to Kiel Holdings.

 

The compensation question? That's real.

Steven gets paid by his fund to invest in SYTE and he gets paid by SYTE. He's double dipping. The biggest gain he got for his fund was by buying millions of shares at well below market value.

 

HVAC has been disappointing at best. There is and was a reason that these businesses sell at such low multiples. Asset management has been better, but results cover a period of the market moving straight up. Q1 will likely be less pretty. Legacy real estate is gone, basically, and internet is a slightly improved downward trajectory.  Just about the entire 215% return(im market value, not book value) came prior to the dilutive offering and all of these investments. Oh, and now you have Jeff's business too, which is probably the best asset in there.

 

You can argue and justify everything, but, ultimately, the optics are terrible. And my experience tells me that when the optics are bad and you need to start explaining why reality differs... well, it doesn't.

 

We've made different bets here. I respect your opinion, but I think you're missing the point. Integrity matters and the behavior here has been worrisome for some time. You are a frog that is slowly being boiled, and more and more of your profits will go to Kiel, et. al.

 

Steven talks about trust in his letters but almost every action he has taken has suggested to shareholders that they should not trust him to have their interests at heart.

 

I hope I'm wrong. I have sold some shares over time, but still hold a fair amount, that I continue to sell as the opportunity presents itself.

 

[TBW]

I agree with Tim.  Kiel's comp is a silly issue here.  A point that is missed, his bonus is a multiple of 100k, so if assets were to go up 20x, his bonus as it is written now, would still only be a multiple of 100k.  Huge operating leverage for shareholders and I think a great deal for shareholders.

 

You could have bought shares at $0.05 if you wanted to, just had to pick up the phone, they didn't sell all they wanted to.  If you aren't accredited, that rule is unfair imo, then yes you can complain there but that isn't SYTE's fault.

 

The optics of certain things does look poor, but having had many conversations with these guys they all clear up once you understand the restrictions they were under.  That is my opinion, you are certainly welcome to yours and I suppose time will tell.

[rkbabang]

My only problem with the name is that it is so generic sounding.  "Enterprise Diversified"  Enterprise is such a generic word, its like calling it Company, Inc.

 

Why not Sitestar Diversified or something else memorable, Melrose Diversified?

 

Oh well, I guess it doesn't really matter.

 

 

[John Hjorth]

I agree with Tim.  Kiel's comp is a silly issue here.  A point that is missed, his bonus is a multiple of 100k, so if assets were to go up 20x, his bonus as it is written now, would still only be a multiple of 100k.  Huge operating leverage for shareholders and I think a great deal for shareholders.

 

You could have bought shares at $0.05 if you wanted to, just had to pick up the phone, they didn't sell all they wanted to.  If you aren't accredited, that rule is unfair imo, then yes you can complain there but that isn't SYTE's fault.

 

The optics of certain things does look poor, but having had many conversations with these guys they all clear up once you understand the restrictions they were under.  That is my opinion, you are certainly welcome to yours and I suppose time will tell.

 

That is always true, Tim. [ : - )  ]

 

Disclaimer: No skin in the game here. My showstopper for even diving just a bit deep into this investment is: The plumming businessess, serial aquired. I might be wrong about theese kind of businesses in the US, but I have my own personal operational experience here in Northern Europe with having such colleagues. I ended up very angry, my subordinates scared out of their minds - they,  still continuing stealing from warehouse stocks - while security tightned and tightned - thinking: "What?! - Aren't we allowed to steal from our employer anymore?"

[NBL0303]

 

You could have bought shares at $0.05 if you wanted to, just had to pick up the phone, they didn't sell all they wanted to.  If you aren't accredited, that rule is unfair imo, then yes you can complain there but that isn't SYTE's fault.

 

 

Thank you for your insights.  I have a question about this that maybe you or someone else who is familiar with Sitestar and their private offering could help with: For the shareholders who purchased those 5 cent shares in private transactions - were they/are they restricted from selling them for a certain amount of time?  I realize they were probably restricted with stock legend issues/etc. but if a shareholder participated in the private offering, could they go about the process of getting them registered, the legend removed, whatever - and sell them on the open market - or was that restricted for a certain amount of time?

 

[LR1400]

I agree with Tim.  Kiel's comp is a silly issue here.  A point that is missed, his bonus is a multiple of 100k, so if assets were to go up 20x, his bonus as it is written now, would still only be a multiple of 100k.  Huge operating leverage for shareholders and I think a great deal for shareholders.

 

You could have bought shares at $0.05 if you wanted to, just had to pick up the phone, they didn't sell all they wanted to.  If you aren't accredited, that rule is unfair imo, then yes you can complain there but that isn't SYTE's fault.

 

The optics of certain things does look poor, but having had many conversations with these guys they all clear up once you understand the restrictions they were under.  That is my opinion, you are certainly welcome to yours and I suppose time will tell.

 

That is always true, Tim. [ : - )  ]

 

Disclaimer: No skin in the game here. My showstopper for even diving just a bit deep into this investment is: The plumming businessess, serial aquired. I might be wrong about theese kind of businesses in the US, but I have my own personal operational experience here in Northern Europe with having such colleagues. I ended up very angry, my subordinates scared out of their minds - they,  still continuing stealing from warehouse stocks - while security tightned and tightned - thinking: "What?! - Aren't we allowed to steal from our employer anymore?"

 

With you. Though I have a friend who does ok in HVAC, I don't think it is a business I want to own. I can't see the ability to scale beyond local. I'm sure others can.

[Tim Eriksen]

 

You could have bought shares at $0.05 if you wanted to, just had to pick up the phone, they didn't sell all they wanted to.  If you aren't accredited, that rule is unfair imo, then yes you can complain there but that isn't SYTE's fault.

 

 

Thank you for your insights.  I have a question about this that maybe you or someone else who is familiar with Sitestar and their private offering could help with: For the shareholders who purchased those 5 cent shares in private transactions - were they/are they restricted from selling them for a certain amount of time?  I realize they were probably restricted with stock legend issues/etc. but if a shareholder participated in the private offering, could they go about the process of getting them registered, the legend removed, whatever - and sell them on the open market - or was that restricted for a certain amount of time?

 

Yes they were fully restricted until Sitestar completed the legal work necessary.  In the end I think it took around 12-13 months to get removed.   

[NBL0303]

 

You could have bought shares at $0.05 if you wanted to, just had to pick up the phone, they didn't sell all they wanted to.  If you aren't accredited, that rule is unfair imo, then yes you can complain there but that isn't SYTE's fault.

 

 

Thank you for your insights.  I have a question about this that maybe you or someone else who is familiar with Sitestar and their private offering could help with: For the shareholders who purchased those 5 cent shares in private transactions - were they/are they restricted from selling them for a certain amount of time?  I realize they were probably restricted with stock legend issues/etc. but if a shareholder participated in the private offering, could they go about the process of getting them registered, the legend removed, whatever - and sell them on the open market - or was that restricted for a certain amount of time?

 

Yes they were fully restricted until Sitestar completed the legal work necessary.  In the end I think it took around 12-13 months to get removed. 

 

Thank you, Tim!  So any purchasers of those shares are now free to sell them?  I don't have a problem with that or anything I'm just curious.

[InelegantInvestor]

 

You could have bought shares at $0.05 if you wanted to, just had to pick up the phone, they didn't sell all they wanted to.  If you aren't accredited, that rule is unfair imo, then yes you can complain there but that isn't SYTE's fault.

 

 

Thank you for your insights.  I have a question about this that maybe you or someone else who is familiar with Sitestar and their private offering could help with: For the shareholders who purchased those 5 cent shares in private transactions - were they/are they restricted from selling them for a certain amount of time?  I realize they were probably restricted with stock legend issues/etc. but if a shareholder participated in the private offering, could they go about the process of getting them registered, the legend removed, whatever - and sell them on the open market - or was that restricted for a certain amount of time?

 

Yes they were fully restricted until Sitestar completed the legal work necessary.  In the end I think it took around 12-13 months to get removed.   

It's interesting. One of the big reasons given for the huge discount was that the shares were restricted. If they were indeed only restricted for one year, does not seem to at all justify the 50% discount.

[Tim Eriksen]

Buyers are free to sell as far as I know.  As I recall the discount was closer to 35 to 40% (.05 vs. market of .08).  Not trying to nitpick.  At the time I had no way of knowing how long the restriction would last.  If purchasers might have to pay some of the cost.  What the opportunity cost in holding would be.  How well the company would perform. etc.

 

I bought in my fund, but I chose not to present it to Solitron's board at the time thinking it would be a tough sell as the first purchase.  Oops. 

[DTEJD1997]

My only problem with the name is that it is so generic sounding.  "Enterprise Diversified"  Enterprise is such a generic word, its like calling it Company, Inc.

 

Why not Sitestar Diversified or something else memorable, Melrose Diversified?

 

Oh well, I guess it doesn't really matter.

There is a problem with this name change.  I do not know if it is intentional or not.

 

The problem is that it is so generic, it is going to play havoc with search engines.  That is, a prospective investor, OR anybody else wishing to research the company will type in "enterprise diversified" and it will come back with false positive hits.

 

Obviously, somebody who has good "Google-Fu" can work around this...but it will require more time & energy & will also require knowledge of how to search.

 

I often wonder if some companies do this on purpose to fly under the radar or hideout from prying eyes?

[CorpRaider]

What's the problem with the HVAC bidness?  Employees take the lion's share/are hard to retain?  Seems like lots of guys start up their own shop, with like one helper, in that industry.

[InelegantInvestor]

What's the problem with the HVAC bidness?  Employees take the lion's share/are hard to retain?  Seems like lots of guys start up their own shop, with like one helper, in that industry.

HVAC contractors are asset-lite(maybe they own a truck). Only proprietary value is customer list and relationships. It's generally a relationship business. How long does that value last once old owner moves on?

 

So you're not buying reproducible revenues and profits, necessarily.

 

 

[valuedontlie]

There are no public residential HVAC operators... And the public HVAC companies on the commercial side are mostly in design/build as opposed to maintenance/repair...

 

Similar attributes would be the plumbing industry and I would look at Chemed (CHE) which owns Roto Rooter. It is mostly plumbing and drain cleaning. Consistent revenue growth, 20% EBITDA margins, hardly any capex, and buying up smaller operators at 4-5x EBITDA.

 

Presentations site:

http://ir.chemed.com/events-and-presentations/upcoming-events

[gfp]

Last time I was shooting the shit with our HVAC man (an owner operator) he spent an hour talking about all the non-compete agreements his friends and colleagues have subverted over the years. 

[InelegantInvestor]

Last time I was shooting the shit with our HVAC man (an owner operator) he spent an hour talking about all the non-compete agreements his friends and colleagues have subverted over the years. 

 

It turns out these assets are cheap for a reason.

[CorpRaider]

Interesting stuff.  Thanks.

[Jurgis]

Last time I was shooting the shit with our HVAC man (an owner operator) he spent an hour talking about all the non-compete agreements his friends and colleagues have subverted over the years.

 

So basically owner could sell his business and then start a new one and pretty much go to his former clients while the buyer is left with not much?

 

Not saying this happened to SYTE. Just clarifying.