CSU - Constellation Software

[Liberty]

I think they just remove the dividend from it and add the retained free cash, but I haven't looked at it in a bit.

[SlowAppreciation]

I think they just remove the dividend from it and add the retained free cash, but I haven't looked at it in a bit.

 

Yeah that seems to be what they're getting at but I can't quite make the figures add up

[Liberty]

New Q&A is up:

 

http://www.csisoftware.com/wp-content/uploads/2018/05/QA-May-14-2018-Final.pdf

[Liberty]

Acquisition:

 

https://www.prnewswire.com/news-releases/constellation-homebuilder-systems-acquires-customerinsight-300659728.html

[Phaceliacapital]

Did anyone ever look at their 2040 bonds? Has a 8.1 coupon & price around 125.

[Liberty]

Did anyone ever look at their 2040 bonds? Has a 8.1 coupon & price around 125.

 

You mean the debentures? Make sure you read the filings, because they're pretty unique. The interests reset each year based on the Canadian CPI and they are callable under certain circumstances...

[Liberty]

Vela acquisition:

 

http://virtual-strategy.com/2018/06/27/fog-software-group-acquires-pace-software-inc/

[Liberty]

CSU shareholder Q&A (I asked the single question):

 

http://www.csisoftware.com/wp-content/uploads/2018/06/QA-June-2018-Final.pdf

[thowed]

Nice, thanks.

 

I hope one day I'll stop thinking 'I'm too late!' and buy some.

[doughishere]

 

 

"Buybacks of undervalued stock feel to me like insiders preying upon their weakest shareholders using superior information. I’d argue to our board of Directors that there is no "Mr. Market" whom we can take advantage of without qualm.  "

 

I dont really understand this. Nice question, Lib.

[racemize]

 

 

"Buybacks of undervalued stock feel to me like insiders preying upon their weakest shareholders using superior information. I’d argue to our board of Directors that there is no "Mr. Market" whom we can take advantage of without qualm.  "

 

I dont really understand this. Nice question, Lib.

 

Graham and Buffett have said this before.  I tend to disagree as it is providing liquidity to people who want to sell, and they were likely to sell anyway.

[Shooter MacGavin]

 

 

"Buybacks of undervalued stock feel to me like insiders preying upon their weakest shareholders using superior information. I’d argue to our board of Directors that there is no "Mr. Market" whom we can take advantage of without qualm.  "

 

I dont really understand this. Nice question, Lib.

 

Graham and Buffett have said this before.  I tend to disagree as it is providing liquidity to people who want to sell, and they were likely to sell anyway.

 

I agree.  And broadcasting that you think it's undervalued is a way to be fair, which is what Berkshire does (1.2x etc).  It's unfair to force a tax inefficient return of capital to one group of shareholders to protect another from themselves.  The company should do what is economically rational for the shareholders who are staying in.

[Shooter MacGavin]

CSU shareholder Q&A (I asked the single question):

 

http://www.csisoftware.com/wp-content/uploads/2018/06/QA-June-2018-Final.pdf

 

it's a great Q btw.

[Shooter MacGavin]

Did anyone ever look at their 2040 bonds? Has a 8.1 coupon & price around 125.

 

Is there a way for americans to buy this?  IB told me I can't do it through them.

[gfp]

You should be able to buy it through Interactive Brokers if you get approval / trading permission / data subscription or whatever you need for the Toronto Stock Exchange.  It is definitely available through IB

 

Did anyone ever look at their 2040 bonds? Has a 8.1 coupon & price around 125.

 

Is there a way for americans to buy this?  IB told me I can't do it through them.

[Shooter MacGavin]

You should be able to buy it through Interactive Brokers if you get approval / trading permission / data subscription or whatever you need for the Toronto Stock Exchange.  It is definitely available through IB

 

Did anyone ever look at their 2040 bonds? Has a 8.1 coupon & price around 125.

 

Is there a way for americans to buy this?  IB told me I can't do it through them.

 

 

really?  I called them and they said I can buy stock but not bonds.  I have the permissions for TSX.  I own CSU.

[Astrea]

I couldn't when I tried about a year or so ago through both IB and Schwab. For Schwab, I think it was because I was an international client and they could only do it for US clients.

[maybe4less]

You should be able to buy it through Interactive Brokers if you get approval / trading permission / data subscription or whatever you need for the Toronto Stock Exchange.  It is definitely available through IB

 

Did anyone ever look at their 2040 bonds? Has a 8.1 coupon & price around 125.

 

Is there a way for americans to buy this?  IB told me I can't do it through them.

 

 

really?  I called them and they said I can buy stock but not bonds.  I have the permissions for TSX.  I own CSU.

 

They are definitely available if you have a Canadian account, but for whatever reason IB doesn't allow US accounts to trade Canadian debentures.

[gfp]

Oh Sorry I didn't notice you were talking about the debt

 

You should be able to buy it through Interactive Brokers if you get approval / trading permission / data subscription or whatever you need for the Toronto Stock Exchange.  It is definitely available through IB

 

Did anyone ever look at their 2040 bonds? Has a 8.1 coupon & price around 125.

 

Is there a way for americans to buy this?  IB told me I can't do it through them.

 

 

really?  I called them and they said I can buy stock but not bonds.  I have the permissions for TSX.  I own CSU.

[KCLarkin]

"Buybacks of undervalued stock feel to me like insiders preying upon their weakest shareholders using superior information. I’d argue to our board of Directors that there is no "Mr. Market" whom we can take advantage of without qualm."

 

This is surprisingly irrational for Leonard. He's usually pretty open-minded but he has a very rigid view on buybacks.

[Liberty]

"Buybacks of undervalued stock feel to me like insiders preying upon their weakest shareholders using superior information. I’d argue to our board of Directors that there is no "Mr. Market" whom we can take advantage of without qualm."

 

This is surprisingly irrational for Leonard. He's usually pretty open-minded but he has a very rigid view on buybacks.

 

It's not irrational, it's just more strict ethically than almost everyone else out there, which isn't the worst thing to have a CEO be...

 

He sees this as an insider buying shares from an outsider with a potentially large informational asymmetry, and like Buffett (especially in the early days of BRK), he's cultivated a shareholder culture that is idiosyncratic and more partnership-like than most companies. A lot of employees are shareholders and while they might be sophisticated at doing VMS software, they might not be sophisticated market participants and he feels very protective of them, as he's made clear at both AGMs that I've been to.

 

In my follow-up question, I ask about potential ways to mitigate this, for example Buffett who has bought large blocks of stocks directly from shareholders (going through succession planning or whatever -- he could make it known that the company is interested in buying large blocks under certain parameters, as a kind of open-ended tender), and his approach of making it clear ahead of time that there's a point at which he'd consider the stock a good value and would buy back (1.3x of book or whatever). There's also the Singleton approach of doing public tender offers where everybody knows ahead of time and can decide to participate or not.

 

There's more in my follow-up, but I guess we'll see if they answer my follow up the next time they do these...

 

I just don't think he likes the idea of the company going in the open market and buying when others don't know that they're buying (I don't just mean the usual repurchase authorization). It's not because everybody else does it they should do it if they feel uncomfortable with it, I like that they're independent thinkers.

[Shooter MacGavin]

"Buybacks of undervalued stock feel to me like insiders preying upon their weakest shareholders using superior information. I’d argue to our board of Directors that there is no "Mr. Market" whom we can take advantage of without qualm."

 

This is surprisingly irrational for Leonard. He's usually pretty open-minded but he has a very rigid view on buybacks.

 

It's not irrational, it's just more strict ethically than almost everyone else out there, which isn't the worst thing to have a CEO be...

 

He sees this as an insider buying shares from an outsider with a potentially large informational asymmetry, and like Buffett (especially in the early days of BRK), he's cultivated a shareholder culture that is idiosyncratic and more partnership-like than most companies. A lot of employees are shareholders and while they might be sophisticated at doing VMS software, they might not be sophisticated market participants and he feels very protective of them, as he's made clear at both AGMs that I've been to.

 

In my follow-up question, I ask about potential ways to mitigate this, for example Buffett who has bought large blocks of stocks directly from shareholders (going through succession planning or whatever -- he could make it known that the company is interested in buying large blocks under certain parameters, as a kind of open-ended tender), and his approach of making it clear ahead of time that there's a point at which he'd consider the stock a good value and would buy back (1.3x of book or whatever). There's also the Singleton approach of doing public tender offers where everybody knows ahead of time and can decide to participate or not.

 

There's more in my follow-up, but I guess we'll see if they answer my follow up the next time they do these...

 

I just don't think he likes the idea of the company going in the open market and buying when others don't know that they're buying. It's not because everybody else does it they should do it if they feel uncomfortable with it, I like that they're independent thinkers.

 

I completely agree that its a higher standard of morality.  I think Mark's moral compass is pointed north and he is incredibly rational.  But even so, it creates an issue and to your point, there are other ways to resolve this issue fairly.  I'm really curious to hear what they have to say to your follow up Liberty.

 

Additionally, aren't they are going out in the market anyway to purchase stock  in the open market for the employee comp program? so arguably, by their own logic, they could still appear to use "insider information" to compensate employees to the detriment of other shareholders.

[Liberty]

Additionally, aren't they are going out in the market anyway to purchase stock  in the open market for the employee comp program? so arguably, by their own logic, they could still appear to use "insider information" to compensate employees to the detriment of other shareholders.

 

My understanding is that it's the employees themselves that are buying and not the company, but I could be mistaken about that. They probably have a certain time window (buy within X months, must hold for Y years..?), but I don't know the details of the plan.

[KCLarkin]

I just don't think he likes the idea of the company going in the open market and buying when others don't know that they're buying

 

This is precisely the irrational part. The exiting shareholder's are making open market sales regardless. Buying back undervalued stock is countercyclical. So it protects selling shareholders and is accretive to holding shareholders. The only people who are harmed are new shareholders who now need to compete with the buybacks.

 

The moral and ethical issues have largely been dealt with by the regulators. With the strict buyback regulations in Canada, I can't see how a company could legally take advantage.

 

And actually, the irrationality by Leonard is much worse. A few years ago, CSU was put up for strategic review because it was so undervalued. Many other companies have been ransacked by raiders. Leonard knows how dangerous it is for a company to be undervalued for a prolonged period of time but he is against one of the best tools to correct that undervaluation.

[Liberty]

I just don't think he likes the idea of the company going in the open market and buying when others don't know that they're buying

 

This is precisely the irrational part. The exiting shareholder's are making open market sales regardless. Buying back undervalued stock is countercyclical. So it protects selling shareholders and is accretive to holding shareholders. The only people who are harmed are new shareholders who now need to compete with the buybacks.

 

The moral and ethical issues have largely been dealt with by the regulators. With the strict buyback regulations in Canada, I can't see how a company could legally take advantage.

 

And actually, the irrationality by Leonard is much worse. A few years ago, CSU was put up for strategic review because it was so undervalued. Many other companies have been ransacked by raiders. Leonard knows how dangerous it is for a company to be undervalued for a prolonged period of time but he is against one of the best tools to correct that undervaluation.

 

It's a nuance, but I don't think he's saying that the action of buying back stock is hurting shareholders, he's saying he doesn't want to be the one that has bought undervalued stock from shareholders, who he sees as partners, because management/the company is a different actor than all the others in the marketplace.

 

But you bring up a good point with the counter-cyclicality of buybacks and providing liquidity, and I encourage you to write in a question about this angle and see what they have to say about it. I wish more people would send in good questions through the new mechanism, I'm afraid that they might shut that down too eventually if nobody uses it...