writser Posted September 30, 2016 Share Posted September 30, 2016 Let me first scare away 90% of the readers: Trina Solar is an ADR of a Chinese solar panel producer. It has never paid out a dividend and shares outstanding have quadrupled over the past decade. If you think Chinese people are not to be trusted and all Chinese companies are frauds, please ignore this topic. I am assuming TSL is a real company. You can buy their products, the founder & CEO is a participant at Davos and they have job listings on LinkedIn. Oaktree and Templeton are major shareholders, amongst others. Obviously these facts are not a guarantee that everything is kosher (Sino-Forest anyone?) but it doesn't look like a total fraud either. The founder & chairman wants to take the company private, probably to relist in China at a higher valuation. He submitted a non-binding proposal in December 2015 and a definitive agreement was struck in August 2016. See the preliminary proxy for a brief timeline of what happened: link, page 22-33. He is offering $11.55 ($11.60 minus an ADR fee) per ADR. This number has been on the table since December 2015 and has not changed. I think that's a good sign. In some Chinese deals the buyer tries to lowball with a new offer if the stock trades down after the initial proposal. Now, obviously there are some issues here. First of all, there is the China risk. As a minority ADR holder you can get ripped off / be misled and there is nothing you can do about it. There has been a crackdown on relistings in China. Getting financing in China has been getting more difficult. Relisting might not be as attractive with the Chinese stock market cooling down. Recently some Chinese deals have taken way longer than was expected (DKSY, QIHU), some have even been cancelled (YY). However, the past few years I have found the Chinese going-private space to be an excellent hunting ground. Lots of deals work out approximately as expected and offered a great IRR somewhere down the road. Amongst others I participated in Country Style Cooking, Global Tech, Mindray Medical, Wuxi Pharmatech, Dangdang, Taomee, Mecox Lane and Jiayuan.com. Solar stocks are not exactly popular and lots of investors automatically ignore any Chinese deal because "they are frauds" and that's exactly why I think this opportunity exists. Short interest in TSL is relatively high at 5% but not bad compared to FSLR (12%), SCTY (22%) , CSIQ (13%) or most other major solar names. Frankly, I think the main risk is that the buying consortium cannot get financing in time. As a fellow member pointed out, the smaller deals are usually better as 1) they don't need a big consortium to get financing and 2) they are less scrutinized by regulators. On the other hand there is a ~44m termination fee for the buyers so they have a decent incentive to close the deal. But my main consideration: TSL is currently trading at 10.25 or a ~12% discount to the deal price. Deal is expected to close in Q1 2017. Even with some hiccups the IRR looks promising. You can even buy Mar '17 or Jan '18 10 puts if you want a hedge in case the deal falls through. I would not recommend going all-in on this but I think it is a fine addition to your portfolio if appropriately sized. I currently have a 1.5% allocation, might go higher at some point. Sorry for the incoherent rambling. Link to comment Share on other sites More sharing options...
awindenberger Posted September 30, 2016 Share Posted September 30, 2016 I would add that the company is cheap if they don't end up going private. So if the deal fell through the stock would tank, but that would be a buying opportunity. Link to comment Share on other sites More sharing options...
writser Posted November 4, 2016 Author Share Posted November 4, 2016 New proxy filing: link: vote planned for 16 december. I honestly don't understand what I am missing here. Link to comment Share on other sites More sharing options...
writser Posted November 9, 2016 Author Share Posted November 9, 2016 Trump presidency crushes all solar ETF's. TSL is down a bit with the bunch - consider me skeptical whether this has a big influence on the proposed buyout. Maybe a decent buying opportunity? Link to comment Share on other sites More sharing options...
hillfronter83 Posted November 9, 2016 Share Posted November 9, 2016 Trump presidency crushes all solar ETF's. TSL is down a bit with the bunch - consider me skeptical whether this has a big influence on the proposed buyout. Maybe a decent buying opportunity? The buyout group only controls 5.5% share o/s. Although it seems to be in everyone's interest for the deal to go through, I'm a little concerned for shareholder approval. I grabbed a few shares today. Do you know how to vote the proxy in IB? Another Chinese buyout going on is AMCN. There are some disagreements between the CEO and the buyout group so more skeptical, but it's also in everyone's interest for the deal to go though. The spread is over 90% now. Link to comment Share on other sites More sharing options...
writser Posted November 9, 2016 Author Share Posted November 9, 2016 You should get an (e)-mail from IB for the proxy voting. Yeah, one of the main risks is that the vote doesn't pass so size accordingly (I only have a small position). But it doesn't look like anybody is really interested in picking a fight over this so far. I like that the upside is significant while TSL seems to trade at a somewhat depressed valuation - even if you assign a decent % to things going wrong the odds look in our favour. Also, the buyout group seems to act decisively so far and I can't imagine they do so knowing that Oaktree and Templeton are strongly opposed. AMCN: I have looked at it in the past but it is too shady for me. Lawsuits, failed "attempts" at taking the company private, target of pump and dump schemes, short writeups on SeekingAlpha, making consistent losses, and, while I know Trina Solar at least makes real solar panels I can buy, I don't know what AMCN is doing and whether it is a total fraud or not. I like Chinese mergers as a group but you have to be careful and that one didn't pass the smell test so I didn't spend more time on it. I like my arbs quiet and uncontroversial. Link to comment Share on other sites More sharing options...
ccplz Posted November 13, 2016 Share Posted November 13, 2016 I would add that the company is cheap if they don't end up going private. So if the deal fell through the stock would tank, but that would be a buying opportunity. Why is it cheap? Link to comment Share on other sites More sharing options...
hillfronter83 Posted November 15, 2016 Share Posted November 15, 2016 You should get an (e)-mail from IB for the proxy voting. Yeah, one of the main risks is that the vote doesn't pass so size accordingly (I only have a small position). But it doesn't look like anybody is really interested in picking a fight over this so far. I like that the upside is significant while TSL seems to trade at a somewhat depressed valuation - even if you assign a decent % to things going wrong the odds look in our favour. Also, the buyout group seems to act decisively so far and I can't imagine they do so knowing that Oaktree and Templeton are strongly opposed. AMCN: I have looked at it in the past but it is too shady for me. Lawsuits, failed "attempts" at taking the company private, target of pump and dump schemes, short writeups on SeekingAlpha, making consistent losses, and, while I know Trina Solar at least makes real solar panels I can buy, I don't know what AMCN is doing and whether it is a total fraud or not. I like Chinese mergers as a group but you have to be careful and that one didn't pass the smell test so I didn't spend more time on it. I like my arbs quiet and uncontroversial. Thanks wrister. So the condition for the deal to go through is that they need 2/3 of "the Shares present and voting in person or by proxy". Since nobody has opposed the deal publicly, it's very high probability it'll go through. Link to comment Share on other sites More sharing options...
snow pea Posted November 28, 2016 Share Posted November 28, 2016 Down 8% today on, as far as I can tell, earnings report disappointment. Anyone see anything that I'm missing as a reason for this to have traded down to a now ~25% discount to the deal price? Does the earnings report (which didn't even look that bad to me) weigh negatively on the chances of the deal going through? Curious for any other thoughts on this. Link to comment Share on other sites More sharing options...
writser Posted November 28, 2016 Author Share Posted November 28, 2016 Earnings were out a few days ago. I don't think that has anything to do with it. Twitter is going crazy about a leaked document that supposedly tells us a going private is less likely due to a crackdown on Chinese capital outflows. Link to comment Share on other sites More sharing options...
snow pea Posted November 28, 2016 Share Posted November 28, 2016 I see - thanks! Link to comment Share on other sites More sharing options...
hillfronter83 Posted November 28, 2016 Share Posted November 28, 2016 Earnings were out a few days ago. I don't think that has anything to do with it. Twitter is going crazy about a leaked document that supposedly tells us a going private is less likely due to a crackdown on Chinese capital outflows. This is nothing really new. The Chinese version of the report seems to suggest the added oversight will focus on "capital escape" rather than legitimate transaction. Here is the link: http://www.yicai.com/news/5169245.html If shareholders approve, the deal will probably go through. But it may take longer. Link to comment Share on other sites More sharing options...
writser Posted December 12, 2016 Author Share Posted December 12, 2016 Well, obviously this deal is hairier than the average one. ISS recommends voting in favour but Glass Lewis advises against the merger (they serve roughly 35% of the market). Given that insiders own only 5% of shares outstanding the vote might be close or might even fail to pass. I think the vote of the 'activists' might be crucial, i.e. Oaktree and Templeton. If they think there is value here they might even vote 'no'. Apart from the vote there are the rumours about raising capital and the fact that the PV industry isn't exactly the hottest sector of the moment. I wouldn't call this a done deal. But hey, I'm a numbers guy and 17% upside is large enough for me to mitigate these problems. Also, at a very quick glance the stock doesn't appear to be extremely expensive - I don't expect it to fall 40%+ if the vote fails. Risk/reward seems ok. Nevertheless, to reiterate: just a small position for me. Link to comment Share on other sites More sharing options...
writser Posted December 16, 2016 Author Share Posted December 16, 2016 http://www.prnewswire.com/news-releases/trina-solar-announces-shareholders-vote-to-approve-going-private-transaction-300379667.html Approximately 97.7% of the Company's total outstanding ordinary shares were present in person or by proxy at today's extraordinary general meeting. Of the ordinary shares voted in person or by proxy at the extraordinary general meeting, approximately 97.8% were voted in favor of the proposal to authorize and approve the Merger Agreement, Plan of Merger and any and all transactions contemplated by the Merger Agreement, including the Merger. Not even close! Didn't see that coming. Shares up 10% premarket. Link to comment Share on other sites More sharing options...
writser Posted March 8, 2017 Author Share Posted March 8, 2017 TSL trades up to 11.47 premarket. Looks like some people know the deal is closing soon. Unfortunately I sold out a few weeks ago to make room for (what appeared at the time as) a better opportunity. Result: approximately break-even. Some philosophizing: the difficulty with larger deals such as this one is that you are never quite sure other people in the market have an informational edge over you. In November this trades down 10% on a single day due to some rumors. But with $50m value traded who am I to judge whether some people have more information than I do? I'm just an armchair theorist so I did what I usually do: nothing. Two weeks ago I sold out to buy a much more attractive microcap merger. I think both decisions were fine at the time (though buying a bit more in November would have been defensible) but they make me feel like an idiot. Actelion is a similar situation. Deal looks very attractive but if shares drop or rise sharply I'm not sure whether I have an edge and what I am supposed to do. That's why I keep these positions small even though I think they are on average very decent. I prefer the boring illiquid deals. It is easier to double down when 1000 shares per day are traded. Makes it less likely Steve Cohen is dumping his position in your lap. Link to comment Share on other sites More sharing options...
Jurgis Posted March 8, 2017 Share Posted March 8, 2017 I prefer the boring illiquid deals. It is easier to double down when 1000 shares per day are traded. Makes it less likely Steve Cohen is dumping his position in your lap. OT. But is it really? It won't be Steve Cohen, but possibly some small guy who talked to someone at the company involved. It's not as if SEC is gonna prosecute a case of micro cap insider trading at ~1K shares... OTOH you're right that it's high probability to be generic no-clue retail investor(s) who got tired/spooked/flipped/etc. Link to comment Share on other sites More sharing options...
writser Posted March 8, 2017 Author Share Posted March 8, 2017 I'm not sure either. I perceive my edge to be larger in obscure smallcap mergers but I cannot quantify that. In fact I'm not even sure it is true. Hence my rambling above. Maybe I should be a bit more confident about deals such as this one (or a bit less confident about the smallcap deals). Anyway, I hope that a few readers made some money here. Link to comment Share on other sites More sharing options...
snow pea Posted March 8, 2017 Share Posted March 8, 2017 I did, and I am thankful as usual for your contributions, writser. Link to comment Share on other sites More sharing options...
udravi Posted March 8, 2017 Share Posted March 8, 2017 I did as well. Thank you for the idea. Link to comment Share on other sites More sharing options...
rukawa Posted March 9, 2017 Share Posted March 9, 2017 As did I. I too am greatful. Link to comment Share on other sites More sharing options...
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