BOMN - Boston Omaha Corporation

[rmeurer]

WEB's great nephew just went public.....Boston Omaha Corporation (BOMN). Could this be BRK in 1965?

 

Look how he thinks and writes:

 

http://www.bostonomaha.com/documents/51/ed7ffdd5e40f3cc0ee01...

 

 

Multibagger?

[rmeurer]

Better Link:

 

http://www.bostonomaha.com/documents/51/ed7ffdd5e40f3cc0ee01dcbd7ab9df34.pdf

[paperwerks]

Like the company, subsidiaries and the way he thinks, but not at twice book value and with negative cash flow.

 

[scorpioncapital]

My experience is that great investors are unique. When I see 'words' that resemble words of some other famous 'partnership' I'm a little weary. Imitation is the finest form of flattery but one has to be careful to conclude the results would be the same. But if he is a genius, then even above the offering price would turn out to be cheap. What's the plan here? Buy 10 shares and hope it goes from $13 to $250,000 in 40 years :)

 

[Guest longinvestor]

Like the company, subsidiaries and the way he thinks, but not at twice book value and with negative cash flow.

 

Funny how the market works, with no cash flow and 2xBV while at Omaha there the whole world worries about BRK's "what the hell are we going to do with all that cash?" and stay in range of 1.xx BV!

 

Move over uncle and old economy, it's the nephews' world order. It is about the future and all that.

[Dustin T]

I'll be curious what comments Great uncle Warren will make on this, he's sure to be asked eventually. My gut feeling is that if he is just another of thousands of people who attempt to emulate his uncle on a large scale or a small. He's got a big marketing edge and it's possible Great uncle Warren answers his phone calls and gives him advice.

 

The first is a reason not to invest, it'll just drive the price up beyond it's true value. Probably already has.

 

The second would be truly invaluable, Warren's generic advice is available to all but being able to bounce specific ideas off of his great uncle would accelerate anyone's learning. If it's coupled with the prerequisite intelligence, drive and ethics it would make it worth watching.

 

I wish him luck, my own great uncle bought me my first stock and had a huge role in my interest in investing.

 

Thank you HAL

 

 

[skanjete]

Interesting.

Apparently, the CEO's get a bonus of 20% of equity growth above 6% a year.

 

hmm.

 

 

[rmeurer]

From Cowen report on BOMN:

 

Conservatively Capitalized With $150mm of Cash Equity ($100mm from the Principals)

 

Co-Chairmen Alex Rozek and Adam Peterson (the "Principals") have taken the concept of "insider buying" to a new level, as entities they control have invested over $100 million of cash equity or two-thirds of total paid-in capital. The company hasn't taken on any debt, and we expect the conservative stance toward financial leverage will remain for some time.

[oddballstocks]

I'll be curious what comments Great uncle Warren will make on this, he's sure to be asked eventually. My gut feeling is that if he is just another of thousands of people who attempt to emulate his uncle on a large scale or a small. He's got a big marketing edge and it's possible Great uncle Warren answers his phone calls and gives him advice.

 

The first is a reason not to invest, it'll just drive the price up beyond it's true value. Probably already has.

 

The second would be truly invaluable, Warren's generic advice is available to all but being able to bounce specific ideas off of his great uncle would accelerate anyone's learning. If it's coupled with the prerequisite intelligence, drive and ethics it would make it worth watching.

 

I wish him luck, my own great uncle bought me my first stock and had a huge roll in my interest in investing.

 

Thank you HAL

 

Yes, he's clearly playing on the branding.  I believe WEB provided all of the seed capital.  So he's aware of it and somewhat engaged.

 

Have heard through the grapevine that Alex is smart and would do well on his own.  Don't know him, so time will be the ultimate judge.

[rmeurer]

COVER OF COWEN REPORT

 

We begin coverage today on Boston Omaha, a company created to acquire great businesses and hold them for the long term. Fresh off an $85 million equity raise,

we expect rapid growth as capital is deployed at an accelerating rate. The shares could double in value by the end of 2020, in our opinion, suggesting 20-25% IRRs are possible.

Link Media: Attractive Billboard Rollup Strategy

 

Through its Link Media subsidiary, Boston Omaha is rolling up sub-scale billboard operators in smaller markets where competition - to buy and to operate - is generally less intense. It's a $4.4 billion market opportunity with solid underlying growth and high contribution margins. We estimate Link is generally buying assets for 7-10x trailing pre-synergy EBITDA or 5-7x pro forma EBITDA; public pure-play outdoor advertisers trade at 12-14x Adj. EBITDA. Link could be worth $180-210 million or $14-15 per share, in our opinion, by the end of our projection period. See financial model beginning on p. 14 for details.

General Indemnity Group: Attractive Surety Underwriting Strategy

 

Through its GIG subsidiary, Boston Omaha seeks to become a significant player in

the $6 billion market (premiums in 2016) for underwriting commercial surety. This attractive niche is characterized by relatively low loss ratios yet given its size is below the radar of most large underwriters. The company's recently acquired United Casualty & Surety Insurance Company ("UC&S") last year underwrote $2.3 million of premiums in Massachusetts alone, earning it a 1.3% state-wide market share. Loss ratio at

this A- ("Excellent") AM Best-rated underwriter was below one percent in each of

the past three years and has averaged roughly one percent throughout its 28-year history. The company is rapidly gaining regulatory approval to operate in all fifty states, which should lead to significant organic growth, in our opinion. GIG could be worth $100 million or more - roughly $8 per share - by the end of our projection period. See financial model on p. 15 for details.

Conservatively Capitalized With $150mm of Cash Equity ($100mm from the Principals)

 

Co-Chairmen Alex Rozek and Adam Peterson (the "Principals") have taken the concept of "insider buying" to a new level, as entities they control have invested over $100 million of cash equity or two-thirds of total paid-in capital. The company hasn't taken on any debt, and we expect the conservative stance toward financial leverage will remain for some time.

Talented Operational Team in Place

 

The Principals have installed talented management, most notably from our perspective Jim McLaughlin who was recently hired to run the company's billboard operations. McLaughlin has spent most of his career consolidating the billboard industry on behalf of private-equity backed companies including Olympus Media (CEO from Jun-04 to Jun-12) and Signal Outdoor (CEO from Oct-13 to Oct-16).

[eclecticvalue]

Darn, now the cat is out of the bag.

[Munger_Disciple]

Apparently, the CEO's get a bonus of 20% of equity growth above 6% a year.

 

This sounds like Biglari, not Buffett. Plus, the mere act of issuing shares well above book will trigger the bonus.

[valuedontlie]

Apparently, the CEO's get a bonus of 20% of equity growth above 6% a year.

 

This sounds like Biglari, not Buffett. Plus, the mere act of issuing shares well above book will trigger the bonus.

 

It's pegged to equity growth from retained earnings and strips out impact from share issuance/retirement. Intended to reflect business performance in isolation.

[Munger_Disciple]

It's pegged to equity growth from retained earnings and strips out impact from share issuance/retirement. Intended to reflect business performance in isolation.

 

Yes, you are right. Still too rich for my taste. Not very Berkshire like.

[matts]

Apparently, the CEO's get a bonus of 20% of equity growth above 6% a year.

 

This sounds like Biglari, not Buffett. Plus, the mere act of issuing shares well above book will trigger the bonus.

 

The bonus is based on adjusted equity, so issuing shares will not benefit them directly. Share repurchases are also ignored in the bonus calculation, which is interesting. 

 

 

[rmeurer]

They are currently paying themselves minimum wage....you read that correctly.

 

The 2 principals have $100m of their own money at stake....The market cap is around $170m

[John Hjorth]

I suggest my fellow board members to start a separate topic in the investment idea forum about this company. This forum on the CoBF board is for Berkshire, and all its Berkaholics.

[Jurgis]

Or Sanjeev can move this thread to "Investment Ideas" and rename using ticker/name.

[Partner24]

20% above 6% IRR?

 

I'll pass this one.

 

 

[John Hjorth]

Or Sanjeev can move this thread to "Investment Ideas" and rename using ticker/name.

 

I have now asked Sanjeev to do the move. Thank you, Jurgis.

[tede02]

The 2 principals have $100m of their own money at stake....The market cap is around $170m

 

Just curious where this figure is coming from?  Contributed capital is only around $67m and much of that I presume came from ouside shareholders, no?

[Munger_Disciple]

They are currently paying themselves minimum wage....you read that correctly.

 

The 2 principals have $100m of their own money at stake....The market cap is around $170m

 

I think this is not completely accurate. First, the prospectus says their pay is an annualized $275K but is temporarily lower until Dec 2017. Second, the two Co-CEOs are investment managers of two funds. So my guess is that the limited partners in those funds own most of the capital invested in the company. I am also guessing that the CEO pay is temporarily lower perhaps because they are already getting management fees from their funds. But we don't know for sure.

 

I will pass based on the incentive arrangement which I think is too high for a company with public shareholders. 

[rmeurer]

FROM COWEN REPORT:

 

"Conservatively Capitalized With $150mm of Cash Equity ($100mm from the Principals). Entities controlled by Alex Rozek

and Adam Peterson (the "Principals") had already provided $55 million of the the company's $67 million of paid-in equity capital

before investing an additional $47.5 million alongside the public in the most-recent equity offering. The company hasn't taken on

any debt. Billboards are "leverable", but we expect management to maintain a conservative stance toward its balance sheet."

[Foreign Tuffett]

They are currently paying themselves minimum wage....you read that correctly.

 

The 2 principals have $100m of their own money at stake....The market cap is around $170m

 

I think this is not completely accurate. First, the prospectus says their pay is an annualized $275K but is temporarily lower until Dec 2017. Second, the two Co-CEOs are investment managers of two funds. So my guess is that the limited partners in those funds own most of the capital invested in the company. I am also guessing that the CEO pay is temporarily lower perhaps because they are already getting management fees from their funds. But we don't know for sure.

 

I will pass based on the incentive arrangement which I think is too high for a company with public shareholders.

 

I'm with you that the incentive fee makes this a pass. I would have to really, really, really like the management and strategy to invest in a situation like this where you're entrusting management to "build" a business from the ground up even as they take a decent chunk of the possible upside.

[CorpRaider]

Who is the other guy?  The Peterson guy, from Omaha.  Anyone have any background info on him?  Seems like he put up most of the capital.  Relative of Chuck Peterson?  I'm not finding a lot.  Thanks in advance.