BOMN - Boston Omaha Corporation

[thepupil]

is anyone considering shorting this?

 

2.6x BV, 3x TBV for a fee burdened investment vehicle.

 

Biggest risk is accretive issuance / reflexivity, but this is pretty nuts and I tend to want to fade those who read a journal article and buy this.

 

 

 

 

 

[Tim Eriksen]

Bump today from article in WSJ

 

https://www.wsj.com/articles/a-buffett-run-firm-is-on-a-roll-but-warren-has-nothing-to-do-with-it-1513938601

 

Quotes from Alex Bossert and myself.

 

[eclecticvalue]

is anyone considering shorting this?

 

2.6x BV, 3x TBV for a fee burdened investment vehicle.

 

Biggest risk is accretive issuance / reflexivity, but this is pretty nuts and I tend to want to fade those who read a journal article and buy this.

 

I would think this is a good time to issue a lot of shares or make acquisitions via shares. Pull some moves from the Outsiders playbook.

[thepupil]

is anyone considering shorting this?

 

2.6x BV, 3x TBV for a fee burdened investment vehicle.

 

Biggest risk is accretive issuance / reflexivity, but this is pretty nuts and I tend to want to fade those who read a journal article and buy this.

 

I would think this is a good time to issue a lot of shares or make acquisitions via shares. Pull some moves from the Outsiders playbook.

 

I agree. But issue shares to whom?

 

As of now there are 13.3mm shares. Let's say they find buyers for 13mm @ 28 (that's ~$360 million, so far I count about ~$15mm ish of actively managed institutional ownership). So book value goes up by 360 and share count goes up by 13, so there'd be about $509mm of equity and 26mm shares and book value would be ~$19.5, so it'd be at 1.4x pro-forma for something that's 70% cash and still has the fees. That's a pretty expensive SPAC.

 

Akre (who owns $5mm and manages $7.8B) has the firepower to fund this thing ad infinitum, so I'm not saying it won't happen, but it's tough to see.

 

The alternative is to issue stock for assets/companies.

 

So what business owner (that has an affinity for Buffett) is willing to accept stock valued at 2.5x book, 3x tangible book for their life's work?

 

 

 

[stahleyp]

Since these guys have somewhat of a track record for their firms, anyone know what their longer term returns are?

[CorpRaider]

is anyone considering shorting this?

 

2.6x BV, 3x TBV for a fee burdened investment vehicle.

 

Biggest risk is accretive issuance / reflexivity, but this is pretty nuts and I tend to want to fade those who read a journal article and buy this.

 

Yeah, checked to see if any puts traded.  Pair trade with GLRE?

[thepupil]

is anyone considering shorting this?

 

2.6x BV, 3x TBV for a fee burdened investment vehicle.

 

Biggest risk is accretive issuance / reflexivity, but this is pretty nuts and I tend to want to fade those who read a journal article and buy this.

 

Yeah, checked to see if any puts traded.  Pair trade with GLRE?

 

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/audit/us-audit-pitchbook-2016-annual-us-pe-middle-market-report.pdf

 

In 2016, 748 lower middle market ($25-$100mm EV) private equity deals closed, with a total deal value of $36 billion.

 

0% of those were run by Buffett's grandnephew, but LP's also only paid NAV* for them.

 

*and 2% on committed capital & 20 over a pref. BOMN has a lower fee structure than PE (assuming corporate overhead is lower than PE's management fee).

[Jurgis]

Anyone has full WSJ article?

[CorpRaider]

https://www.bloomberg.com/news/articles/2017-12-27/buffett-grandnephew-skirts-comparisons-beats-the-market-anyway

[bskptkl]

Since these guys have somewhat of a track record for their firms, anyone know what their longer term returns are?

This is a comment on VIC from chewy:

 

"I spent some time searching and found Magnolia Group's 2013 letter.  Historical net returns:

 

2005: +2.1%

 

2006: +24.0%

 

2007: +27.5%

 

2008: -28.3%

 

2009: +58.4%

 

2010: +15.7%

 

2011: +2.4%

 

2012: +21.4%

 

2013: +33.0%

 

If anyone has 2014-current returns I'd be interested to see them.

 

 

 

So basically Magnolia doesn't short and Peterson's returns have matched the market with the exception of 2007 and 2009 where he outperformed by about +25% in each year.  So a reasonable track record, but certainly not a track record that should cause investors to compare him to the slightly more famous Buffett."

[AzCactus]

This one is getting a hell of a lot more attractive in my view. 

[narsai]

This one is getting a hell of a lot more attractive in my view.

 

Especially with ~$7 per share of cash. I like the balance sheet and the synergy of the businesses. Their operational costs do seem high though.

 

What's a fair value?

[Shane]

I am bothered by the 20% fee structure.  What is the normal ROE of a US business?  12%?  These guys get a 20% incentive fee on half of this return without even approaching being exceptional.

[EricSchleien]

Does anyone have any insight into Alex's connection with Bexil: https://www.businesswire.com/news/home/20131218006268/en/Bexil-American-Mortgage-Announces-Strategic-Partnership-Big

 

The Winmill family has always seemed super sketchy to me...

[CorpRaider]

Wow, I suppose that I am missing something.  I thought the shelf registration was smart issuance of stock way above book, apropos of an "outsider."  It even walked through the dilution to the purchaser, but this announces they are purchasing $150MM of the $200MM via LPs they manage (the other $50 is being offered at the market by Cowen).

 

http://www.bostonomaha.com/documents/101/c0242e4865a5dedc06c6672a4b8a7ad1.pdf

[thepupil]

Alex "Gandhi" Rozek: Be the accretive issuance you wish to see in the world.

[Jurgis]

These kind of transactions are tough to pull off without leaving some kind of crappy taste afterwards. Is it really fair for both sides? How can you determine?

 

OTOH, maybe its less fair for the LP investors and maybe BOMN shareholders can just be happy about it.  8)

[mwtorock]

finally got time to read 2017 10k. They added cap to incentive payout and also added high watermark. Decent. I have just a tracking position, but probably will add.

 

 

[Jurgis]

Boston Omaha Corporation Announces $19 Million Equity Investment in CB&T Holding Corporation

http://www.bostonomaha.com/documents/132/11822710cf900b5a6cb7e97751cbcb60.pdf

 

What's with the companies run by hedge fund guys... they just can't resist investing into ten different businesses and building conglomerates. (Yeah, I won't mention names, but you know some others like that on CoBF  ::) ). I thought BOMN at least will be in 2 business areas, but nooooo they just have to do more side deals...  ::)

[Spekulatius]

Car lending in Louisiana. Ouch. One can only hope that they know what they are doing.

[Jurgis]

Backyard of globalfinancepartners IIRC. Maybe he'll chime in with some local taste.  8) (Yeah, that food.  ::) )

[gfp]

Yeah I saw that press release but I've never heard of the company they invested in.  I looked it up online and the google reviews cracked me up.  Sounds like  they do car loans for people with horrible credit (who also happen to not be awesome at spelling).  I know a hard money lender in town that deals with these type of customers  (he inherited the lending company from his family, office is behind bullet proof glass..) - what a miserable way to make a living.

 

Backyard of globalfinancepartners IIRC. Maybe he'll chime in with some local taste.  8) (Yeah, that food.  ::) )

[CorpRaider]

I looked at it too. Seems like a tiny community bank engaged in subprime car lending nationally via dealers.  I don't get it.

[Jurgis]

Yeah I saw that press release but I've never heard of the company they invested in.  I looked it up online and the google reviews cracked me up.  Sounds like  they do car loans for people with horrible credit (who also happen to not be awesome at spelling).  I know a hard money lender in town that deals with these type of customers  (he inherited the lending company from his family, office is behind bullet proof glass..) - what a miserable way to make a living.

 

Backyard of globalfinancepartners IIRC. Maybe he'll chime in with some local taste.  8) (Yeah, that food.  ::) )

 

Thanks.  8)

[oddballstocks]

Interesting that they purchased 14.99%. You need regulatory approval to go over 9.99%.  So they received approval, yet stopped at 14.99%?  Why not buy the entire thing, or 51% giving them a controlling stake.

 

Subprime auto can be done right, usually if you have a loan loss reserve of 15-20%.  The thing with subprime auto lending is defaults are almost universally high (10%+), but it's constant, they don't go higher in a crisis, they're just high all the time.  If you assume and price that in from the start it can be an ok business.

 

I see the attraction here.  You pay 1% on deposits and lend at 15% for a 14% gross spread, you reserve 20% of that for a 11% spread before expenses.  Call centers are cheap, they're probably grinding through hundreds of people who are paid $12/hr to provide poor customer service.  ROA could be 4-5%, which when levered is crazy.

 

If offered the opportunity to make 15% by running a check cashing place in a dumpy neighborhood, or 9% running an upstanding business in a respectable area I'd probably take the 9%.  But then again I'm not out to squeeze every nickel either.  There are scummy businesses that earn high returns, but it doesn't necessarily mean it's a great investment.  Scummy businesses attract different sets of problems, usually the personnel attracted to them aren't as trustworthy and aren't as reliable.

 

But hey, if these guys want to do a fantastic rollup they could go all-in on liquor stores in poor areas, check cashing, payday lending, subprime autos, strip clubs, and barely legal back room bar gambling operations.  If all that matters is making money then this is the route to go, the returns are great!