FRMO - FRMO Corp.

[jwfm1985]

Any idea on when PSP will start trading? Was going to be late December I believe but don't see any update...

[rijk]

looks like it's trading

 

regards

rijk

 

http://investing.money.msn.com/investments/stock-price?symbol=GB%3aPAH

[jwfm1985]

looks like it's trading

 

regards

rijk

 

http://investing.money.msn.com/investments/stock-price?symbol=GB%3aPAH

 

That was the vehicle they used to find and fund the deal, which I believe has since stopped trading on the london exchange. The new company will be called Platform Specialty Products and trade on the NYSE...

[Sportgamma]

I believe they got a Notice of Effectiveness yesterday

 

http://www.sec.gov/Archives/edgar/data/1590714/999999999514000173/xslEFFECTX01/primary_doc.xml

[matts]

It began trading today as PAH on the NYSE

 

[Sportgamma]

Regarding indexation:

 

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1769220

 

Abstract:     

Over the past 20 years, a trend toward index fund investing has emerged. Currently, more mutual fund assets are indexed to the S&P 500 than any other index. Prior research on downward-sloping demand curves suggests that widespread acceptance of S&P 500 index investing may push prices of companies in the S&P 500 beyond fundamental values. This paper explores the impact of flows into S&P 500 index funds on corporate valuations. The results show that money flow into S&P 500 index funds is inflating the values of companies in the index relative to those outside of the index.

[Sportgamma]

In the last 5 months of 2013 total AUM at HK grew 11.5% with most of the growth coming from the mutual funds (23.5%). Total AUM is now $9.7B

[Dustin T]

My notes/thoughts on the conf. call.

 

Company has essentially no debt as almost all of the liabilities are due to deferred tax liabilities related to as yet unrealized capital gains.

 

They are now the largest holder of seats on the Minneapolis grain exchange. This sits 3 blocks from the old Metrodome and may have some real estate value.

 

They aren’t interested in going into the insurance business, because of its capital intensive nature as well as the year to year unpredictability. Really like the scalability of indexes and index funds. I think they will certainly try to create more products in this arena and their success will be tied to their ability to create useful indexes and perhaps more importantly to sell them.

 

All the questions were asked by private investors, this is still a low key operation below the radar of virtually all full time professional analysts. Made for in my opinion a more enjoyable conference call, the questions I usually hear for bigger companies make me half think the analysts are just trying to fill blanks on a spreadsheet.

 

[WideMoat]

Also... from yesterday's CC.

 

They will launch a fourth index product for emerging markets, likely within the next 60 days.  It will begin as an LP, managed by Horizon Kinetics.

[giofranchi]

February 2014 Commentary

 

 

Gio

Feb_2014_Commentary_FINAL.pdf

[giofranchi]

March 2014 Commentary

 

 

Gio

Mar_2014_Commentary_FINAL.pdf

[Dustin T]

http://www.forbes.com/sites/briansolomon/2014/03/26/meet-the-internet-fund-avoiding-facebook-twitter-the-rest-of-bubble-2-0/

 

Article on Peter Doyle V.P. of FRMO

[zuokk]

http://www.otcmarkets.com/financialReportViewer?symbol=FRMO&id=118751

 

FRMO reported Q3 earlier.

[Sportgamma]

http://www.otcmarkets.com/financialReportViewer?symbol=FRMO&id=118751

 

FRMO reported Q3 earlier.

 

Thanks.

 

Trying to figure out the nature of loss from the from investment partnerships in the income statement. Since its on the income statement, I´m guessing its realized. Additionally, since all the investment partnerships are showing higher cost basis and higher unrealized gains, I´m guessing they realized losses on individual positions held within the partnerships. Correct?

 

Also found this interesting:

 

11. Subsequent Event

On February 25, 2014, FRMO made an offer to the members of the Bermuda Stock Exchange (“BSX”) to acquire up to a maximum of 575,265 shares, or 42.77% of total BSX shares issued and outstanding, at a price of $4.50 per share plus applicable stamp duty. The offer expired on March 31, 2014 and resulted in subscriptions for 509,114 shares (37.57%) for a total consideration of $2,370,515 (including Bermuda Stamp Duty of $79,502). The Bermuda Monetary Authority approved the transaction on April 11, 2014. The transaction is expected to be consummated on April 15, 2014.

 

[Dustin T]

FRMO news release about the Berumuda stock exchange investment.

 

http://www.frmocorp.com/_content/statements/FRMO_NEWS_RELEASE_20140416.pdf

 

I look forward to hearing what Murray has to say about it in the conf. call

[giofranchi]

Q1 2014 Commentary

 

 

Gio

Q1_2014_Commentary.pdf

[giofranchi]

May 2014 Commentary

 

 

Gio

May_2014_Commentary_FINAL.pdf

[Sportgamma]

I must admit that I have a serious investment-crush in these guys...

 

The last item, which is tiny in fact but may be more significant in character, is a new line item in our income statement. It did not make it into our published financial results, but we’ll get it in next time, unless the accountants have some objection. The item is an $800 bit of income for this most recent quarter and another one for the prior quarter. For the six months, there is $1,600 of income showing under an account we call ‘Board and Other External Fees.’ Maybe this will lead into one of Murray’s discussions. Those relate to directors’ fees that actually are due Mr. Stahl for his being a member of the board of the Minneapolis Grain Exchange.

With exchanges, a corporation very often can’t actually own seats or, in this case, memberships. So, even though we might think of FRMO, for instance, as owning memberships, they must be held in an individual’s name. So, I believe that the Minneapolis Grain Exchange memberships are actually in Mr. Stahl’s name. As a member of the board, he does get emoluments, as they call it. But he has disclaimed those and prefers that and believes that they should accrue, at least in part, to the benefit of FRMO Corp. So, I hope we’ll see that line item actually on the published financial statements next time. And now I’ll turn the discussion over to Murray.

 

 

 

In the Securities Sold, Not Yet Purchased category—which technically is a liability, although we look at it a little bit differently—in February 2014, we have $5.6 million of proceeds from securities sold short, with a market value of $2.1 million. A year ago, we had $4.6 million of proceeds. And we had a $2.2 million, closer to $2.3 million, market value. So, we sold short roughly $1 million worth of securities, and the market value declined by that $1 million and another $140,000 on top of that.

 

If you look at the denominator, which of course is the market value of the securities sold short, on February 2013, which is a little bit less than $2.3 million, that is actually a very big rate of return, which actually leads me into strategic items, which is why I bring it up. There is no magic there. All we’re doing is selling short various of the so-called path-dependent—or dysfunctional as I call them—indexes and exchange traded funds. The academic term is ‘path-dependent,’ which I’ll define momentarily, but the word I us is ‘dysfunctional.’

 

 

One product is the Virtus Wealth Masters Fund, which now, as of the most recent reckoning, has about $121 million in it. That is one of those instruments.

 

...

 

I think the results of the Virtus Wealth Masters Fund speak for themselves, and I’m very enthusiastic about it. I talked about it last time. I don’t want to go into too much detail about it now unless it comes up in the Q&A, because I want to move on to other interesting items, but I have very high hopes for that fund.

 

 

 

Another is that not very many days ago, we announced that we took a big interest in the Bermuda Stock Exchange. Again, we can’t promise you anything. However, if we are able to accomplish something like a new type of security or a new type of fund to trade on that exchange, the following arithmetic attributes would apply. The Bermuda Stock Exchange, at the valuation that we transacted in it, has a market capitalization of all of $6 million.

Someone once asked me, “What is the point of going after ‘the peewee exchanges’?” My answer is that if you create something, the return you get, to some degree, is a function of the denominator, in other words, how much money you need to invest in it. As to the numerator, the product is going to do whatever it is going to do; it would do the same thing if it were part of a bigger exchange. However, if the denominator is small enough—the idea is to get the maximum operating leverage by having the minimal investment necessary to secure a place in that instrumentality.

Another point that you might not realize is that Bermuda has no corporate income tax. Again, we can’t promise anything, but in the event that they are able to accomplish something, the profits would accrue to the Bermuda Stock Exchange, the corporation, and would basically accrue tax-free. That is a way of meaningfully increasing your after-tax rate of return.

 

We don’t need to have $1 billion of cash on the balance sheet or anything like that. We’d like to make our cash work for us, but in no sense are we interested in deteriorating the balance sheet whatsoever. I like the balance sheet we have; I think it is a fabulous balance sheet. We’d like to make it bigger and we’d like to make it better. There will be a diversity of investments, and they’ll have the common theme of an idea. Intellectual capital, given the scale of investment, can have a lot of operational gearing.

 

 

 

To use the stock as a currency for future acquisitions, let me put it this way: you know what I own of the company. At the moment, given our valuation, I’m not in the mood to dilute myself at all, not even a hundredth of a basis point. I just don’t want to do it. Maybe that tells you something about what I think of the company, but I don’t wish to use it as a currency at the current stock price.

 

 

[Dustin T]

Murray Stahl is a favorite of mine as well, I learn more from his calls and market research then I do from most anywhere else. So much room to grow too, if only the price would improve. Though that last quote you included does hint that he does not think the stock is overvalued yet.

[Guest ajc]

 

FRMO Corp Q3 2014 Conference Call Transcript

 

http://www.frmocorp.com/_content/letters/2014_Q3_FRMO_Transcript.pdf

 

 

 

[giofranchi]

 

FRMO Corp Q3 2014 Conference Call Transcript

 

http://www.frmocorp.com/_content/letters/2014_Q3_FRMO_Transcript.pdf

 

Yeah! Thank you! :)

 

Steven Bregman – President & Chief Financial Officer

 

The closest I can come to it—and it is a pale comparison; it really is not as good—to demonstrate that the 4%-odd revenue share is extremely valuable, is to compare it to a royalty. It is a royalty, basically, not subject to manipulation or added expenses. The closest I can come to it, off the top of my head, is the burger joints, the chains, like Burger King Worldwide and Wendy’s and McDonald’s and so forth. They have a mix, even if it is lopsided, of company-owned restaurants and franchise restaurants.

 

And mostly they try to get the maximum ratio they can of franchise restaurants because, in the franchise restaurants, the parent company, the corporation, only gets about a 4%—call it a franchise royalty—from the franchisees. But their operating margin on that is 80%. And on the company-owned restaurants, where they actually have to own something and manage it and pay salaries and expenses and rent and so forth, they have about a 20% margin. So, the value of anything that approaches a royalty is really very high.

 

The same imo is true both for BH and for ALS.

 

Gio

[giofranchi]

Q2 2014 Commentary

 

 

Gio

July2014Commentary_FINAL.pdf

[ItsAValueTrap]

 

FRMO Corp Q3 2014 Conference Call Transcript

 

http://www.frmocorp.com/_content/letters/2014_Q3_FRMO_Transcript.pdf

 

Yeah! Thank you! :)

 

Steven Bregman – President & Chief Financial Officer

 

The closest I can come to it—and it is a pale comparison; it really is not as good—to demonstrate that the 4%-odd revenue share is extremely valuable, is to compare it to a royalty. It is a royalty, basically, not subject to manipulation or added expenses. The closest I can come to it, off the top of my head, is the burger joints, the chains, like Burger King Worldwide and Wendy’s and McDonald’s and so forth. They have a mix, even if it is lopsided, of company-owned restaurants and franchise restaurants.

 

And mostly they try to get the maximum ratio they can of franchise restaurants because, in the franchise restaurants, the parent company, the corporation, only gets about a 4%—call it a franchise royalty—from the franchisees. But their operating margin on that is 80%. And on the company-owned restaurants, where they actually have to own something and manage it and pay salaries and expenses and rent and so forth, they have about a 20% margin. So, the value of anything that approaches a royalty is really very high.

 

The same imo is true both for BH and for ALS.

 

Gio

 

Some companies intentionally buy back their franchisees.  Lululemon is an example.  See's Candies has avoided franchising as well as Chipotle Mexican Grill (which was spun off from McDonald's).

[giofranchi]

Some companies intentionally buy back their franchisees.  Lululemon is an example.  See's Candies has avoided franchising as well as Chipotle Mexican Grill (which was spun off from McDonald's).

 

Well… It was Mr. Buffett who said “a franchise is the best business”… not Mr. Bregman, nor certainly me… I have sometimes disagreed with Mr. Buffett’s view on business matters… and I have always been wrong! ;)

 

Gio

 

[giofranchi]

Alternatively, one can invest in non-REIT real estate companies, particularly those that own land. There exist a number of publicly traded companies that own mostly or only undeveloped or partially developed land. For the following reasons, they can be a very interesting diversification element within a portfolio.

 

First, development activities are site-specific and occur on a reasonably unsystematic basis. There are zoning factors and engineering plans to consider, as well as the economy of the given neighborhood, changes in the demographic nature of the given city or neighborhood, and so on. Many of these circumstances are often unrelated to the overall economy.

 

Second, land’s value is heavily dependent upon the type of development activity pursued. When a developer repurposes an existing building, more often than not that developer can create considerable value just by assigning a new use to the property.

 

The third point is that it is impossible to accurately value any of these situations, because one would need to know the specific development activity imagined by the developer; the developer could be considering many options and might not yet have even arrived at a conclusion. Much of what is going to happen in the future cannot be in the price of the shares.

 

Fourth, once there has been a development announcement, there is usually a very specific timetable, which removes considerable uncertainty. The return, such as it is, occurs in a very brief time period because, once the development is announced, the slope of the equity yield curve (which reflects the time and value-catalyst expectations of investors) changes completely.

 

...

 

There is a further logic to the discount applied to land companies. Even if outside shareholders were to agitate for such a company to liquidate its holdings and pay out the proceeds, management could probably not get much for those properties, for the very reasons mentioned above. In truth, the shares are probably priced near enough to effective liquidation value. But that liquidation value embodies an enormous (equity yield curve-based) discount, because after a suitable period of time, once a strategic plan is put in place, followed by the appropriate legal and zoning allowances, followed by actual development, the value creation potential can be very large.

--Page 8 July 2014 Commentary

 

Although that refers mainly to real estate developments, the very same “logic to the discount applied to land companies” might have benefitted ALS, when its purchase of the whole CDP was recently closed.

 

Gio