FCAU - Fiat Chrysler Automobiles

[Phaceliacapital]

You only have cash exit rights if you voted against the merger. The majority voted pro the merger, but if those that voted against exercise their rights and the amount to be paid exceeds 500 mil the merger will be postponed.

 

The stock is being played by ST event driven funds and it might even lead to a postponement of the merger. If these guys went short before the merger it is in their interest to keep the stock as low as possible because those people that voted against might be convinced into exercising their rights (if they initially didn't plan to) when they see the price drop like this. If the stock is already this volatile, can you imagine what happens if they announce the merger is postponed? That's going to be ugly :) Most people see the financial press reporting very superficially and picking up all the rumors but none of the facts (surprise surprise).

 

Just keep in mind that, operationalwise it's already in the bag, legalwise (like you read above) not yet and this is what causes the confusion (+the point that the Morningstar analyst mentions). The volatility will be significant in the next few weeks, so if you're interested, pick up the shares while you still can, LT this stock goes to EUR 12 or more.

 

 

[tombgrt]

Yes I read that transcript, thank you for posting it and your information above. :)

 

 

I missed the first train upwards but feel it is a safer bet now, bought a small position. Classic case of misunderstanding/overreaction.

[peter1234]

I actually think Fiat could have done a much better job communicating the merger mechanics with some simple FAQs.

 

Marchionne does not care about market gyrations and is focused on Operations and the long term.

 

That is the right thing to do, but at a certain point, there is some reflexivity creeping back into the company, especially one that is so dependent on the debt markets.

 

;)

[Ian L]

If this merger fails, then I believe next time people will be more aware of the put options, so more likely to vote against the merger.

[Phaceliacapital]

Yes I read that transcript, thank you for posting it and your information above. :)

 

 

I missed the first train upwards but feel it is a safer bet now, bought a small position. Classic case of misunderstanding/overreaction.

 

Sorted out your IB problem?

 

And Peter, http://www.sec.gov/Archives/edgar/data/1605484/000089183614000090/sc0059.htm

 

it's an entire Q&A file.. And do note that every recent Fiat debt issuance has been oversubscribed multiple times...

 

That being said, maybe Sergio himself wanted to buy cheap ;-)

 

 

[tombgrt]

Yeah, I didn't cross the option to trade on the Italian stock market on my permissions. :)

 

Should have bought more! ;)

[peter1234]

Yes I read that transcript, thank you for posting it and your information above. :)

 

 

I missed the first train upwards but feel it is a safer bet now, bought a small position. Classic case of misunderstanding/overreaction.

 

Sorted out your IB problem?

 

And Peter, http://www.sec.gov/Archives/edgar/data/1605484/000089183614000090/sc0059.htm

 

it's an entire Q&A file.. And do note that every recent Fiat debt issuance has been oversubscribed multiple times...

 

That being said, maybe Sergio himself wanted to buy cheap ;-)

 

Thanks, much appreciated. Did not realize that they (finally) posted this just before the meeting. Was looking for it earlier but could not find it.

;)

[Phaceliacapital]

You're welcome!

[jay21]

You only have cash exit rights if you voted against the merger. The majority voted pro the merger, but if those that voted against exercise their rights and the amount to be paid exceeds 500 mil the merger will be postponed.

 

The stock is being played by ST event driven funds and it might even lead to a postponement of the merger. If these guys went short before the merger it is in their interest to keep the stock as low as possible because those people that voted against might be convinced into exercising their rights (if they initially didn't plan to) when they see the price drop like this. If the stock is already this volatile, can you imagine what happens if they announce the merger is postponed? That's going to be ugly :) Most people see the financial press reporting very superficially and picking up all the rumors but none of the facts (surprise surprise).

 

Just keep in mind that, operationalwise it's already in the bag, legalwise (like you read above) not yet and this is what causes the confusion (+the point that the Morningstar analyst mentions). The volatility will be significant in the next few weeks, so if you're interested, pick up the shares while you still can, LT this stock goes to EUR 12 or more.

 

 

 

Thanks.  Your posts have been very helpful.

[gokou3]

Just dipped into a position today.  I missed it the first time around (too busy reading about BAC/AIG, which I am still keeping).  Thanks to the board for the valuable posts again.

[Avyalake]

Norway's wealth fund voted against Fiat-Chrysler merger

 

http://www.reuters.com/article/2014/08/07/fiatchrysler-investor-idUSL6N0QD43W20140807

 

Norway's sovereign wealth fund was the single largest shareholder to vote against Italian carmaker Fiat's merger with its U.S. unit Chrysler, according to minutes of the Aug. 1 shareholder meeting.

 

However,

A filing by Italian stock market watchdog Consob showed this week that Norges Bank had cut its stake in Fiat to 1.338 percent on July 31, a day before the shareholder meeting.

 

Implying at least 1.2% of the No votes won't have the cash exit rights.

 

Also, went through the AGM minutes here :http://www.fiatspa.com/en-US/investor_relations/shareholders/FiatDocuments/FIAT_verbale_straordinaria_ENG_con_allegati.pdf

 

Check out Mohnish's stake and of course he voted for the merger.

[muscleman]

Norway's wealth fund voted against Fiat-Chrysler merger

 

http://www.reuters.com/article/2014/08/07/fiatchrysler-investor-idUSL6N0QD43W20140807

 

Norway's sovereign wealth fund was the single largest shareholder to vote against Italian carmaker Fiat's merger with its U.S. unit Chrysler, according to minutes of the Aug. 1 shareholder meeting.

 

However,

A filing by Italian stock market watchdog Consob showed this week that Norges Bank had cut its stake in Fiat to 1.338 percent on July 31, a day before the shareholder meeting.

 

Implying at least 1.2% of the No votes won't have the cash exit rights.

 

Also, went through the AGM minutes here :http://www.fiatspa.com/en-US/investor_relations/shareholders/FiatDocuments/FIAT_verbale_straordinaria_ENG_con_allegati.pdf

 

Check out Mohnish's stake and of course he voted for the merger.

 

Pabrai has 12 M shares, which is worth $100 M. I thought his fund size is only $300 mn and he said in a video that he won't put more than 10% into a single stock. Has he changed his mind?

 

Again, the media is trying to swap concepts. "vote against Italian carmaker Fiat's merger with its U.S. unit Chrysler". This gives people the impression that if the merger fails, Fiat and Chrysler will be separate companies.

[phil_Buffett]

Muscleman i think mohnish has right now almost 700mio and his average price in fiat shares is around 3,4€ :D so he has already big yield and less then 10% of his assets in it

[sleepydragon]

Norway's wealth fund voted against Fiat-Chrysler merger

 

http://www.reuters.com/article/2014/08/07/fiatchrysler-investor-idUSL6N0QD43W20140807

 

Norway's sovereign wealth fund was the single largest shareholder to vote against Italian carmaker Fiat's merger with its U.S. unit Chrysler, according to minutes of the Aug. 1 shareholder meeting.

 

However,

A filing by Italian stock market watchdog Consob showed this week that Norges Bank had cut its stake in Fiat to 1.338 percent on July 31, a day before the shareholder meeting.

 

Implying at least 1.2% of the No votes won't have the cash exit rights.

 

Also, went through the AGM minutes here :http://www.fiatspa.com/en-US/investor_relations/shareholders/FiatDocuments/FIAT_verbale_straordinaria_ENG_con_allegati.pdf

 

Check out Mohnish's stake and of course he voted for the merger.

 

Thanks for the AGM minutes. Some of the interesting quotes:

 

"He .. was convinced that in the future, thanks to Mr. MARCHIONNE, everything would go smoothly. He thus advised the CEO to stop smoking, in order to avoid negative consequences for his health, as had already happened to many of his friends, because the company needed him for the next ten years."

 

CEO responded to Antonio VIALE that:

 

"the €500 million limit on the exercise of cash exit rights can’t be changed by anyone, therefore, if

that limit were to be exceeded the merger could not go ahead; his advice, based on his knowledge of the

market, is that exercising that right would be an enormous risk. It is not a call option but a put

option that shareholders can exercise within 15 days after the minutes for the Meeting have been

filed, but the put option is conditional on the €500 million limit not being exceeded; if the €500

million limit were to be exceeded, the put would not be exercisable; his impartial advice would be

not to exercise the right, but everyone is free to choose for themselves."

 

 

 

 

[LC]

 

 

Also, went through the AGM minutes here :http://www.fiatspa.com/en-US/investor_relations/shareholders/FiatDocuments/FIAT_verbale_straordinaria_ENG_con_allegati.pdf

 

Check out Mohnish's stake and of course he voted for the merger.

 

Thanks for posting. This is the first time I'm seeing Mohnish's stake on paper! Glad to be in good company :)

[karthikpm]

http://www.fiatspa.com/en-US/media_center/FiatDocuments/2014/Agosto/Information_on_Cash_exit_Rights.pdf

 

Summary of conditions for cash exit price

 

Settlement of Shares Submitted for Redemption. Settlement of the shares submitted for

redemption will proceed in accordance with the procedures indicated in Article 2437-quater of

the Italian Civil Code. Pursuant to such provisions of law, these shares will be offered for sale in

the following manner:

(a) First, the shares will be offered to existing Fiat shareholders at the Exit Price;

 

2

http://www.fiatspa.com/en-US/investor_relations/notices/FiatDocuments/2014/Fiat_avviso_di_recesso_ENG.pdf(b) Second, any shares not purchased by Fiat shareholders may, at the Company’s

discretion, be offered to the public at the Exit Price; and

© Third, any shares remaining unpurchased after 180 day from the date on which the

exercise of the cash exit right was notified to the Company will, subject to the

consummation of the Merger be purchased by FCA at the Exit Price and cancelled.

 

[peter1234]

"If the cap were to be exceeded, and the Company chooses to call a new extraordinary shareholders meeting, that meeting could simply adopt a new merger plan which would result in the determination of a new cash exit price," it added in a statement.

 

http://uk.reuters.com/article/2014/08/12/uk-fiat-spa-chrysler-mergers-idUKKBN0GC16020140812

 

 

[Phaceliacapital]

Yes, and it will go on like that till the share price is so low I guess. If it's postponed once I would believe the odds are high it's postponed several times..

[Avyalake]

The odds are low that this merger won't go through. I wonder why anyone would take this cash exit if one has the option of selling covered calls at that exit price. Upside ensured with a premium if the merger doesn't go through. Also this won't go down ad infinitum since  number of shares that can be bought back goes up everytime and more people need to sign up for cash exit.

 

Considering the volatility on the price quote it seems like the premium i would want would be much more than 10% that is available at this point and that it is not riskless and it takes another 6 months.

 

So the possibility of a quick rise back to previous levels should be very good. In a way the drop after the "ambitious"  May plan is good in hindsight with this law and lower price for forced share repurchases.

[Avyalake]

An excellent episode of this American life on a dealership and their incentives via @planmaestro. http://m.thisamericanlife.org/radio-archives/episode/513/129-cars

 

Excerpts:

 

" They're part of Chrysler. And if they sell 129 cars and trucks by the end of October, Chrysler will pay them a bonus that's pretty much the difference between the dealership being in the black or being in the red for the month-- somewhere between $65,000 and $85,000, depending on which models they sell. Different cars are in different amounts. If they sell 128 cars-- fall just one car short-- they get nothing."

 

" everybody is shooting for at least 15 sales a month. At 15 sales, your commission for the next month jumps from 20% to 30%.

 

There's also a bonus of $600 when you hit 10 cars, $250 if you sell seven cars in the first two weeks of the month. There's money you get directly from Chrysler, and that can be anywhere between $50 and $250 per car.

 

Mid-level salesman here at Town & Country make around $60,000 a year. Top performers are closer to $100,000. Most of that is commissions and bonuses. "

 

" this leaves out the third and main reason for the great deal that he's getting-- they need eight more sales by 9 o'clock. And the cop ends up buying his Durango for $2,214 less than the dealership paid for it."

 

" The dealership is selling the car to Katie below cost at a $900 loss. And TK is going to end up spending $1,200 of his own money to ship the car out to her in Las Vegas."

[muscleman]

When will we know the result of this "merger"? The stock holders have 15 days to use cash exit rights but the debt holders have 60 days. Does this mean we probably won't know until after 60 days?

[peter1234]

When will we know the result of this "merger"? The stock holders have 15 days to use cash exit rights but the debt holders have 60 days. Does this mean we probably won't know until after 60 days?

 

Do we know why debt holders would or would not approve?

[Phaceliacapital]

And what happens if they don't approve?

 

Then your 500 mn limit will be hit rather quickly..

[PLynchJr]

Greenwood has posted a very detailed update to their Fiat thesis.

 

http://www.gwinvestors.com/Main/Blog/Entries/2014/8/12_Fiat_SpA_(F_IM)_Update__Tiger_Backed_into_a_Corner.html

[karthikpm]

Thanks PLynchJr

 

They have the most bullish thesis on Fiat I have read. .  €30 per share seems unrealistic in the next couple of years. I worry that it creates a bias and creates a false sense of a large "margin of safety". I do think FIATY is undervalued just not by these margins.