ELF.TO - E-L Financial Corp. Ltd.

[bizaro86]

For sure - I'm a Canadian tax filer but this position is in an RRSP so a big deemed dividend isn't an issue for me. For non Canadian filers its even worse - if there is a big deemed dividend there will be Canadian withholding tax on it.

 

Even in non-reg for Canadians if there is a big deemed dividend there would be an offsetting capital loss. Some neat tax planning possibilities there for people in low tax brackets. Dividends attract very low to zero tax rates in the bottom brackets, because the credit effectively assumes a higher bracket. Someone who is in a low bracket this year (whether because they're in school, lost job due to covid, whatever) could manufacture a big deemed dividend, pay little to no tax, and carry the capital losses forward.

 

"The amount paid by E-L Financial under the Offer for the Shares less any amount deemed to be received by

the Resident Shareholder as a dividend (after the application of subsection 55(2) of the Tax Act, if applicable, in the

case of a corporate Resident Shareholder) will be treated as proceeds of disposition of the Shares. The Resident

Shareholder will realize a capital gain (or capital loss) on the disposition of the Shares equal to the amount by which

the Resident Shareholder’s proceeds of disposition, net of any costs of disposition, exceed (or are less than) the

adjusted cost base to the Resident Shareholder of the Shares sold to E-L Financial pursuant to the Offer"

 

So the capital loss in a non-registered account is the closure price (say $750) less PIC ($18) = $732 capital loss?

 

I'm assuming this is an eligible Canadian dividend tax which has a lower tax rate?

 

That's how it should work, imo. Note that I'm not a (or your!) tax advisor. However, with a $750 price and $18 paid in capital, you should have a dividend of $732 (with associated taxable income, gross up, and dividend tax credit).

 

The capital loss should be your adjusted cost base minus your proceeds of disposition. So if you pay $710 it looks like this:

 

$710 - (750 -732) = $692 in capital losses

 

 

[spartan]

Algoma Central Corporation Announces Special Dividend of $2.65 Per Share

 

https://www.businesswire.com/news/home/20201214005201/en/Algoma-Central-Corporation-Announces-Special-Dividend-of-2.65-Per-Share#:~:text=CATHARINES%2C%20Ontario%2D%2D(BUSINESS%20WIRE,of%20%242.65%20per%20common%20share.

[SafetyinNumbers]

Algoma Central Corporation Announces Special Dividend of $2.65 Per Share

 

https://www.businesswire.com/news/home/20201214005201/en/Algoma-Central-Corporation-Announces-Special-Dividend-of-2.65-Per-Share#:~:text=CATHARINES%2C%20Ontario%2D%2D(BUSINESS%20WIRE,of%20%242.65%20per%20common%20share.

 

I think ELF owns about 10.5m shares directly so another ~$28m for the next NCIB or special dividend of their own.

[StubbleJumper]

ELF traded at CDN$750 this afternoon.  That's the top end of their Dutch Auction range, and tomorrow is the closure of that tender.  No more arbitrage opportunity this time.

[SafetyinNumbers]

ELF traded at CDN$750 this afternoon.  That's the top end of their Dutch Auction range, and tomorrow is the closure of that tender.  No more arbitrage opportunity this time.

 

Can you explain the arbitrage?

 

I suppose it makes sense that we drifted to the top end of range if everyone who tendered or wanted to sell has tendered or sold. I think most places had the deadline for instructions as Monday night. Maybe post SIB announcement, some value shop initiated a position and used all of the selling decisions brought forward by the SIB and pinned the stock below $750 to accumulate a position.

 

I think I have been watching too much #IndustryHBO. I was on an equity sales desk for only 6 months but the narratives do make it more fun especially if they are plausible. The narratives also helped sell stock back in the day when there were more active managers.

 

Personally, I tendered a small amount of stock because I overbought anticipating the SIB. I clearly should not have and sold in the market yesterday or even just kept the leverage on (less than 10%, despite the ideas I share on this site, I think I’m risk averse and avoid leverage). It will be embarrassing if the SIB clears below 750.

 

[StubbleJumper]

ELF traded at CDN$750 this afternoon.  That's the top end of their Dutch Auction range, and tomorrow is the closure of that tender.  No more arbitrage opportunity this time.

 

Can you explain the arbitrage?

 

I suppose it makes sense that we drifted to the top end of range if everyone who tendered or wanted to sell has tendered or sold. I think most places had the deadline for instructions as Monday night. Maybe post SIB announcement, some value shop initiated a position and used all of the selling decisions brought forward by the SIB and pinned the stock below $750 to accumulate a position.

 

I think I have been watching too much #IndustryHBO. I was on an equity sales desk for only 6 months but the narratives do make it more fun especially if they are plausible. The narratives also helped sell stock back in the day when there were more active managers.

 

Personally, I tendered a small amount of stock because I overbought anticipating the SIB. I clearly should not have and sold in the market yesterday or even just kept the leverage on (less than 10%, despite the ideas I share on this site, I think I’m risk averse and avoid leverage). It will be embarrassing if the SIB clears below 750.

 

 

The notion of arbitrage is that anybody who could arrange space in one of their tax-advantaged accounts could buy up to 99 shares on the market, and tender them using the odd-lot provision, with very low risk that the offer is cancelled or amended.  This offer is quite likely to be undersubscribed (we'll probably find out tomorrow!) and the tender price will probably be $750.  Anybody who bought at less than $750 is very likely to make a bit of money, and people who bought at less than $720 will likely make $2k-3k on their 99 shares.  I bought some at $705 and some at $706.

 

If an investor has a 5-year horizon, an argument could be made that a small position could be established after this SIB on the basis that the shares are still quite obviously under-priced at $750 and that the Jackman family might finally choose to issue a tender for those last ~16% of shares to take ELF private over the next few years.  At a certain point, that minority position is so small that it's just a nuisance and it requires that the family's financial affairs be made public when they might well prefer some privacy.

 

 

SJ

[SafetyinNumbers]

ELF traded at CDN$750 this afternoon.  That's the top end of their Dutch Auction range, and tomorrow is the closure of that tender.  No more arbitrage opportunity this time.

 

Can you explain the arbitrage?

 

I suppose it makes sense that we drifted to the top end of range if everyone who tendered or wanted to sell has tendered or sold. I think most places had the deadline for instructions as Monday night. Maybe post SIB announcement, some value shop initiated a position and used all of the selling decisions brought forward by the SIB and pinned the stock below $750 to accumulate a position.

 

I think I have been watching too much #IndustryHBO. I was on an equity sales desk for only 6 months but the narratives do make it more fun especially if they are plausible. The narratives also helped sell stock back in the day when there were more active managers.

 

Personally, I tendered a small amount of stock because I overbought anticipating the SIB. I clearly should not have and sold in the market yesterday or even just kept the leverage on (less than 10%, despite the ideas I share on this site, I think I’m risk averse and avoid leverage). It will be embarrassing if the SIB clears below 750.

 

 

The notion of arbitrage is that anybody who could arrange space in one of their tax-advantaged accounts could buy up to 99 shares on the market, and tender them using the odd-lot provision, with very low risk that the offer is cancelled or amended.  This offer is quite likely to be undersubscribed (we'll probably find out tomorrow!) and the tender price will probably be $750.  Anybody who bought at less than $750 is very likely to make a bit of money, and people who bought at less than $720 will likely make $2k-3k on their 99 shares.  I bought some at $705 and some at $706.

 

If an investor has a 5-year horizon, an argument could be made that a small position could be established after this SIB on the basis that the shares are still quite obviously under-priced at $750 and that the Jackman family might finally choose to issue a tender for those last ~16% of shares to take ELF private over the next few years.  At a certain point, that minority position is so small that it's just a nuisance and it requires that the family's financial affairs be made public when they might well prefer some privacy.

 

 

SJ

 

Gotcha thanks. I usually think of arbitrage as risk free so I just wanted to make sure.

[StubbleJumper]

ELF traded at CDN$750 this afternoon.  That's the top end of their Dutch Auction range, and tomorrow is the closure of that tender.  No more arbitrage opportunity this time.

 

Can you explain the arbitrage?

 

I suppose it makes sense that we drifted to the top end of range if everyone who tendered or wanted to sell has tendered or sold. I think most places had the deadline for instructions as Monday night. Maybe post SIB announcement, some value shop initiated a position and used all of the selling decisions brought forward by the SIB and pinned the stock below $750 to accumulate a position.

 

I think I have been watching too much #IndustryHBO. I was on an equity sales desk for only 6 months but the narratives do make it more fun especially if they are plausible. The narratives also helped sell stock back in the day when there were more active managers.

 

Personally, I tendered a small amount of stock because I overbought anticipating the SIB. I clearly should not have and sold in the market yesterday or even just kept the leverage on (less than 10%, despite the ideas I share on this site, I think I’m risk averse and avoid leverage). It will be embarrassing if the SIB clears below 750.

 

 

The notion of arbitrage is that anybody who could arrange space in one of their tax-advantaged accounts could buy up to 99 shares on the market, and tender them using the odd-lot provision, with very low risk that the offer is cancelled or amended.  This offer is quite likely to be undersubscribed (we'll probably find out tomorrow!) and the tender price will probably be $750.  Anybody who bought at less than $750 is very likely to make a bit of money, and people who bought at less than $720 will likely make $2k-3k on their 99 shares.  I bought some at $705 and some at $706.

 

If an investor has a 5-year horizon, an argument could be made that a small position could be established after this SIB on the basis that the shares are still quite obviously under-priced at $750 and that the Jackman family might finally choose to issue a tender for those last ~16% of shares to take ELF private over the next few years.  At a certain point, that minority position is so small that it's just a nuisance and it requires that the family's financial affairs be made public when they might well prefer some privacy.

 

 

SJ

 

Gotcha thanks. I usually think of arbitrage as risk free so I just wanted to make sure.

 

 

Yes, there is always risk in arbitrage.  In fact, there is always risk in investing (or in not investing!).  The risk ranges from extremely small to extremely high, but it is never entirely absent.

 

 

SJ

[SafetyinNumbers]

ELF traded at CDN$750 this afternoon.  That's the top end of their Dutch Auction range, and tomorrow is the closure of that tender.  No more arbitrage opportunity this time.

 

Can you explain the arbitrage?

 

I suppose it makes sense that we drifted to the top end of range if everyone who tendered or wanted to sell has tendered or sold. I think most places had the deadline for instructions as Monday night. Maybe post SIB announcement, some value shop initiated a position and used all of the selling decisions brought forward by the SIB and pinned the stock below $750 to accumulate a position.

 

I think I have been watching too much #IndustryHBO. I was on an equity sales desk for only 6 months but the narratives do make it more fun especially if they are plausible. The narratives also helped sell stock back in the day when there were more active managers.

 

Personally, I tendered a small amount of stock because I overbought anticipating the SIB. I clearly should not have and sold in the market yesterday or even just kept the leverage on (less than 10%, despite the ideas I share on this site, I think I’m risk averse and avoid leverage). It will be embarrassing if the SIB clears below 750.

 

 

The notion of arbitrage is that anybody who could arrange space in one of their tax-advantaged accounts could buy up to 99 shares on the market, and tender them using the odd-lot provision, with very low risk that the offer is cancelled or amended.  This offer is quite likely to be undersubscribed (we'll probably find out tomorrow!) and the tender price will probably be $750.  Anybody who bought at less than $750 is very likely to make a bit of money, and people who bought at less than $720 will likely make $2k-3k on their 99 shares.  I bought some at $705 and some at $706.

 

If an investor has a 5-year horizon, an argument could be made that a small position could be established after this SIB on the basis that the shares are still quite obviously under-priced at $750 and that the Jackman family might finally choose to issue a tender for those last ~16% of shares to take ELF private over the next few years.  At a certain point, that minority position is so small that it's just a nuisance and it requires that the family's financial affairs be made public when they might well prefer some privacy.

 

 

SJ

 

Gotcha thanks. I usually think of arbitrage as risk free so I just wanted to make sure.

 

 

Yes, there is always risk in arbitrage.  In fact, there is always risk in investing (or in not investing!).  The risk ranges from extremely small to extremely high, but it is never entirely absent.

 

 

SJ

 

It’s rare but there are true arbitrage opportunities occasionally. Since September until a few weeks ago there was a pure arbitrage available in the FIRE.DB converts vs the FIRE common, for example, where one could buy the debentures, short the stock and call their broker to convert the debs in 3 business days to stock and cover the short.

 

 

[StubbleJumper]

ELF traded at CDN$750 this afternoon.  That's the top end of their Dutch Auction range, and tomorrow is the closure of that tender.  No more arbitrage opportunity this time.

 

Can you explain the arbitrage?

 

I suppose it makes sense that we drifted to the top end of range if everyone who tendered or wanted to sell has tendered or sold. I think most places had the deadline for instructions as Monday night. Maybe post SIB announcement, some value shop initiated a position and used all of the selling decisions brought forward by the SIB and pinned the stock below $750 to accumulate a position.

 

I think I have been watching too much #IndustryHBO. I was on an equity sales desk for only 6 months but the narratives do make it more fun especially if they are plausible. The narratives also helped sell stock back in the day when there were more active managers.

 

Personally, I tendered a small amount of stock because I overbought anticipating the SIB. I clearly should not have and sold in the market yesterday or even just kept the leverage on (less than 10%, despite the ideas I share on this site, I think I’m risk averse and avoid leverage). It will be embarrassing if the SIB clears below 750.

 

 

The notion of arbitrage is that anybody who could arrange space in one of their tax-advantaged accounts could buy up to 99 shares on the market, and tender them using the odd-lot provision, with very low risk that the offer is cancelled or amended.  This offer is quite likely to be undersubscribed (we'll probably find out tomorrow!) and the tender price will probably be $750.  Anybody who bought at less than $750 is very likely to make a bit of money, and people who bought at less than $720 will likely make $2k-3k on their 99 shares.  I bought some at $705 and some at $706.

 

If an investor has a 5-year horizon, an argument could be made that a small position could be established after this SIB on the basis that the shares are still quite obviously under-priced at $750 and that the Jackman family might finally choose to issue a tender for those last ~16% of shares to take ELF private over the next few years.  At a certain point, that minority position is so small that it's just a nuisance and it requires that the family's financial affairs be made public when they might well prefer some privacy.

 

 

SJ

 

Gotcha thanks. I usually think of arbitrage as risk free so I just wanted to make sure.

 

 

Yes, there is always risk in arbitrage.  In fact, there is always risk in investing (or in not investing!).  The risk ranges from extremely small to extremely high, but it is never entirely absent.

 

 

SJ

 

It’s rare but there are true arbitrage opportunities occasionally. Since September until a few weeks ago there was a pure arbitrage available in the FIRE.DB converts vs the FIRE common, for example, where one could buy the debentures, short the stock and call their broker to convert the debs in 3 business days to stock and cover the short.

 

 

Yes, FIRE sounds like an extremely low risk arbitrage opportunity (but, not zero-risk, right?). Deep in the tail, there's the risk of actually being able to borrow shares, and the risk of the market even being open when you need it.  Is that a one-in-a-million chance of failure?

 

The ELF tender was just a very low risk arbitrage (but definitely not zero) because there was always the tail-risk that the tender offer terms could be amended or that there could be some unknown group of people that have a rational reason to tender a large number of shares which would push the price down.  Would the likelihood of an unfavourable amendment to the SIB be one-in-a-thousand?  Would the likelihood of the tender being fully subscribed be 1-in-50?

 

I am beginning to feel pedantic, which is one of my many personality flaws.  ;D

 

 

SJ

[SafetyinNumbers]

ELF traded at CDN$750 this afternoon.  That's the top end of their Dutch Auction range, and tomorrow is the closure of that tender.  No more arbitrage opportunity this time.

 

Can you explain the arbitrage?

 

I suppose it makes sense that we drifted to the top end of range if everyone who tendered or wanted to sell has tendered or sold. I think most places had the deadline for instructions as Monday night. Maybe post SIB announcement, some value shop initiated a position and used all of the selling decisions brought forward by the SIB and pinned the stock below $750 to accumulate a position.

 

I think I have been watching too much #IndustryHBO. I was on an equity sales desk for only 6 months but the narratives do make it more fun especially if they are plausible. The narratives also helped sell stock back in the day when there were more active managers.

 

Personally, I tendered a small amount of stock because I overbought anticipating the SIB. I clearly should not have and sold in the market yesterday or even just kept the leverage on (less than 10%, despite the ideas I share on this site, I think I’m risk averse and avoid leverage). It will be embarrassing if the SIB clears below 750.

 

 

The notion of arbitrage is that anybody who could arrange space in one of their tax-advantaged accounts could buy up to 99 shares on the market, and tender them using the odd-lot provision, with very low risk that the offer is cancelled or amended.  This offer is quite likely to be undersubscribed (we'll probably find out tomorrow!) and the tender price will probably be $750.  Anybody who bought at less than $750 is very likely to make a bit of money, and people who bought at less than $720 will likely make $2k-3k on their 99 shares.  I bought some at $705 and some at $706.

 

If an investor has a 5-year horizon, an argument could be made that a small position could be established after this SIB on the basis that the shares are still quite obviously under-priced at $750 and that the Jackman family might finally choose to issue a tender for those last ~16% of shares to take ELF private over the next few years.  At a certain point, that minority position is so small that it's just a nuisance and it requires that the family's financial affairs be made public when they might well prefer some privacy.

 

 

SJ

 

Gotcha thanks. I usually think of arbitrage as risk free so I just wanted to make sure.

 

 

Yes, there is always risk in arbitrage.  In fact, there is always risk in investing (or in not investing!).  The risk ranges from extremely small to extremely high, but it is never entirely absent.

 

 

SJ

 

It’s rare but there are true arbitrage opportunities occasionally. Since September until a few weeks ago there was a pure arbitrage available in the FIRE.DB converts vs the FIRE common, for example, where one could buy the debentures, short the stock and call their broker to convert the debs in 3 business days to stock and cover the short.

 

 

Yes, FIRE sounds like an extremely low risk arbitrage opportunity (but, not zero-risk, right?). Deep in the tail, there's the risk of actually being able to borrow shares, and the risk of the market even being open when you need it.  Is that a one-in-a-million chance of failure?

 

The ELF tender was just a very low risk arbitrage (but definitely not zero) because there was always the tail-risk that the tender offer terms could be amended or that there could be some unknown group of people that have a rational reason to tender a large number of shares which would push the price down.  Would the likelihood of an unfavourable amendment to the SIB be one-in-a-thousand?  Would the likelihood of the tender being fully subscribed be 1-in-50?

 

I am beginning to feel pedantic, which is one of my many personality flaws.  ;D

 

 

SJ

 

The risks you mention on FIRE can be managed by having good counterparts which I didn’t have so I legged part of the trade instead but it’s certainly something that has to be considered.

 

I wasn’t as confident as you that the SIB wouldn’t be fully subscribed below the high end of the range, it doesn’t mean I didn’t buy extra to tender like I noted but I was happy to own it if it cleared below my price. It doesn’t really matter, we just define arbitrage differently.

[StubbleJumper]

 

The risks you mention on FIRE can be managed by having good counterparts which I didn’t have so I legged part of the trade instead but it’s certainly something that has to be considered.

 

I wasn’t as confident as you that the SIB wouldn’t be fully subscribed below the high end of the range, it doesn’t mean I didn’t buy extra to tender like I noted but I was happy to own it if it cleared below my price. It doesn’t really matter, we just define arbitrage differently.

 

 

No, I am just pedantic because zero-risk does not exist in my world.  I do use the term risk-free in relation to sovereign debt, but I have never liked it because it is clearly not risk-free.  As you say, pedantry aside, it doesn't really matter.

 

My take on the price risk of the SIB being fully subscribed is driven largely by past SIBs in Canada.  While I haven't done so for a few years now, when you look at the historical SIBs in Canada, in recent years about half were over-subscribed and half were not.  Most often, those which were over-subscribed either treated the profits for tax purposes as capital gains (eg, Dundee, Encana, Trez), or the deemed dividend was small because paid-up-capital was high relative to the tender price (eg Carmanah).  A few that were over-subscribed ended up pro-rating, but they were no so over-subscribed to drive the price below the top of the auction range (Power Corp was one such tender).  A few, such as HCG and BRP had a large deemed dividend, ended up being pro-rated, and the final price was below the top of the range (but, then again, these were small tenders relative to available float). 

 

For ELF, the small public float relative to the tender amount and the large deemed dividend give me considerable confidence that the price will be at the upper end of the range...and in the small likelihood that it's not at the top, it won't be far from the top.  Since I have opted for the odd lot provision, that gives me considerable confidence that all of my shares will be tendered, even if the offer is oversubscribed.  But, in the end, there is always a very small risk that the tender offer could be amended after you buy the shares (eg, Bluebird, MGM, Great Canadian Gaming).  The motivation of the Jackman family enhances the predictability of this.  I think my risk of losing money is negligible, but stranger things have happened.

 

 

SJ

[Maple Fun]

The preliminary result out: $750 no pro rata quite positive

 

Now without the SIB overhang, ELF is very interesting

*Lagged in the value stock rally due to tender offer (now removed)

*Freefloat significantly shrinked due to SIB, I guess the company bought back nearly 20% of real free float

 

It would not surprise me if we could see 8XX by the year end

[SafetyinNumbers]

I would expect them to renew the NCIB in March as well.

 

It will be interesting to see what discount they are willing to buy up to.

[bizaro86]

Interesting that its traded through the tender. I would have thought there might be sellers at $750 or less who didn't want to tender (because of the tax). But maybe the tender was big enough that arbs mopped that up. I did my best to help on that front, so it'll be a merry Christmas for my RRSP...

[StubbleJumper]

Interesting that its traded through the tender. I would have thought there might be sellers at $750 or less who didn't want to tender (because of the tax). But maybe the tender was big enough that arbs mopped that up. I did my best to help on that front, so it'll be a merry Christmas for my RRSP...

 

 

Yep, I picked up a bit of beer money.  If the tax situation weren't so wacked, a guy could have leveraged the hell out of this in a margin account.  But each share tendered is grossed up to be $1,000 of taxable income, so you don't exactly want to buy and tender 300 or 400 shares in a margin account... 

 

I hope they do it again next year!

 

 

SJ

[SafetyinNumbers]

Interesting that its traded through the tender. I would have thought there might be sellers at $750 or less who didn't want to tender (because of the tax). But maybe the tender was big enough that arbs mopped that up. I did my best to help on that front, so it'll be a merry Christmas for my RRSP...

 

 

Yep, I picked up a bit of beer money.  If the tax situation weren't so wacked, a guy could have leveraged the hell out of this in a margin account.  But each share tendered is grossed up to be $1,000 of taxable income, so you don't exactly want to buy and tender 300 or 400 shares in a margin account... 

 

I hope they do it again next year!

 

 

SJ

 

Given your confidence in how the tender would go, couldn't you have levered up in the margin account and just sold in the open market yesterday or today?

[bizaro86]

Interesting that its traded through the tender. I would have thought there might be sellers at $750 or less who didn't want to tender (because of the tax). But maybe the tender was big enough that arbs mopped that up. I did my best to help on that front, so it'll be a merry Christmas for my RRSP...

 

 

Yep, I picked up a bit of beer money.  If the tax situation weren't so wacked, a guy could have leveraged the hell out of this in a margin account.  But each share tendered is grossed up to be $1,000 of taxable income, so you don't exactly want to buy and tender 300 or 400 shares in a margin account... 

 

I hope they do it again next year!

 

 

SJ

 

Given your confidence in how the tender would go, couldn't you have levered up in the margin account and just sold in the open market yesterday or today?

 

I dont think this was directed at me, but I wasn't confident the market price would ever get to $750, even though I thought it was likely the tender would close at $750.

 

There were lots of holders who couldn't tender because of taxes, and I wasn't sure that there would be enough arb capacity in non-tax accounts to mop that up. I was wrong about that, obviously, but if I had been sure about that I would have added quite a bit more in my non-reg account. Live and learn.

[SafetyinNumbers]

Interesting that its traded through the tender. I would have thought there might be sellers at $750 or less who didn't want to tender (because of the tax). But maybe the tender was big enough that arbs mopped that up. I did my best to help on that front, so it'll be a merry Christmas for my RRSP...

 

 

Yep, I picked up a bit of beer money.  If the tax situation weren't so wacked, a guy could have leveraged the hell out of this in a margin account.  But each share tendered is grossed up to be $1,000 of taxable income, so you don't exactly want to buy and tender 300 or 400 shares in a margin account... 

 

I hope they do it again next year!

 

 

SJ

 

Given your confidence in how the tender would go, couldn't you have levered up in the margin account and just sold in the open market yesterday or today?

 

I dont think this was directed at me, but I wasn't confident the market price would ever get to $750, even though I thought it was likely the tender would close at $750.

 

There were lots of holders who couldn't tender because of taxes, and I wasn't sure that there would be enough arb capacity in non-tax accounts to mop that up. I was wrong about that, obviously, but if I had been sure about that I would have added quite a bit more in my non-reg account. Live and learn.

 

I was asking Stubble. We had a previous discussion about how much of an arbitrage this tender was and he was very confident so I’m perplexed about how he traded it.

[StubbleJumper]

Interesting that its traded through the tender. I would have thought there might be sellers at $750 or less who didn't want to tender (because of the tax). But maybe the tender was big enough that arbs mopped that up. I did my best to help on that front, so it'll be a merry Christmas for my RRSP...

 

 

Yep, I picked up a bit of beer money.  If the tax situation weren't so wacked, a guy could have leveraged the hell out of this in a margin account.  But each share tendered is grossed up to be $1,000 of taxable income, so you don't exactly want to buy and tender 300 or 400 shares in a margin account... 

 

I hope they do it again next year!

 

 

SJ

 

Given your confidence in how the tender would go, couldn't you have levered up in the margin account and just sold in the open market yesterday or today?

 

I dont think this was directed at me, but I wasn't confident the market price would ever get to $750, even though I thought it was likely the tender would close at $750.

 

There were lots of holders who couldn't tender because of taxes, and I wasn't sure that there would be enough arb capacity in non-tax accounts to mop that up. I was wrong about that, obviously, but if I had been sure about that I would have added quite a bit more in my non-reg account. Live and learn.

 

 

Yes, there can be a large disconnect between the tender price and the prevailing stock price on the market.  When the shares were trading at $725 or $730 it was an asymmetric bet that you could tender 99 shares and you'd make at least $10/sh, and most likely the full $20 or $25.  That's easy beer money, with very little downside risk.  But, if you are buying shares with the intention of re-selling them on the market at a profit, that's a crap-shoot.  It often occurs that the market price approaches the ultimate tender price, but not always.  Somebody who bought at $730 faced a considerable risk that there would be little or no improvement in the market price in the short-term, particularly with an outfit like ELF which is thinly trade and attracts little interest amongst investors. 

 

The potential driver of a higher short-term stock price would really be the existence of a bunch of little guys like us who were each trying to buy <100 shares using a tax-advantaged portfolio.  But, in Canada, how many little guys like us are there to push up ELF's price?  People like me don't mind screwing around a bit in pursuit of a few thousand bucks, but guys a bit bigger than me probably wouldn't bother, and most guys smaller than me probably wouldn't even know to do it.  No, IMO it's best to not rely on a rational market price in the short term for ELF, UNC and EIT (and, for whatever reason, maybe we can't even get a rational market price for those securities in the *long-term*)!

 

 

SJ

[SafetyinNumbers]

Interesting that its traded through the tender. I would have thought there might be sellers at $750 or less who didn't want to tender (because of the tax). But maybe the tender was big enough that arbs mopped that up. I did my best to help on that front, so it'll be a merry Christmas for my RRSP...

 

 

Yep, I picked up a bit of beer money.  If the tax situation weren't so wacked, a guy could have leveraged the hell out of this in a margin account.  But each share tendered is grossed up to be $1,000 of taxable income, so you don't exactly want to buy and tender 300 or 400 shares in a margin account... 

 

I hope they do it again next year!

 

 

SJ

 

Given your confidence in how the tender would go, couldn't you have levered up in the margin account and just sold in the open market yesterday or today?

 

I dont think this was directed at me, but I wasn't confident the market price would ever get to $750, even though I thought it was likely the tender would close at $750.

 

There were lots of holders who couldn't tender because of taxes, and I wasn't sure that there would be enough arb capacity in non-tax accounts to mop that up. I was wrong about that, obviously, but if I had been sure about that I would have added quite a bit more in my non-reg account. Live and learn.

 

 

Yes, there can be a large disconnect between the tender price and the prevailing stock price on the market.  When the shares were trading at $725 or $730 it was an asymmetric bet that you could tender 99 shares and you'd make at least $10/sh, and most likely the full $20 or $25.  That's easy beer money, with very little downside risk.  But, if you are buying shares with the intention of re-selling them on the market at a profit, that's a crap-shoot.  It often occurs that the market price approaches the ultimate tender price, but not always.  Somebody who bought at $730 faced a considerable risk that there would be little or no improvement in the market price in the short-term, particularly with an outfit like ELF which is thinly trade and attracts little interest amongst investors. 

 

The potential driver of a higher short-term stock price would really be the existence of a bunch of little guys like us who were each trying to buy <100 shares using a tax-advantaged portfolio.  But, in Canada, how many little guys like us are there to push up ELF's price?  People like me don't mind screwing around a bit in pursuit of a few thousand bucks, but guys a bit bigger than me probably wouldn't bother, and most guys smaller than me probably wouldn't even know to do it.  No, IMO it's best to not rely on a rational market price in the short term for ELF, UNC and EIT (and, for whatever reason, maybe we can't even get a rational market price for those securities in the *long-term*)!

 

 

SJ

 

The stock was offered at 660 when the SIB was announced. Given your view, why were you waiting for much higher prices to get involved? Doesn't that change the expected outcomes considerably?

[Scunny Bunny]

The latest SIB effectively bought back 7.6% of the non Jackman stock at ~54% discount to NAV on my calculations. I can only thank those who contributed their shares.

[benhacker]

The latest SIB effectively bought back 7.6% of the non Jackman stock at ~54% discount to NAV on my calculations. I can only thank those who contributed their shares.

 

Ditto.

 

I re-entered here after  a long hiatus right before the NCIB... I haven't sold as I think it's really a good start a catalyst here.  Still too cheap.  Not a huge position though for me.

[StubbleJumper]

 

The stock was offered at 660 when the SIB was announced. Given your view, why were you waiting for much higher prices to get involved? Doesn't that change the expected outcomes considerably?

 

 

I wish I could have know to grab some on Nov 9 at $660.  The intention to issue the SIB was announced on Nov 9, and you are correct that the shares closed at $660 that day.  By the time that I was in a position to purchase on Nov 10 they had increased to $704.  The SIB circular was not posted to SEDAR until after the end of the trading day on Nov 11.  By Nov 12, which was the first day that we could have reasonable assurance about the income tax provisions (deemed div or cap gain), the odd-lot treatment, and the other parameters, the shares closed at $712.  If I would have had an advance copy of the SIB circular so that I could have known to buy on Nov 9, I'd have made a few thousand more bucks.

 

 

SJ

[SafetyinNumbers]

 

The stock was offered at 660 when the SIB was announced. Given your view, why were you waiting for much higher prices to get involved? Doesn't that change the expected outcomes considerably?

 

 

I wish I could have know to grab some on Nov 9 at $660.  The intention to issue the SIB was announced on Nov 9, and you are correct that the shares closed at $660 that day.  By the time that I was in a position to purchase on Nov 10 they had increased to $704.  The SIB circular was not posted to SEDAR until after the end of the trading day on Nov 11.  By Nov 12, which was the first day that we could have reasonable assurance about the income tax provisions (deemed div or cap gain), the odd-lot treatment, and the other parameters, the shares closed at $712.  If I would have had an advance copy of the SIB circular so that I could have known to buy on Nov 9, I'd have made a few thousand more bucks.

 

 

SJ

 

I actually was able to buy some in the morning on Nov 10 at 660. A few thousand were offered there that morning. I guess I got lucky. I made a determination that there was a high probability the SIB would be quite standard based on the press release. Thankfully, that decision proved correct.