petec

I’m very skeptical that Fairfax isn’t selling any stock. It’s perfectly normal for private equity to offload some stock in an IPO. This thing can’t be very disruptive if the underwriters think they can only get $100m away in this market.

They can’t disclose because they don’t know. They’re raising $100m. Until they know the price they don’t know many shares they’re selling, so they don’t know the total shares outstanding, and can’t calculate Fairfax’s percentage.

Wow that thing’s losing money! Utterly astonishing looking at those losses to think Prem claimed he invested at 4x projected EBITDA. Some projections!

Fairfax is up about $70 since Sept 30th so Mr. Market might not be all that asleep at the switch.

Do we know what the new administration is looking at? Banning fracking? Requiring it to be done better? Requiring pipes for flared gas? Or do we just not know?

Hi all I am (from a standing start) trying to figure out the impact on gas markets of any new policies by the Biden administration. In particular I'm interested in what might happen to fracking and the implications, and also whether any particular areas might see higher or lower prices due to fewer pipelines being built. If this has been discussed on another thread, please point me there. Otherwise (informed!) opinions and links would be great. Thanks! P

I’m going out on a limb here. I don’t believe Fairfax sold or shorted. As they say in the (British) Army: as you were.

Yeah this is interesting. I can't read this article but have read others. A couple of years back Ford selected QNX as the OS for all its cars at a rumoured $20/car. Now this. I wonder if a nuance is getting lost here. My understanding is that Android is not as secure as QNX. In fact some time ago I was told that Android wasn't even pursuing safety-critical applications in automotive. If that's right then it is not an appropriate platform for safety-critical features, including anything to do with automated driving. Bearing in mind cars don't just run one platform, I wonder if QNX has been selected for the safety-critical features and Android for other features like infotainment. But I am speculating and may well be wrong.

I don’t disagree with any of your comments on BB, but they could apply to a large number of shares today!

Agree with most of that. Everybody, including Prem, makes a great many "errors of omission" (eg, I should have bought Costco shares in 2009, but I sucked my thumb). Prem also makes a great many moves which we have identified, ex post, as "errors of commission." But, mostly those errors of commission were buying errors rather than selling errors. We are frequently left to bitch and moan that Prem shouldn't have wasted capital on XYZ or ABC company, but rarely do we need to bitch and moan that he sold too early or too late. As you noted, the pre-mature sale of the high-quality large-caps in the aftermath of the financial crisis is the one major selling error that comes to mind. If Prem has failed to take advantage of the opportunity to dump BB shares, it would be a pretty unusual sort of error for him. I would also note that we probably shouldn't be fixated on a US$20+ price for BB. The opportunity to sell in that price range lasted only one trading session (so far). I would not fault FFH for not blowing 47m shares out the door in a single trading session and magically time the top of the market. That being said, there has been plenty of opportunity to basically sell as many shares as you'd want, spread over 3 or 4 sessions, and a weighted-average price of US$15 or $16 would have been easily achieved. In my book, that price is already bat-shit crazy, but I'd love for somebody to show me that it's not! I would be quite concerned with the notion that FFH actually believes that BB is worth more than that. SJ Per your first point, I half agree. I am tempted to say that RFP above $10 was a chance but when you hold a third of the stock maybe you just can't. But my bigger issue with your argument is that there simply haven't been that many great opportunities to sell Prem's equity holdings over the last few years, so how can we know? Per your second, the bull case is obviously that QNX and/or IVY become subscription products, so that instead of earning say $5 per year on 30m cars manufactured, the company earns say $10 per year on the installed fleet. For example, if you assumed that BB could get subscription products into 20m cars a year from 2023 onwards, you'd have $1bn in very high margin incremental revenues by 2027 and all sorts of fancy theories about how that base could be further monetised. I can easily see this market paying $15 for that. The issue is this thesis requires so many things to go right and there is absolutely no hard evidence that it will happen.

Ha. I particularly liked the time when Prem took the opportunity to sell JNJ and short the entire stock market just before the biggest rally of all time. Also when he bought Blackberry and not Microsoft. He *never* misses an opportunity. ::) Prem is well capable of missing an opportunity. He is human. But my personal, unprovable assessment is that he is unlikely to have missed it due to vanity or some misplaced nationalism. If he's missed it it's because he genuinely thinks BB at $20 offers a good risk/reward.

Would increasing the size of a short position go against Prem's "promise" to not short ever again? Or have you found him another loop hole to exploit? Prem speak knows no limits..... My recollection is that he promised not to short indices, not stocks.

No. The worst case is that it has recently been closed out. The best case is this spike gave them an oppy to increase their short and bail themselves out.

@SJ, since you referenced me, I don’t think anything over $8 is batshit crazy - especially on a relative basis. It requires a lot to go right, but that’s not out of the question, and a lot of valuations require a lot to go right today. By the time you get to $25 it’s closer to batshit!

This is what I was trying to say in my last para. Well put.

Good topic. I will be disappointed. If it were just about Blackberry, I could handle it if Prem said: we think the future is bright and Blackberry's prospects will multiple many times over the next decade, so we have not sold. But it is also about Fairfax and its need for capital. The value that could be created by locking in these gains and writing hard market premia against that capital is significant. That value evaporates if Blackberry goes back to $6 for a year or two, even if it then goes to $100 in 2030. I don't know how strongly I feel about selling at $15. But from my point of view, Blackberry at $20 is a sell and Blackberry at $25 is a "chuck it out the door as fast as you can" for FFH. I might feel differently if the cause was not Reddit, but a really tangible change in fundamentals (e.g. lots of customers signing up to IVY or clear progress on a subscription model for QNX). But since the cause seems to be Reddit, the spike is quite likely to be temporary. I am not sure if I will sell if Fairfax has sat pat. The value is still there and the catalyst (hard market). But if they have not sold Blackberry then I will likely sell earlier in the rally that I hope to see.

Converting the note now would serve no purpose unless they're selling everything.

Yes! Not sure what I’m nervous of though! I feel exactly the same way. Surely to heavens Prem is selling portions daily as this rally goes on. At 18, I wasn't so sure. At 25, yeah, I'd be offloading a good chunk.

Yes! Not sure what I’m nervous of though!

A quick skim of the early warning report suggests the standstill clause is largely about change of control and would not prevent Fairfax from selling.

How do you know they missed on Monday?

Hopefully, in the annual letter Prem will write, "FFH owned BB for 10 years and was able to exit its position with a considerable profit. Given the time that FFH held the shares, the gains were not outstanding, but it is nonetheless a profitable exit. In the future, we endeavour to focus more intently on risk management, particularly as it relates to our management team's circle of competence and to better consider the importance of position-sizing when we select our investments. BB will not go down as an epic success for FFH, but it has been a valuable learning experience." SJ Ha - I think we can do better than that! Our investment in Blackberry came to life in the quarter. We bought it for the wrong reasons and the time taken to turn the business around has crushed our IRR. Lesson learned. However, we do at least have a significant gain in absolute terms which we do not want to give up. Looking forward, Blackberry has two shots on goal. Either of QNX or IVY could become leading subscription products in connected cars, a market with a huge TAM. We do not know whether Blackberry will achieve this goal, or when, but the upside over the next 10 years could theoretically be transformational for Fairfax if it does. To balance these risks we have entered into a short position that protects us should Blackberry shares fall to price X. One benefit of this short position may not be immediately obvious, other than to long term followers of Fairfax. Almost everything we short goes straight up!!! We work hard to ensure the success of our investments, and by shorting Blackberry we have all but guaranteed that it is going to the moon.

Out of interest, what if any data did you spot that suggests momentum? Anything on acres under management, client numbers, revenue, etc? Or was it more soft factors like the google announcement?

He may not have had much choice, if he didn’t want to repay the whole loan. But the balance of the evidence is on your side of the argument, given the insider sales last week.

This is a very important element. The best valuation discussions that I've seen have basically posited that *maybe* in five years BB will have enough earnings to justify last week's price. Discount that back to today... Either there's a whole pile of earnings coming down the pipe that I cannot see, or this beast is a screaming sell at today's price. SJ I agree with this, but I’m also aware Prem knows more than me.