Hielko

I doubt that Buffett would agree that a extremely high concentration in financials is a good idea even if you are right about the business in the long term. There isn't going to be a long term for financial companies if the market disagrees with you: most financial companies can't survive very long if they don't have access to debt or equity funding. So you introduce a fair amount of systematic risk in your portfolio if you own almost only financials.

Imo people are usually way to quick to blame short sellers. Sure, he was wrong. So what? If I would keep track of all long pitches from value managers that turn out be be wrong it would quickly grow to a thick book...

PS. Something obscure that I once looked at: http://www.forfarmersgroup.eu (it's a dutch company, but they actually do have english reports). It's traded at some extremely obscure platform from a local bank.

In think in most cases you would find that it would be nearly impossible to buy shares anyways simply because you probably need to find a local broker that is willing to accept international customers, and most don't because of legal/regulatory issues.

Great article I would expect that he could have figured this out from the annual report? Must be a footnote somewhere.

I'm a bit surprised that most here are advising against taking money out of the house equity. Would you advice that a new home owner with a ~$250K portfolio should liquidate his whole portfolio and put his whole net worth in his house? I think the right answer is: it depends. What's your net worth, how much equity do you have in the house? how much is already in other investments etc

Interesting idea. Reading the latest annual report, and seems like they are doing a lot of sensible things to create value.

Interesting that it worked.

Afaik: the option is adjusted so that if it's exercised you get what you would have gotten if you bought 100 shares of stock before the spin-off.

hyten1 The psychological underpinning for this dynamic is beautifully described in Chapter 29 on Kahneman's book Thinking Fast and Slow, when he uses the following example: In each of the four examples below your chances of receiving $1mm increases by 5%. Is the news equally good in each example? A. 0% to 5% B. 5% to 10% C. 60% to 65% D. 95% to 100% From an expected value standpoint all four scenarios have equal value. However from a psychological standpoint, Scenarios A and D are much more valuable (A introduces upside that previously was not there, and D eliminates all remaining downside risk). For this reason people will gladly pay a premium over the probability value for scenarios A and D. This dynamic is the foundation the insurance business, lotteries, Las Vegas gambling, lawsuits and countless more. If you think of written option premiums as insurance that introduces upside, (or eliminates downside risk), Twacowfa's statement will make sense. While this is an interesting phenomenon it is not the key reason why insurance exists (and writing options - since it is just a form of insurance - is for example profitable). The key reason is that the value of money is not a constant: the utility of your first million is for example higher than the utility of your second million. You could lose half your money without a serious impact on your living standards, but losing it all would seriously limit how you can life and what you can do. So it makes sense to transfer those kinds of big risks to other parties that have more money and are therefore more equipped to take the risk. This is the dynamic that is the foundation of the insurance industry.

That's easy, it's not to buy back shares, but to reducing administrative expenses (for example sending annual reports). They also might want to delist if they have less than 300 share holders of record after cashing out odd lot holders.

Yes indeed, interesting.

i don't know the rules about shorting a stock that is subject to a tender offer.. Would very much appreciate if someone could enlightened me on this. Is it that someone that is short have to pay the tender price? I very much doubt so. Or is it that no share would be available for short because they all would be tendered. Makes mo sense. If there are no shares available to borrow - and shares tendered cannot be borrowed - you would be forced to buy back your position at market prices. If there is a large short position this could create a very bad scenario for you and you could be forced to pay a lot more than the tender price if there are not enough tradeable shares anymore to cover short positions.

Yahoo doesn't include dividends. But don't think it's a good comparison anyway. BRK's premium to book value has been declining, so that is distorting the picture how BRK has performed the past 10 years.

In a previous offer with a smaller premium 96% of all outstanding shares were tendered. No way that just 12.7M will be tendered.

Yeah, my initial post also contained some flawed logic. Since the company is overpaying for it's shares in the tender offer (it's really just an alternative way to pay a dividend, but without the tax) the only value that is added is coming from the few % of people that do not participate in the tender offer. So if we ignore that for the moment, and you would assume that the market will value the company after the tender offer at the same level as before the tender offer there is no opportunity at all. At $5.17/share the company had a 122.5M market cap with 23.7M shares outstanding. In the tender offer it will use 82.5M in cash, so the remaining value would be 40M. There would be 15.45M shares outstanding remaining, so after the tender offer the share price should be $2.59/share. So unless you think the company is worth significantly more because of a more efficient capital structure after the tender offer there is no opportunity. Based on the above you would simply expect that the price would still be at 5.17 (0.349 * 10 + 0.651 * 2.59 = 5.17)

nope :(

With the huge premium in the tender offer you can be pretty sure that almost all shares will be tendered, so you have to account for that when calculating the expected value.

Price before Tender Offer announcement: 5.15 Percentage of shares being bought: 34.9% Expected price: 0.349 * 10 + 0.651 * 5.51 = 7.08 Current price: 6.46 Expected return: 9.6% Looks like this could be an opportunity, but it's certainly not a guaranteed 50% return opportunity. And the above math is ignoring certain risks such as the TO being cancelled.

I have thought about this as well: I own a lot of asset and cash rich companies (also long SODI by the way), so my leverage is probably pretty low. But having cash or debt at the company level is not the same as having it at the portfolio level. You listed some positives, but it also has some obvious negatives: you don't have control over the cash. You cannot use it if you find a great opportunity. And while you don't risk a margin call if you have debt at the company level, the company is probably paying a higher interest rate than what you would pay if you used margin. And as a shareholder you are in the end also the guy paying for this debt.

It also depends on the detail of the tender offer. Some only accept settled shares, other also accept a notice of guaranteed delivery.

I think a key difference is that MS products are more critical in the activities they support. Switching from one phone platform to another is no big deal for most users. But switching a (desktop) operating system that is used in critical business processes is something else. You can only move if you can move everything, and especially companies often have expensive custom developed software that has a very long life. They might be using less MS software, but they need to reach some threshold before switching becomes an option. So any decline is going to be way slower. And I do think the number of critical applications is declining: new software is very often web based. Also at the consumer side the OS does not matter that much anymore. Plenty of people have no problems buying a macbook and switching OS, and if in some hypothetical world macbooks would become cheaper than a regular Windows laptop I would bet that MS market share would drop like a brick. The OS isn't that sticky anymore. And if you look at yourself: how many things do you do that really require MS software? I used to use Outlook, now I use Gmail/Agenda. I still use Office, I often use Google Docs as well for small things. I used to use messenger to chat, now I use Facebook or GTalk. I'm still a happy Windows user, but there aren't that many reasons anymore why I can't move to something else.

I have no dog in the fight and couldn't give a crap about it other than the fact that I hate hypocrisy. I don't know the stock, I don't know the article he wrote. Is it a proven scam? This is a fact? Maybe it is, I don't know. I guess, sure, if it's a scam then he shouldn't have written it. But I would ask too, why is some random guy coming to a different message board to start a thread condemning some guy somewhere else? That strikes me as odd. And the the subject line about a "Value Investor" implies that Jacob Wolinsky is some superstar in the investing world instead of a young guy trying to support his family. The whole thing is very weird. I do know the stock, and yes; it's 99.99% a scam (actually looked if shorting was possible, but obv. no borrow available, because it was way to obvious a short). And it's not just some guy, it's someone that posts on this board; also giving a logical reason why it's posted here. It's not just a random post about some random guy that happend to write something about some random company.

You might want to make a distinction between talking your own book or recommending a scam, it's not the same. Just becaues he is honest about his motive doesn't make it ok.

Imo: you can remove the unwittingly from the thread title. This was such an obvious scam, and if you run a website with paid premium content you have no excuse for not figuring this out.