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lessthaniv

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  1. I also agree. They took advantage of the discount in their share price that they had visibility into but at a time where there their cash was tight. I would also be disappointed to see them buy their stock in at a premium with the proceeds.
  2. Surprising how many people drive their cars looking in the rear view mirror.
  3. Better when paired with the footnote. * Amounts in this letter are in U.S. dollars unless specified otherwise. Numbers in the tables in this letter are in U.S. dollars and $ millions except as otherwise indicated. :D
  4. MicroStrategy: Another $600m https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/press-release-archive/microstrategy-announces-proposed-private-offering-of-600m-of-convertible-senior-notes_02-16-2021.pdf
  5. Doesn’t matter when it closes. The point is (I think) they’ve locked in that price for a future buyback of 1.4m shares. Edit: what I mean is that when it closes doesn’t affect the profitability of the eventual buyback. If the TRS contract allows the parties to close out quarterly for example, FFH may be limited to a short term window where they can accrue gains on the reference asset (1.4m shares) less the cost paid (LIBOR + spread) for the period. On the other hand, if the counter party can't close out until a specific termination date set in the future, say 1 year from initiation, then FFH has more time to capture upside on the reference asset which is exciting knowing all the tailwinds occurring at the moment (Farm Edg, BB etc, CR's etc ). Paying LIBOR + spread vs. getting upside on 1.4M shares from $443cdn for a few more quarters is a pretty attractive risk/reward with all these tailwinds in mind. I'm by no means a SWAP expert - but that's how I'm understanding this at the moment. Correct me if I'm missing something. If it’s just a financial bet then you’re right. I don’t think it’s a financial bet. I think it’s a buyback. I think once they have the cash to pay 1.4m * USD344, they close out the TRS and buy 1.4m shares, using gains on the TRS to pay for any amount by which the share price exceeds USD344. Thought about that way, it doesn’t matter whether the transaction happens tomorrow or in a decade. I could easily be wrong! Actually, the way it works is that Fairfax pays a fee...usually Libor plus a negotiated rate. As Fairfax trades higher, the counterparty pays the difference between the strike price and market price. At the end of the swap time period, Fairfax gets the counterparty payments minus the Libor plus negotiated rate. It's not a buyback, but they benefit from it as if they bought those shares, paid a fee and reaped the gains. If Fairfax stock falls, then Fairfax pays the difference between the strike price and market price into the swap. Cheers! Yes I realise this. I think the debate we are having is over whether the benefit is: 1) locking in a profit on the appreciation of their own shares, in which case the longer the TRS lasts the better, and 2) locking in a price at which to buy back shares, in which case it doesn't matter how long the TRS lasts so long as it lasts long enough for them to collect $344*1.4m = $480m of cash to complete the buyback. Confirmed on CC this morning that the TRS was bought for investment purposes as I expected and they were a 1 year agreements from initiation. Felt FFH valuation was among the best they could see. Also mentioned historically they have been able to extend these as long as they’d like.
  6. Not only were they able to do it, but they apparently didn't have to disclose the swap in the same way they have to disclose market purchases. Which makes me think that a TRS on Blackberry was also possible without disclosure. Time will tell. We can live in hope! SJ Very great quarter. Laughed when I saw the TRS on themselves. Have been speculating they would do that for the BB position - never imagined they would use it for repurchase purposes and as away around leverage ratios. Prem always surprises! A little disappointed with the Brit sale - it was established yesterday... If they needed cash, they could've gotten that from selling some of the BB shares. The sale of Brit suggests that they probably didn't sell/trim BB for that cash. We'll see what they say tomorrow, but I'm not optimistic that BB was hedged/sold anymore. Could you please walk us through the TRS situation? So, they entered into TRS equivalent to 1.4m shares at US$344. Today FFH closed at US$399. Would I be correct to understand that FFH is therefore ahead by about US$77m on that transaction? Yes, the leverage ratios are high and look like they are a constraint. The gains in Q4 and Q1 help immensely, as would a ridiculous Farmers Edge valuation, but holdco will need more cash during 2021, and now is not the time to take dividends from the insurance subs. IMO, they'll need to float some debt this year, and it might be time to have a conversation with the banker about amending the covenants on that revolver. SJ SJ Could you please walk us through the TRS situation? So, they entered into TRS equivalent to 1.4m shares at US$344. Today FFH closed at US$399. Would I be correct to understand that FFH is therefore ahead by about US$77m on that transaction? Yes, I agree with this statement but they have to pay some cost on the reference asset which will reduce this a bit ( likely = LIBOR+spread)
  7. Doesn’t matter when it closes. The point is (I think) they’ve locked in that price for a future buyback of 1.4m shares. Edit: what I mean is that when it closes doesn’t affect the profitability of the eventual buyback. If the TRS contract allows the parties to close out quarterly for example, FFH may be limited to a short term window where they can accrue gains on the reference asset (1.4m shares) less the cost paid (LIBOR + spread) for the period. On the other hand, if the counter party can't close out until a specific termination date set in the future, say 1 year from initiation, then FFH has more time to capture upside on the reference asset which is exciting knowing all the tailwinds occurring at the moment (Farm Edg, BB etc, CR's etc ). Paying LIBOR + spread vs. getting upside on 1.4M shares from $443cdn for a few more quarters is a pretty attractive risk/reward with all these tailwinds in mind. I'm by no means a SWAP expert - but that's how I'm understanding this at the moment. Correct me if I'm missing something.
  8. I'm interested as to understanding the terms of the TRS contract they've initiated. In praticular, when/how it can be terminated. Taking into account the comment about price ~ $443cdn and the following quote; "Throughout much of last year, I made public statements that Fairfax shares were trading at a ridiculously cheap price. Since the latter part of 2020 we have purchased total return swaps of 1,407,864 shares of Fairfax" The stock hit ~$443cdn in later Nov, so I'd guess the contract is only a couple of months old. Hopefully it can only be closed on the termination date so they can book the rest of their gains first! Edit: Corrected actual quote
  9. Fairfax is up about $70 since Sept 30th so Mr. Market might not be all that asleep at the switch. True, but BV @ Sept 30,2020 was @ US$442. The move you cite lifted the share price to today's close of US$365 which is still US$77 below Sept 30,2020 book value. I'm with Viking. I see a disconnect and expect the dots will soon be connected.
  10. According to Shortdata, FFH shorts were busy through the end of January. https://shortdata.ca/top-covered-shorts/
  11. There must have been a karma requirement or something because it kicked me and everyone I know out. It's back up and running
  12. Xerxes noted that it is trading X-D today, so shave US$10/sh off the price for that alone. SJ Yes, you are right. Perhaps that problem occurred yesterday? The current USDCAD=1.2646 and the FRFHF/FFH=1.2679, so the prices are at least consistent with today's exchange rate. SJ Yesterday, FRFHF closed at US $381.74. Currently at US$369 after opening up at US$372.16. So, at the moment its off about US$13 from yesterday's close.
  13. This manager is gonna earn some nice AUM fees. Nav today = $18.86 Close today = $139 Now that's some enthusiasm!
  14. I decided to sell most of my position. I still have Fairfax India and willing to give that more time. Seems like they have a little more preference for quality assets in that portfolio, and I like India's 5-15 year growth potential. The irony is that Fairfax owns a good chunk of Fairfax India, and more importantly, generates really nice management fees and performance bonuses from Fairfax India. If Fairfax India does exceedingly well, Fairfax will benefit handsomely. If Fairfax India does average, Fairfax will still benefit from the fees. I would rather own the asset manager! Cheers! I think the upside on both is good. I give the nod to FIH.U as a deeper valuation opportunity but I own both! ;D
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