Rod

Any thoughts on a paired trade--long E and short Common? Right now the E is trading at par with the Common assuming conversion. This seems to assume there is zero chance of the E getting paid cash--even partially. And in Jim's "haircut" scenario the haircut would have to do less damage than a conversion or why would the E's vote in favour? The only risk I can see is that the company comes into some good luck with asset sales and maybe strong results from Delonex and the Common soars. At the same time the company has enough new liquidity to pay the E in cash. E's would get $25, but the loss on the short side of the trade would be much higher. I think the risk would be that in an extension scenario that is a haircut as suggested, the common could rally as it would avoid dilution in the near term at least and the upside on the DC.PR.E would be limited. I think you are right that there are other risks. I am still kicking myself for not shorting the E at $24 in July before the Q2 release when the Common was around $1.50. That was a "Wiley Coyote" moment--the E holders had yet to look down and see how much they would lose on conversion at $2! It was also a one-way bet since it couldn't go up, only down.

Any thoughts on a paired trade--long E and short Common? Right now the E is trading at par with the Common assuming conversion. This seems to assume there is zero chance of the E getting paid cash--even partially. And in Jim's "haircut" scenario the haircut would have to do less damage than a conversion or why would the E's vote in favour? The only risk I can see is that the company comes into some good luck with asset sales and maybe strong results from Delonex and the Common soars. At the same time the company has enough new liquidity to pay the E in cash. E's would get $25, but the loss on the short side of the trade would be much higher.

I'm not surprised. Nothing really has gone right in Dundee's restructuring efforts since they sold the oil property to Delonex. I think unless they can sell either Blue Goose or preferably Parq in the next couple of months they will have to pull the trigger on the conversion of the E to shares. They desperately need a win at this point. Conversion would strengthen the balance sheet dramatically and eliminate about $6 million per year in dividend payments.

Buffett's lifestyle is only modest by billionaire standards.

It's not the first time I've heard Charlie say something scientifically questionable. I think science is his weak spot despite his efforts to be a generalist. It’s very likely the other way around - the Chinese kids got better parents. Adopting kids from China isn’t cheap, so the parents very likely have financial resources. there are also significant background checks. There is a significant selection bias going on on the parent side. A very good point. And who was it that said to always invert? ;)

Looking at the Chou RRSP fund, I notice that even though the portfolio is very concentrated, several of his investments are down around 90%. Clearly these were bad bets. Yet the commentary mostly ignores this and blames poor performance on the market not respecting value. I would think some admission of mistakes is in order here.

It's not the first time I've heard Charlie say something scientifically questionable. I think science is his weak spot despite his efforts to be a generalist.

Charlie did make a comment about Chinese girls adopted at birth by Americans and raised in America being high achievers. I found the idea strange since it would suggest that there is something genetic involved. I have believed the success of Chinese Americans to be cultural and involve values instilled in them by family and community. So it would be very interesting to see strong evidence that there is a genetic component to the success of the Chinese. Right now I'm sceptical. I doubt any ethnic group has inbuilt genetic advantages. I could imagine that the American adoptive parents may subconsciously expect their Chinese child to be a high achiever because that is the stereotype and it would affect the way they raise the child. In any case, trying to conclude genetic superiority of some group is pretty much impossible to do scientifically because it's impossible to separate cultural and social factors.

Cool pencil! My last purchase was a used book off Amazon called "Mathematics Applied to Deterministic Problems in the Natural Sciences", which I will read entirely for fun. So I out-nerded you there by a considerable margin.

That's useful info. It's hard to believe they couldn't sell these two hotels for a high price in the current market. If they did they could pay off most of the high cost debt and that might leave them at least in a break-even position on the remainder of the project. Then they could ramp that up over time. Hopefully, they can arrange a sale or equivalent transaction in the next couple months.

Maybe it was Ned Goodman! I’m only half joking—he received a deferred share grant of 2 million shares earlier this month.

I can’t see the E’s voting to extend if the $2 conversion remains. What’s the benefit to them? And I have a hard time seeing Dundee give up the conversion option.

I suppose if the option presented to E holders is to get converted to common and lose almost half their value or get extended with some kind of sweetener then they most likely will take the extension. But I'm not sure what Dundee could do to sweeten the offer much. My question is are we sure that Dundee wouldn't rather convert? Presumably an extension would eliminate the conversion option at $2. I am not sure that Dundee won't take it now instead of losing that option forever. I am no longer an owner of the common, just the B and D, so obviously I would prefer they convert, so maybe that is influencing my judgement!

I think Dundee’s strategy with the E’s will depend on how things look for the company next year. If the restructuring has gone well (stop laughing), Dundee may be willing and able to pay off the E’s with cash. Or, more likely, as Safety has pointed out, the E’s will trade at a small premium and the holders won’t bother to redeem them. And Dundee may be happy just to let them continue indefinitely. If things have gone very badly by next summer, Dundee may be happy to convert the E’s into common at $2. If progress is so-so, but not bad enough that the company would want to issue shares at $2, and the stock is still below $2, then Dundee may use Safety’s idea of threatening to convert the shares if E holders don’t support an extension. Of couse the stock may trade at or a little above $2 then things get complicated. The threat of conversion won’t likely work. And E holders may have no desire to continue.

I wonder if the E shares might start to sell off and reflect the risk of conversion?

Jonathan's comments on the CC suggest to me that cash redemption of the Es is the least likely outcome. The very poor Parq results put them in a much more serious liquidity crunch than I previously believed. DPM won't be sold. Parq looks like it will require substantial ongoing capital infusions. If the Delonex drilling doesn't go well, then I think they'll turn off the dividends on the prefs. I missed what he said about the CRA tax issue. I looked at the financials and it appears there could be a material charge there, but not quantifiable at this time? Anyone have further insight? Many negatives in the quarter & on the call but there were some things that give me a glimmer of hope. At least the events at Parq are really forcing them to move on getting this cleaned up. Some of the positives on the CC were the acknowledgement of potential buyers for Blue Goose, "advanced stages" in negotiating with outside parties for solutions to Parq, moving portfolio down to 30 positions from 70 and "potential proceeds of $100mm to $200mm" from these sales, DPM doubling EBITDA over next year & Jonathan saying "at right price anything is for sale". While the BC gaming industry is having a tough year, it seems as though Parq Casino is outperforming the others... And the casino part – there is no question that the casino industry if you look at the other participants in the BC industry they’re down on the table drop close to 20% year-to-date. We’re actually up on the edge water because - with the same number of tables and the same slots but we’re up because it's in a much nicer building. But certainly we’re up in a really tough market. Need to look further into the CRA filing - could it be a disallowance of the deduction amount on a large capital gain?? DC currently has the following tax loss carry forwards which could be very valuable assuming they begin to make money again... At June 30, 2018, the Corporation had operating loss carry forwards of $527,656,000 (December 31, 2017 – $505,195,000) and capital loss carry forwards of $234,396,000 (December 31, 2017 – $231,918,000). As someone who has owned both the common and the B/D prefs, I like to think about which offers the better risk adjusted return. As of now I feel that belongs to the prefs for the following reasons: The B and D prefs have a potential upside of 2-2.5x from current prices around $9.40. I feel that to make a bet on the common you would need to have a reasonable expectation that 3x to 5x was possible, otherwise why choose the common over the preferred since the preferred is safer and pays a 15% dividend? Until problems with Parq materialized I felt that it was reasonable to think a 3x to 5x return was possible. But now with the Parq asset looking like a bust a large potential upside has been lost. Worse the cash flow problems stemming from the needs of Parq are making it more likely that the E prefs will be converted into common, which would take out an even larger part of the upside potential. At this stage I don't think the common offers enough of an upside advantage over the prefs to make it as good a bet. Also, I figure even if things go well and it becomes clear that Dundee's NAV is solidifying on a decent number, say $6 per share, the stock is likely to trade at a large discount to that for a long time given the bad experience and doubts investors have about the company. So, it may not trade much above $3 even with a $6 NAV. If that happens the company would have ample opportunities to buy back cheap stock for a long time driving value growth. I would prefer to buy it then rather than now when there is so much uncertainty about it's ultimate value and the prefs are so cheap.

I agree about Parq. It needs to be fixed fast. Either through a full or partial sale and/or refinancing. They can't wait much longer. And that doesn't suggest that they will get great terms on any deal. This is the deal breaker for me. I am hiding out in the preferreds until there is more safety in the common.

There are circumstances, I think, in which that would be good for the common as well. It increases my base case NAVPS outlined above. It decreases my bull case/everything goes right NAVPS. But everything isn't going right! The problems at Parq have added to the risk for the common and reduced the upside. I still think the common is a good bet. But I now believe that the B and D prefs are a better bet. You can get a double out of these and make 15% along the way with much less risk. It's hard for the common to compete with that IMO. When you throw in the growing possibility that the E prefs will be converted to common, it makes the case for the B and D even stronger. I own both the common and the prefs in about 30/70 ratio. I am pretty sure that if I didn't own any of it right now I'd only buy the prefs.

I think the chance that the E prefs will be converted to common at $2 is growing. If that were to happen it would, obviously, not be good for the E holders. The common shares would lose some risk, but at the cost of losing a lot of the potential upside. The winner in this scenario would be the B and D prefs, which would be safer and not lose any upside.

Q2 is out. Parq results not good--still running at an operating loss and now a writedown. Will be interesting to hear the conference call tomorrow.

The upside in this thing if either Parq or Chad work out is immense. Recent reviews of Parq seems to be improving... https://www.tripadvisor.ca/Attraction_Review-g154943-d12945737-Reviews-Parq_Vancouver-Vancouver_British_Columbia.html I was in Vancouver a few days ago so I stopped by Parq to take a look. I was there around noon so wasn't expecting it to be too busy. The casino was doing good business, more than I would have expected for that time of day. There was a lot of people checking in and out of hotels. The restaurants that I saw were not open at the time except for Honey Salt and Market East. There were people in them buy not a lot. The building itself is impressive. The exterior is beautiful and the interior is very clean and felt like a nice place to spend time. I would call it "classy" but coming from me that might not mean much. Hard to judge business from just one brief visit, but if there is a weak spot currently I can imagine it is the restaurants.

It's a good idea. I didn't even know that Google Scholar existed.

I think that stock buybacks are part of the plan once the balance sheet has been sorted out. Have they said so? Yes. In the reply to a question at the annual meeting as well as in the conference call for Q1. The idea of stock buybacks, both common and preferred, was raised. Jonathan Goodman said it was the right idea but needed to wait until the balance sheet issues were sorted out first.

I think that stock buybacks are part of the plan once the balance sheet has been sorted out.

D and B prefs trading around 10 now. That's over 14% yield on the B and more like 15.7% when it resets next year (at current 5-year bond yield). Does this not represent an extreme degree of pessimism?