Prem Watsa Takes 3 New Small Holdings (Steel Partners)

[LowIQinvestor]

http://finance.yahoo.com/news/prem-watsa-takes-3-small-202308973.html

 

I own SXCL (Steel Partners largest holding) and agree that both are undervalued but am curious why he would bother with such a tiny position.

 

 

 

 

[mcliu]

Is this for his personal portfolio?

[Nnejad]

I noticed a few small positions added this quarter that had recent share tender offers (see also Morgan Stanley AFP). These could have just been arbitrage plays.

[NormR]

IIRC, small positions are often analyst picks rather than Prem's

[thepupil]

I like SPLP. Trading at about 70% of my estimated NAV (marks subs at market values, additional upside if SXCL or others are undervalued).

 

Granted that NAV pays full 1.5% and 20%, but Warren recently took in a nice portion of shares (which amounts to a return of full fee paying permanent capital). That tells me he thinks it is undervalued. The discount and the recent aggressive share repurchase are enough for me at the moment.

 

I haven't started to untangle the consolidated financials yet. anyone else own?

[no_thanks]

I own it, higher than it is right now.  Honestly, there is not much to like besides the discount and the share repurchases, but that is enough for me.  I don't plan on holding it forever. 

[Parsad]

http://finance.yahoo.com/news/prem-watsa-takes-3-small-202308973.html

 

I own SXCL (Steel Partners largest holding) and agree that both are undervalued but am curious why he would bother with such a tiny position.

 

Hamblin-Watsa's committee members are given a certain amount of the portfolio to look after, and the analysts are also given portfolios...but much, much smaller.  It could very well be that one of the analysts was buying it in his/her portfolio...not unlike what you see in Berkshire's filings when Todd, Ted or in past days, Lou Simpson would buy a position.  Cheers!

[greenwave]

I like SPLP. Trading at about 70% of my estimated NAV (marks subs at market values, additional upside if SXCL or others are undervalued).

 

Granted that NAV pays full 1.5% and 20%, but Warren recently took in a nice portion of shares (which amounts to a return of full fee paying permanent capital). That tells me he thinks it is undervalued. The discount and the recent aggressive share repurchase are enough for me at the moment.

 

I haven't started to untangle the consolidated financials yet. anyone else own?

------

Not sure if this is much of a factor at all in the case of Fairfax buying into SPLP,…but I have followed SPLP somewhat over the past 2-3  years or so.  SPLP has been very active in accumulating a major position in a very small cap company -- MLNK . This company was a remnant of the dot com era with no debt and surplus cash on its balance sheet and extremely poor operating results over many years . MLNK has a huge NOL ( 1 Billion +/- or so as I recall  ) on their books which I think attracted SPLP to become an “ active agent for change” at MLNK.  As I understand it, SPLP now has very strong influence over the B O D and has become its largest shareholder, and has “effectively gained control “ without disturbing the ability to utilize the NOL in the future.

 

For what it’s worth, I just noticed after reading your post that last week MLNK’s volume increased to about 3 times its normal volume on May 21 . My thought is that SPLP or a related party may be actively accumulating additional MLNK shares before MLNK acquires a profitable subsidiary to monetize the NOL over the longer term ?

 

greenwave

[Cunninghamew]

http://finance.yahoo.com/news/prem-watsa-takes-3-small-202308973.html

 

I own SXCL (Steel Partners largest holding) and agree that both are undervalued but am curious why he would bother with such a tiny position.

 

FYI... looks like they are doing a reverse/forward split. He did pretty much the same thing at DGT Holdings.  I have no clue, but I am guessing liquidity will dry up a little after considering anyone holding 500 shares or less will be cashed out

 

I might be off base with that comment

[BRK IN MKE]

http://finance.yahoo.com/news/prem-watsa-takes-3-small-202308973.html

 

I own SXCL (Steel Partners largest holding) and agree that both are undervalued but am curious why he would bother with such a tiny position.

 

FYI... looks like they are doing a reverse/forward split. He did pretty much the same thing at DGT Holdings.  I have no clue, but I am guessing liquidity will dry up a little after considering anyone holding 500 shares or less will be cashed out

 

I might be off base with that comment

 

So are shares going from $33 to $16,500? I am not sure if I am reading this right, but it seems like the most ridiculous thing I have ever heard. I understand the need to create long-term shareholders, but that seems excessive.

 

 

[thepupil]

if you own fewer than 500 shares you'll get cashed out.

 

If you own 500 or more you will end up owning the same number of shares at the same price it is a reverse split $33---> $16,500 but then splits back to the original (forward split) $16500--> $33.

 

what's fun about this one is you don't know what price you will get cashed out if you are a smaller shareholder, because i think that's determined by the closing price on the day before the split. No odd lot arb opportunities here!

 

It's a  bit of financial engineering to cash out small guys at a price that is likely lower than intrinsic value.

 

EDIT: Here is confirmation that you just get whatever the stock price is on that day.

 

Cashed Out Stockholders will receive a cash payment from the transfer agent representing a per share price equal to the closing price of the Company’s Common Stock on the date that the Board implements the Reverse/Forward Split.

 

 

[BRK IN MKE]

Thanks for the explanation. I had never heard of that strategy before.

 

What is the point of getting rid of the small shareholders? (b/c they increase costs???)

 

 

[Tim Eriksen]

Thanks for the explanation. I had never heard of that strategy before.

 

What is the point of getting rid of the small shareholders? (b/c they increase costs???)

 

It is to reduce costs.  Fairly common for unlisted micro caps to implement since Sarbanes Oxley.

[krazeenyc]

if you own fewer than 500 shares you'll get cashed out.

 

If you own 500 or more you will end up owning the same number of shares at the same price it is a reverse split $33---> $16,500 but then splits back to the original (forward split) $16500--> $33.

 

what's fun about this one is you don't know what price you will get cashed out if you are a smaller shareholder, because i think that's determined by the closing price on the day before the split. No odd lot arb opportunities here!

 

It's a  bit of financial engineering to cash out small guys at a price that is likely lower than intrinsic value.

 

EDIT: Here is confirmation that you just get whatever the stock price is on that day.

 

Cashed Out Stockholders will receive a cash payment from the transfer agent representing a per share price equal to the closing price of the Company’s Common Stock on the date that the Board implements the Reverse/Forward Split.

 

Could this lead to shenanigans? Could someone try to force the share price down on the final day?

[LowIQinvestor]

SXCL under book value (20% discount) due to oil price decline and general liquidity.

 

latest financials:

http://investor.steelexcel.com/phoenix.zhtml?c=97782&p=irol-newsArticle&ID=1987127

[LowIQinvestor]

Full Year Earnings Released : SXCL

 

http://investor.steelexcel.com/phoenix.zhtml?c=97782&p=irol-newsArticle&ID=2026118

 

"The Company generated Adjusted EBITDA of $9.6 million in the fourth quarter of 2014, as compared to Adjusted EBITDA of $5.8 million in the 2013 quarter, an increase of $3.8 million or 66.4%. For the year ended December 31, 2014, the Company generated Adjusted EBITDA of $40.2 million, as compared to Adjusted EBITDA of $23.8 million in 2013, an increase of $16.4 million, or 69.1%."

 

"At December 31, 2014, the Company had cash and marketable securities totaling $190.4 million."

[LowIQinvestor]

On June 24, 2015, the Board of Directors of Steel Excel Inc., a Delaware corporation (the "Company"), approved the repurchase of up to an aggregate of 500,000 shares of the Company's common stock (the "2015 Repurchase Program"). The 2015 Repurchase Program supersedes and cancels, to the extent any amounts remain available, all previously approved repurchase programs. Any repurchases under the 2015 Repurchase Program will be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market, in compliance with applicable laws and regulations. In connection with the 2015 Repurchase Program, the Company may enter into a Stock Purchase Plan in conformity with the provisions of Rule 10b5-1 and Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. The 2015 Repurchase Program is expected to continue indefinitely, unless shortened by the Board of Directors.

 

The Company's previously announced application for listing on the Nasdaq Capital Market tier continues to be reviewed by Nasdaq.

[LowIQinvestor]

Post got cut off:

 

SXCL is extremely undervalued.