Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?

[Cardboard]

When everything seems lost that is when things turns.

 

Who mentioned about this holding recently? I think we mostly had all written it off when we heard about these accounting issues.

 

I also recall a $100 million valuation for the land alone held by Blue Goose. And Biogen did hit some good success with an Alzheimer drug recently thought to be ineffective. Is TauRX truly worthless?

 

And there is oil in Chad. How much really in that play to be economic is more the question. I am impressed by how fast Delonex is going after it and how much the oil market has improved from only a year ago. Back then $50 oil was the number, there was uncertainty about concluding the sale and this payment on first oil and royalty looked like a pipe dream 4 or 5 years down the road.

 

You just start to add a few wins to this portfolio of 70+ holdings and all of a sudden latest prices for the stock and preferreds look absolutely crazy.

 

Cardboard

 

 

 

[Sportgamma]

When everything seems lost that is when things turns.

 

Who mentioned about this holding recently? I think we mostly had all written it off when we heard about these accounting issues.

 

I also recall a $100 million valuation for the land alone held by Blue Goose. And Biogen did hit some good success with an Alzheimer drug recently thought to be ineffective. Is TauRX truly worthless?

 

And there is oil in Chad. How much really in that play to be economic is more the question. I am impressed by how fast Delonex is going after it and how much the oil market has improved from only a year ago. Back then $50 oil was the number, there was uncertainty about concluding the sale and this payment on first oil and royalty looked like a pipe dream 4 or 5 years down the road.

 

You just start to add a few wins to this portfolio of 70+ holdings and all of a sudden latest prices for the stock and preferreds look absolutely crazy.

 

Cardboard

 

This is precisely what I find so appealing with this situation. Not everything has to go right. If some things go right or at least revert back to adequacy this would be a positive outcome.

[obtuse_investor]

Interesting development.

 

Roumell Asset Management submits letter to Board of Directors of Dundee Corporation

 

https://www.prnewswire.com/news-releases/roumell-asset-management-submits-letter-to-board-of-directors-of-dundee-corporation-300706238.html

[Rod]

Interesting development.

 

Roumell Asset Management submits letter to Board of Directors of Dundee Corporation

 

https://www.prnewswire.com/news-releases/roumell-asset-management-submits-letter-to-board-of-directors-of-dundee-corporation-300706238.html

 

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.

[SafetyinNumbers]

The proposal to offer a discounted extended security to replace the DC.PR.E is a new one that was mentioned on this board before. Obviously any discount would be accretive to NAV and improve the liquidity position which would support the valuation of the DC.PR.B and DC.PR.D.

[gokou3]

Basically Roumell is asking the company to stiff the E holders instead of the common holders.  I like that.  E holders have been living in a fantasy for a long while (until recently) that they would get par back in 2019.

[Rod]

The proposal to offer a discounted extended security to replace the DC.PR.E is a new one that was mentioned on this board before. Obviously any discount would be accretive to NAV and improve the liquidity position which would support the valuation of the DC.PR.B and DC.PR.D.

 

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.

[SafetyinNumbers]

The proposal to offer a discounted extended security to replace the DC.PR.E is a new one that was mentioned on this board before. Obviously any discount would be accretive to NAV and improve the liquidity position which would support the valuation of the DC.PR.B and DC.PR.D.

 

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.

[Rod]

The proposal to offer a discounted extended security to replace the DC.PR.E is a new one that was mentioned on this board before. Obviously any discount would be accretive to NAV and improve the liquidity position which would support the valuation of the DC.PR.B and DC.PR.D.

 

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.

[Rod]

Interesting development.

 

Roumell Asset Management submits letter to Board of Directors of Dundee Corporation

 

https://www.prnewswire.com/news-releases/roumell-asset-management-submits-letter-to-board-of-directors-of-dundee-corporation-300706238.html

 

The story has been picked up by The Globe & Mail:

 

https://www.theglobeandmail.com/business/streetwise/article-dundee-corp-faces-investor-spat-over-preferred-share-repayment/

[bizaro86]

The proposal to offer a discounted extended security to replace the DC.PR.E is a new one that was mentioned on this board before. Obviously any discount would be accretive to NAV and improve the liquidity position which would support the valuation of the DC.PR.B and DC.PR.D.

 

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.

 

I tried to short the E then and couldn't find borrow.

[Rod]

I tried to short the E then and couldn't find borrow.

 

At least you were smart enough to try.

[sculpin]

Through it's holding in Union Group, Dundee indirectly owns 16M shares of ICC Labs (ICC-X), a Cannabis producer in Uruguay. I think it's worth watching because ICC has recently moved up from $1 to $1.70 as it seems to be catching the cannabis wave. At the current price it's worth about 50 cents per Dundee share, or roughly 20% of the market cap. I guess a best case scenario would be that ICC shoots up to $5 or so on a take over or continuation of the bubble, and Union Group sells. Dundee's share of that value would be about $1.40 per share, more than half the current market cap, a not inconsiderable amount.

 

Thanks for noticing that and letting us know

 

A Uruguayan news source has reported that Aurora is in talks to acquire the ICC business. Haven't seen anything from a Canadian source yet.

 

https://www.busqueda.com.uy/nota/una-empresa-productora-de-la-marihuana-oficial-negocia-su-venta-la-principal-compania-de

 

No idea of the legitimacy of the article or report, only thought it might be interesting for Dundee followers.

 

ICC sold to Aurora for $1.95 per share...

 

https://www.newswire.ca/news-releases/aurora-cannabis-to-acquire-south-american-market-leader-icc-labs-692843161.html

 

 

[bizaro86]

Too bad they're taking shares here.

[Rod]

Too bad they're taking shares here.

 

And too bad those shares will be held by Union Group, the company that can't provide audited financial statements. How exactly does that work? Doesn't "can't" mean "won't"? And why wouldn't they? Wouldn't the most reasonable conclusion be that Union Group has been involved in some kind of fraud?

[doc75]

Too bad they're taking shares here.

 

And too bad those shares will be held by Union Group, the company that can't provide audited financial statements. How exactly does that work? Doesn't "can't" mean "won't"? And why wouldn't they? Wouldn't the most reasonable conclusion be that Union Group has been involved in some kind of fraud?

 

Agreed.  I'd like to know a little more about the 30% haircut they applied to the ICC position.  Why that number?

 

I don't have much faith that they'll see any money from Union Group.

[Cardboard]

"Accordingly, during 2017, the Corporation has impaired its carrying value in Union Group to its 40% share of the value of Union Group’s interest in ICC Labs Inc.  In determining its 40% share of the value of ICC Labs Inc., the Corporation applied a liquidity discount  of  30%  to  reflect  the  regulatory escrow  arrangements required under  the  rules  of  the  TSX  Venture  Exchange,  and  to accommodate  any  obligations  that  may  arise  that  would  otherwise  erode  value.    The  Corporation  anticipates  that  the determination of fair value may vary significantly in future periods, both as a result of changes in the price of ICC Labs Inc., and also  as  Union  Group  provides  third-party  evidence  of  the  value  of  its  underlying  assets.    There  can  be  no  certainty  as  to  the magnitude of these potential changes."

 

I think that 30% is a pretty significant discount now considering that Aurora is highly liquid (ICC transaction represents only 3.6% of shares of ACB), there is no hold period per the press release (unless there is in the agreement) and that Union Group other asset is a 5.3 MW hydropower plant in Peru (must be worth something).

 

What are Union Group liabilities is unclear but, I would say that if you write-off the power plant in full, that it should account for the accounting issues. The rest seems to be oil & gas land. There is no mention of debt anywhere.

 

So this asset would be worth (40 million shares of ICC at $1.95 held by Union Group) x 40% held by Dundee or $31.2 million. And this would be tax free since they bought their Union Group stake for $50 million U.S.

 

The bigger question IMO is can they force a liquidation of Union Group (they hold 40%) or force a distribution of ACB shares?

 

We would have to dig into the filings of Union Acquisition Corp. which is registered with the SEC (LTN on NYSE) to try to find out more about the structure of Union Group.

 

Cardboard

[sculpin]

Positive as Dundee holds a position in this exchange - back in 2013 they owned 33%... about $25 million total now??

 

Maverick businessman Ned Goodman has bought a minority stake in CNSX Markets and wants to transform it into a true competitor to the Toronto Stock Exchange. Goodman, CEO of the Toronto-based holding company Dundee Corp., has reportedly teamed up with CNSX chairman Thomas Caldwell and his Urbana Corporation and purchased a 33 per cent interest in the rival exchange. He will also join the board as deputy chairman.

 

Increase in Valuation of CNSX Markets Inc. Shares

NOT FOR DISTRIBUTION TO U.S. WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.

 

TORONTO, Sept. 17, 2018 (GLOBE NEWSWIRE) -- Urbana Corporation (“Urbana”) (TSX & CSE: URB & URB.A) announces today an increase in the valuation of its CNSX Markets Inc. (“CNSX”) shares.

The CNSX operates the Canadian Securities Exchange (“CSE” or “Exchange”).

 

Based on the positive performance of the CSE over the recent quarters, Urbana’s management has increased the valuation of the CNSX shares that Urbana holds from $1.29 to $2.00 per share. This represents an increase of approximately $9.4 million (or 4.2%) in Urbana’s net assets.

 

For 2018 to-date, the results for the CSE’s trade volume and value, as well as the amount of capital raised from equity financings, are all on-pace to far exceed the Exchange’s 2017 record setting results. The total number of listed securities on the CSE recently surpassed the 400 milestone. In total, over $2 billion of capital has been raised through the CSE in 2018 to-date.

 

The CSE’s CEO, Richard Carleton, commented: “Our company’s performance in 2018 is a clear indicator of the CSE’s growing impact on capital formation in the Canadian capital markets. Continuing to achieve trading and corporate finance milestones comes in no small part from the support and advocacy we receive from our listed companies, shareholders and Board.”

 

Urbana’s President, Thomas S. Caldwell, C.M., noted: “We are very pleased with this investment and the results reflect the great leadership and team at the CSE.”

[doc75]

The CSE’s CEO, Richard Carleton, commented: “Our company’s performance in 2018 is a clear indicator of the CSE’s growing impact on capital formation in the Canadian capital markets. Continuing to achieve trading and corporate finance milestones comes in no small part from the support and advocacy we receive from our listed companies, shareholders and Board.”

 

Urbana’s President, Thomas S. Caldwell, C.M., noted: “We are very pleased with this investment and the results reflect the great leadership and team at the CSE.”

 

Isn't the CSE's recent success largely tied to cannabis?  I believe the CSE has come to prominence in this area because the major exchanges in the US and Canada (including the TSX-V) do not allow companies that do cannabis-related business in the US.  The ban is due to somewhat murky legal position, where state and federal laws differ.

 

For instance, MedMen is listed on the CSE, which makes no sense aside from the legal angle.

 

My point is that one has to think that, sooner than later, the major exchanges are going to either accept the murky legal standing or the murkiness will be cleared up, and you can bet that any substantial company on the CSE is going to move swiftly to a bigger exchange.

 

 

 

 

[sculpin]

The CSE’s CEO, Richard Carleton, commented: “Our company’s performance in 2018 is a clear indicator of the CSE’s growing impact on capital formation in the Canadian capital markets. Continuing to achieve trading and corporate finance milestones comes in no small part from the support and advocacy we receive from our listed companies, shareholders and Board.”

 

Urbana’s President, Thomas S. Caldwell, C.M., noted: “We are very pleased with this investment and the results reflect the great leadership and team at the CSE.”

 

Isn't the CSE's recent success largely tied to cannabis?  I believe the CSE has come to prominence in this area because the major exchanges in the US and Canada (including the TSX-V) do not allow companies that do cannabis-related business in the US.  The ban is due to somewhat murky legal position, where state and federal laws differ.

 

For instance, MedMen is listed on the CSE, which makes no sense aside from the legal angle.

 

My point is that one has to think that, sooner than later, the major exchanges are going to either accept the murky legal standing or the murkiness will be cleared up, and you can bet that any substantial company on the CSE is going to move swiftly to a bigger exchange.

Hopefully Dumbdee can monetize both ICC and their investment in the CSE in the next few months while the cannabis market is still on fire. An extra $50mm to $60mm coming from these 2 investments could offset a good portion of the E pref liability.

[Cardboard]

Excellent find Sculpin!

 

There is nothing mentioned about this investment in their recent MD&A's. It must be hidden in the other categories. You should share to Roumell Asset Management to ensure that they know about this little nugget and pressure management to liquidate.

 

That is another $25 million out of nowhere and with the other ICC investment, we now have near enough to redeem most of the DC.PR.E.

 

And whatever is left can easily be extended or paid with holdco cash. I would even venture to say that $25 million is enough to redeem unhappy holders and extend the rest. As I mentioned previously, only a small portion exercised their right earlier this year to get redeemed.

 

So between these two things that were totally unexpected (most had written off in full their expectation for Union Group recovery), we essentially put to rest any refinancing issue.

 

So now attention should turn to bigger investments such as Chad over the coming weeks to see if we get first oil, refinancing of Parq and a potential sale of Blue Goose.

 

Cardboard

[petec]

Cardboard, are you confident Dundee can actually realise cash from the ICC transaction?

[Rod]

Excellent find Sculpin!

 

There is nothing mentioned about this investment in their recent MD&A's. It must be hidden in the other categories. You should share to Roumell Asset Management to ensure that they know about this little nugget and pressure management to liquidate.

 

That is another $25 million out of nowhere and with the other ICC investment, we now have near enough to redeem most of the DC.PR.E.

 

And whatever is left can easily be extended or paid with holdco cash. I would even venture to say that $25 million is enough to redeem unhappy holders and extend the rest. As I mentioned previously, only a small portion exercised their right earlier this year to get redeemed.

 

So between these two things that were totally unexpected (most had written off in full their expectation for Union Group recovery), we essentially put to rest any refinancing issue.

 

So now attention should turn to bigger investments such as Chad over the coming weeks to see if we get first oil, refinancing of Parq and a potential sale of Blue Goose.

 

Cardboard

 

Hopefully, Parq doesn't end up killing them first! I'm worried about that asset. It isn't just refinancing that is needed. It's also running a big operating loss. The fact that we are almost at the end of Q3 and there have been no announcements of any restructuring is ominous to me. I wonder how they are going to carry this thing through the winter season.

[Cardboard]

Unless I missed it, Parq is non-recourse isn't?

 

Obviously, if they want to retain their equity investment, they have to keep injecting cash along with their partners to take it through start-up.

 

Let's not be too dire about this one. This is prime Vancouver real estate with international hotels. There has been some slowdown due to crack down on money laundering by this "make people feel good", job destroyer, useless B.C. NDP government. This is temporary IMO. And Asians tend to love gambling and there are quite a few living in the area.

 

Moreover, I never really felt the need to head straight for a casino in the middle of the summer: too many other fun things to do. I would imagine that I am not alone and that winter time, grey/rainy Vancouver will bring in more visitors.

 

Regarding ICC/Union Group, yes I do believe that a recovery is quite probable. They own 40% of Union so they must have some say in what goes and/or there must be terms in the shareholder agreement indicating how one withdraws. I would also be shocked if the accounting issues at Union Group mean a full wipe-out of that investment. ICC is by far their largest and is just an independent holding unlike their hydro asset.

 

The only way to wipe that out is that they have more hidden liabilities than this is worth: debt, unpaid taxes. Seems quite improbable to me but, who knows? That company just sponsored Union Acquisition Corp. registered with the SEC as I mentioned previously. If they are so fraudulent then, who would have injected funds into this?

 

Finally, I am more confident about the Canadian cannabis industry sticking around. I would not buy since it seems awfully expensive but, players such as WEED and ACB will have a large market share and there are some provinces even now banning people from raising their own weed despite this being legal!

 

My grandfather used to raise his own tobacco in his garden and nobody bothered him. You can also produce beer and wine at home for your own consumption.

 

That is another fine Trudeau accomplishment or creating a regulated industry so that him, his cronies and government can all line up their pockets

 

Cardboard

[Rod]

Unless I missed it, Parq is non-recourse isn't?

 

Obviously, if they want to retain their equity investment, they have to keep injecting cash along with their partners to take it through start-up.

 

Let's not be too dire about this one. This is prime Vancouver real estate with international hotels. There has been some slowdown due to crack down on money laundering by this "make people feel good", job destroyer, useless B.C. NDP government. This is temporary IMO. And Asians tend to love gambling and there are quite a few living in the area.

 

Moreover, I never really felt the need to head straight for a casino in the middle of the summer: too many other fun things to do. I would imagine that I am not alone and that winter time, grey/rainy Vancouver will bring in more visitors.

 

I think the danger with Parq is that all the money they have invested to date is gone and everything they add goes down the tubes as well. It's not a given that they would recognize the right time to pull the plug and allow the project to go bankrupt. I hope it works out, but there's no guarantee that an expensive complex entertainment project works out. I'm sure there is some value in the project but it may all end up in the hands of the banks that loaned the construction money.