FFH delisting from NYSE

[Parsad]

We were also getting a lot of coverage from U.S. investment firms and things such as Motley Fool which were the result of being listed in the United States. Have you ever seen anything in the U.S. on Onex or Power Corporation?

 

This is neither a positive, nor a negative...we are measuring intrinsic value, not popularity. 

 

On another note, we have no problem at all buying Canadian stocks in our U.S. dollar account that we use for MPIC Fund I, LP.  Some U.S. discount brokers may be giving you problems, but most won't, and certainly most full-service brokers won't give any problems. 

 

If you are a U.S. resident, and aren't happy with your broker, please feel free to call ours:

 

Ajay Desai/Qui Lam - Morgan Stanley Smith Barney - 1-800-731-9418

 

Their service is simply the best, and we cannot recommend them enough!  Cheers!

[watsa_is_a_randian_hero]

I'm not going to be able to use my FFH as margin equity if I take delivery on the 2011 calls, now that it is going to be a "foreign" listed stock.

 

In order to preserve my margin borrowing capacity I'll need to take delivery of FFH and then move the shares to an account in Canada I assume?  Any tips on best/reasonable Canadian brokerage?

 

 

Get an account with Interactive Brokers.  They give 30% initial and maintenance margin on Toronto FFH.

 

http://www.interactivebrokers.com/en/p.php?f=margin

 

 

[woodstove]

Flip it around ... the NYSE listing created an opening for abuse, and probably has cost FFH investors something like 20 pct of intrinsic value because of dilution at depressed prices.  De-risking is simply prudent.

[watsa_is_a_randian_hero]

Will the NYSE shares be converted to ADRs like other Canadian securities?  Since you cannot hold foreign (non-ADR) securities in an IRA, will the securities be automatically converted?

 

Packer

 

You can hold foreign securities in IRA.  Move to Interactive Brokers if your broker will not let you.

[watsa_is_a_randian_hero]

Since you cannot hold foreign (non-ADR) securities in an IRA

 

I have some good news for you there:

 

I held my NBFCF (Northbridge) shares in my IRA -- traded over the counter.

 

I currently hold SFKUF (SFK.UN) in my IRA -- again, over the counter.

 

This is not even necessary - a good broker will let you hold direct.  IB lets you hold foriegn stocks directly, so OTCBB is not necessary.  Only requirement is you have to purchase FX (CAD) first, then purchase stock.  This is because the IRA is a non-margin account, so you cannot borrow the CAD to buy FFH. 

[StubbleJumper]

I applaud the idea of cost savings, but IMO we are going a bit backwards. On average, volume on the NYSE was higher than in Toronto. Actually, I would be curious to know at this point the number of Fairfax holders being American vs Canadian.

 

We were also getting a lot of coverage from U.S. investment firms and things such as Motley Fool which were the result of being listed in the United States. Have you ever seen anything in the U.S. on Onex or Power Corporation? It is true that this "coverage" was mostly negative in the past, but has turned very positive ever since the CDS gains. Fairfax was gaining followers and investors down there with each day going by and this process will slow down dramatically without our presence on the NYSE. It will be interesting to see if firms such as JP Morgan will continue covering the company and attending conference calls.

 

Why not delisting on the TSX instead to realize cost savings? Similar savings, no restriction for investors that I can think of and still access to the largest capital market in the world.

 

Cardboard

 

 

The cost savings are significant.  I seem to recall that many of us were whining about administrative costs ballooning a few years ago, which Prem attributed partially to Sarbanes Oxley requirements.  So buy back ORH, de-list FFH, and you're golden (er, what about ORH-A and ORH-B?).  Maybe it'll save us $1/sh per year at the FFH level?  De-listing from the TSX probably would not save nearly as much money, as it is really SOX that made US costs silly.

 

I view this as Prem returning to his principles (he had been forced to stray on a few of them).  Years ago, he had a tendency to say that his job was to run FFH with a view for long-term profitability.  With that objective, he disdained media attention, did not care about silly analysts who know bugger-all, and scoffed at all the silly buggers who waste their management team's time on quarterly teleconferences.  He had to adopt the quarterly calls, and he had to make himself available for media over the past few years.  Maybe now he is using FFH's financial strength to consolidate the demands on his time and attention, allowing him to focus on generating wealth (as opposed to granting interviews).

 

It is also possible that Prem had originally imagined doing a traditional offering to US investors through a consortium of investment banks and brokers (ie, IPo/SPO type offering).  In that case, the  US listing could be quite useful to tap into a greater pool of individual investors.  However, if you are using private placement instead to sell $1b of common shares at a time, well who needs the NYSE?

 

SJ

[FFHWatcher]

I figure FFH will save enough money to hire another Brian Bradstreet and another Prem, as long as we don't include the dividend in his comp. ;)

[hyten1]

wondering does anyone know

 

i assume if you own FFH:NYSE in a discount broker that supports canadian exchange, will it get automatically converted to the securities under TSX?

 

i am talking specifically about etrade.

[SharperDingaan]

 

Keep in mind that a NYSE listing exists primarily so that you can issue securities to unsophisticated US investors, & it carries a lot of additional costs with it. Given that FFH issues primarily to sophisticated investors/institutions, & there is no restriction on their obtaining their shares through the TSX requirements, there is little practical reason for the dual listing.

 

The liquidity on the TSX listing rises, there is a more efficient use of the limited FFH float, & there is significantly better market enforcement. If FFH wanted to add float, most folk would also be more comfortable with it being done on the TSX vs the NYSE.

 

SD

 

 

[Uccmal]

You know, I could imagine that FFH is real fed up with NYSE for not stepping forward during the short attacks.  The NYSE did absolutely nothing to help out back then.  

 

The aggregate savings between all the various companies must be pretty big as indicated.  I am wondering if Prem has been talking with the Power Corp guys?

 

My biggest hope is that this is not a precursor to going private.  

[Guest misterstockwell]

I have probably 100 accounts at Ameritrade holding FFH. I spoke with the trading desk this morning. They said that TD Ameritrade will have no problem holding Toronto listed shares, and that they have no issues trading shares on the Toronto or Vancouver exchanges. They have previously told me they won't trade Toronto listed shares, so this is good news. Bottom line? No change.

[NumquamPerdo]

What a wild ride it has been!  It was helpful listing on NYSE when FFH needed capital after the TIG acquisition went bad but man it has been costly for them overall.  Not just the direct costs of a dual listing but the increased cost of capital when they became a short-and-distort target and the psychological toll of dealing with certain Manhattan scum for so long.

 

I think the TSX should market its USD listing service more aggressively.  Money is more mobile than it was 10 years ago and the NYSE risks losing its prominence if it can't maintain a level playing field.

[smw397]

 

My biggest hope is that this is not a precursor to going private.  

 

That was my first concern as well.  In the end I was a bit ambivalent about the ORH buyout but it was well timed for me and wasn't nearly as big as my FFH holding anyway.  I would not want to have to find something else to do with my resources at this point, even if they bought us out for 1.25 BV.

[ubuy2wron]

I'm not going to be able to use my FFH as margin equity if I take delivery on the 2011 calls, now that it is going to be a "foreign" listed stock.

 

In order to preserve my margin borrowing capacity I'll need to take delivery of FFH and then move the shares to an account in Canada I assume?  Any tips on best/reasonable Canadian brokerage?

 

Eric as a US resident no Canadian broker will open an account for you, thank the SEC for this. I am sure you can find a US domiciled broker who will extend margin on Cdn listed securities.

[txlaw]

I have an Etrade account, and at the moment you cannot hold foreign stocks in your retirement accounts.  That may force me to move to someone like Interactive Brokers if I want to hold FFH for the long term.  I'll have to look into it to see how the pricing works over there. 

 

Does anyone have any other suggestions for those who want to hold FFH in their retirement accounts other than IBKR?

 

Also, this brings up another issue that I've been wondering about for a while.  Does anybody know how tax withholding works for Canadian companies that issue dividends?  Does tax withholding for foreign investors differ if you own a Canadian company via the TSX versus the NYSE?  I've been trying to avoid Canadian stocks that issue dividends because I don't know how the distribution process works.

 

Not asking for tax advice -- just general information about how tax withholding for dividends works for U.S. investors in Canadian stocks.

[tooskinneejs]

I have online US accounts with Scottrade.  I just spoke with a broker at Scottrade who said Canadian-listed stocks can be held in regular or IRA accounts.  He said that after the December 10th delisting, I will need to call and place transaction orders by telephone (cannot currently trade Canadian-listed stocks online), but that Scottrade is working to get about 95% of Canadian-listed stocks available for transactions online sometime in the next few months.

 

Bottom line for me, my holdings in Fairfax will remain unaffected but I'll have to pay $27 per transaction by phone until online trades are available for Canadian stocks early next year (presumably at $7).

[Williams406]

Mr. Stockwell,

 

I'm in a similar position to yours with client accounts held at TD Ameritrade. I just spoke with the trading desk and was told that holding and trading securities on the TSE is no problem provided U.S. dollar denomination. So we're good on this score. However, there was a question about the mechanics. Would there be a seamless transition of FFH (NYSE) to FFH.U (TSE, U.S. dollar denominated) or would FFH (NYSE) would need to be sold prior to buying FFH.U. Did you heard anything definitive on this aspect of the delisting?

 

Williams406

[20ppy]

Guys, does this mean I am forced to sell my FFH shares with a big IRS bill if I am with TD Ameritrade? Is there a way to not to sell shares and convert? Even if that means I have to get physical share certificate and move it to another account, it will save me money.

[twacowfca]

Eric, we have a large holding with Fidelity that's traded

on the LSE.  When this was a regular account, we were

told it wasn't marginable, but now that we are dealing

through their institutional desk, they are crediting us

with margin, although they did not notify us about their

change in policy.  We almost never use margin, so our

attitude has been: don't ask, don't tell.  Evidently, these

brokers have different standards for larger accounts.

[Guest misterstockwell]

Mr. Stockwell,

 

I'm in a similar position to yours with client accounts held at TD Ameritrade. I just spoke with the trading desk and was told that holding and trading securities on the TSE is no problem provided U.S. dollar denomination. So we're good on this score. However, there was a question about the mechanics. Would there be a seamless transition of FFH (NYSE) to FFH.U (TSE, U.S. dollar denominated) or would FFH (NYSE) would need to be sold prior to buying FFH.U. Did you heard anything definitive on this aspect of the delisting?

 

Williams406

 

I did not ask about that. I figured that I own shares of Fairfax, which will remain the same no matter where they are listed. I assume there will be no transaction involved, but I better ask!

[Tommm50]

I have an Etrade account, and at the moment you cannot hold foreign stocks in your retirement accounts.  That may force me to move to someone like Interactive Brokers if I want to hold FFH for the long term.  I'll have to look into it to see how the pricing works over there. 

 

Does anyone have any other suggestions for those who want to hold FFH in their retirement accounts other than IBKR?

 

Also, this brings up another issue that I've been wondering about for a while.  Does anybody know how tax withholding works for Canadian companies that issue dividends?  Does tax withholding for foreign investors differ if you own a Canadian company via the TSX versus the NYSE?  I've been trying to avoid Canadian stocks that issue dividends because I don't know how the distribution process works.

 

Not asking for tax advice -- just general information about how tax withholding for dividends works for U.S. investors in Canadian stocks.

 

All Y'all,

 

In looking at the tax forms I see no restriction to owning foreign stocks in an IRA. See  http://www.ira.com/faq/faq-14.htm

 

Where do you get the notion it's a problem?

 

Tommm

[valuecfa]

Guys, does this mean I am forced to sell my FFH shares with a big IRS bill if I am with TD Ameritrade? Is there a way to not to sell shares and convert? Even if that means I have to get physical share certificate and move it to another account, it will save me money.

 

No. There will be a reorganization to another security, not FFH.TO (since your broker doesn't offer canadian holdings directly). This will be a nontaxable reorganization of your shares.

[T-bone1]

with regard to options, I am told that the CBOE will only allow closing transactions (no new positions) - not sure if this takes effect today or once they delist. Existing options will reference FFH in Canada after the delisting and should not be affected.

[txlaw]

I have an Etrade account, and at the moment you cannot hold foreign stocks in your retirement accounts.  That may force me to move to someone like Interactive Brokers if I want to hold FFH for the long term.  I'll have to look into it to see how the pricing works over there. 

 

Does anyone have any other suggestions for those who want to hold FFH in their retirement accounts other than IBKR?

 

Also, this brings up another issue that I've been wondering about for a while.  Does anybody know how tax withholding works for Canadian companies that issue dividends?  Does tax withholding for foreign investors differ if you own a Canadian company via the TSX versus the NYSE?  I've been trying to avoid Canadian stocks that issue dividends because I don't know how the distribution process works.

 

Not asking for tax advice -- just general information about how tax withholding for dividends works for U.S. investors in Canadian stocks.

 

All Y'all,

 

In looking at the tax forms I see no restriction to owning foreign stocks in an IRA. See  http://www.ira.com/faq/faq-14.htm

 

Where do you get the notion it's a problem?

 

Tommm

 

It's not a problem except that my particular broker (Etrade) does not have the capability at this time.  According to some subsequent posts, other discount brokers do have this capability.

 

With respect to tax withholding, my understanding (which might be wrong) is that the Canadian government withholds a percentage of the dividends distributed to foreign holders of Canadian companies.  I was never really sure about how this worked, but it didn't really matter so much to me given my holding period and my position in ORH (versus FFH).  But now I'm thinking it's a good time to try to figure out how one recovers the amount withheld by the Canadian tax authority (perhaps by taking a deduction on one's U.S. returns?).  

[turar]

Guys, does this mean I am forced to sell my FFH shares with a big IRS bill if I am with TD Ameritrade? Is there a way to not to sell shares and convert? Even if that means I have to get physical share certificate and move it to another account, it will save me money.

 

No. There will be a reorganization to another security, not FFH.TO (since your broker doesn't offer canadian holdings directly). This will be a nontaxable reorganization of your shares.

But I'm guessing that new security will not be directly FFH.U? How liquid will it be?