Fairfax stock positions

[Dazel]

If Fairfax were to hedge say half their position by borrowing 50m shares (shorting the stock)...they would indeed shrink the available shares in the float because they would not cover the shorts with their own shares right away because they would still have 43m shares that were not hedged.

 

So they would control approx 150m shares through ownership and short (hedge postions). They could cover anytime but likely would not. They would effectively Shrink the float by another 10%. This would dump lighter fluid on the squeeze...

 

 

[petec]

Blackberry is screaming higher in pre-market trading - over $20 a share.  About a 600 million paper gain for FFH. Now I REALLY hope they sell their common shares before the WSB crowd moves on.

 

The CFO must feel like an eejit :)

[StubbleJumper]

So the BB convertible debs are now worth $1 billion (55m shares x $18)?

 

Speechless.

 

 

SJ

 

[bearprowler6]

So the BB convertible debs are now worth $1 billion (55m shares x $18)?

 

Speechless.

 

 

SJ

 

The question becomes....how will shareholders feel about Prem if he does not capitalize on this parabolic move up in Blackberry? What will you do if the Blackberry price retreats and we find out that Fairfax did not lock in any of the gains?

 

As SJ correctly points out....a $1 billion unrealized gain on the convertible debs alone? Only of value to us if Prem acts to lock in those gains. Would you be okay if he does not act? If he lets this opportunity pass us by?

[StubbleJumper]

So the BB convertible debs are now worth $1 billion (55m shares x $18)?

 

Speechless.

 

 

SJ

 

The question becomes....how will shareholders feel about Prem if he does not capitalize on this parabolic move up in Blackberry? What will you do if the Blackberry price retreats and we find out that Fairfax did not lock in any of the gains?

 

As SJ correctly points out....a $1 billion unrealized gain on the convertible debs alone? Only of value to us if Prem acts to lock in those gains. Would you be okay if he does not act? If he lets this opportunity pass us by?

 

 

My guess is that Prem's immediate need is a 6-pack of new underwear because he must be shitting himself about once per day in January.

 

 

SJ

[petec]

So the BB convertible debs are now worth $1 billion (55m shares x $18)?

 

Speechless.

 

 

SJ

 

The question becomes....how will shareholders feel about Prem if he does not capitalize on this parabolic move up in Blackberry? What will you do if the Blackberry price retreats and we find out that Fairfax did not lock in any of the gains?

 

As SJ correctly points out....a $1 billion unrealized gain on the convertible debs alone? Only of value to us if Prem acts to lock in those gains. Would you be okay if he does not act? If he lets this opportunity pass us by?

 

I don't expect them to monetise. Sharp moves like this don't usually offer big shareholders the chance to liquidate.

[TwoCitiesCapital]

They're up $1.6B on the Blackberry position YTD, on a $10B market cap, and their stock price hasn't moved more than +5% over the same time. Seems to me buying Fairfax is the safest and easiest way to play BB.

 

1) If Prem doesn't hedge and it keeps running - you get more exposure to the upside without the upside increase in risk b/c the price of FFH isn't increasing.

 

2) If Prem successfully hedges it - you've locked in that 16% gain and the market will EVENTUALLY reflect that.

 

3) If Prem doesn't hedge and it crashes - well, Fairfax never ran up with it to begin with so you're risk is limited.

 

Heads you win. Tails you don't lose. You're not going to 1-2x your money on FFH from this so way less sexy than BB outright, but there is very limited risk for any easy 10-30%.

 

So the BB convertible debs are now worth $1 billion (55m shares x $18)?

 

Speechless.

 

 

SJ

 

The question becomes....how will shareholders feel about Prem if he does not capitalize on this parabolic move up in Blackberry? What will you do if the Blackberry price retreats and we find out that Fairfax did not lock in any of the gains?

 

As SJ correctly points out....a $1 billion unrealized gain on the convertible debs alone? Only of value to us if Prem acts to lock in those gains. Would you be okay if he does not act? If he lets this opportunity pass us by?

 

I don't expect them to monetise. Sharp moves like this don't usually offer big shareholders the chance to liquidate.

 

I bet there's a market if they wanted to sell some OTM covered calls to partially hedge - but really what I expect is for them to enter into a TRS with a bank as they've done on many other single name positions to short before.

[bluedevil]

Can they really do a TRS with a bank on a stock that is going haywire and doesn't have a huge market cap?  I get Exxon, but this I would imagine would be much harder to pull off, as much more complicated and difficult for bank to hedge.

[TwoCitiesCapital]

Can they really do a TRS with a bank on a stock that is going haywire and doesn't have a huge market cap?  I get Exxon, but this I would imagine would be much harder to pull off, as much more complicated and difficult for bank to hedge.

 

I imagine you can do TRS on just about anything if you're willing to pay the spread to LIBOR.

 

And the bank just needs to be long the stock. Seems like there are plenty of shares/options available for them to do that with. Between open market purchases, options availability, and others entering the market to short the shares at these levels - should be easy for the intermediary to get long the stock to hedge the TRS.

[StevieV]

So the BB convertible debs are now worth $1 billion (55m shares x $18)?

 

Speechless.

 

 

SJ

 

The question becomes....how will shareholders feel about Prem if he does not capitalize on this parabolic move up in Blackberry? What will you do if the Blackberry price retreats and we find out that Fairfax did not lock in any of the gains?

 

As SJ correctly points out....a $1 billion unrealized gain on the convertible debs alone? Only of value to us if Prem acts to lock in those gains. Would you be okay if he does not act? If he lets this opportunity pass us by?

 

I don't expect them to monetise. Sharp moves like this don't usually offer big shareholders the chance to liquidate.

 

Normally you may not, but this is not a normal situation.  The volume today is again HUGE.

 

123 million shares have traded so far today as I type.  Just over an hour into trading.  I see no reason Prem couldn't dump 10 million shares for $200 million today.  By this afternoon, maybe 10 million shares/$200 million will look low.

 

JOKE I can't help but make - watch Fairfax make a killing on BB and then lose it being short GME

[petec]

So the BB convertible debs are now worth $1 billion (55m shares x $18)?

 

Speechless.

 

 

SJ

 

The question becomes....how will shareholders feel about Prem if he does not capitalize on this parabolic move up in Blackberry? What will you do if the Blackberry price retreats and we find out that Fairfax did not lock in any of the gains?

 

As SJ correctly points out....a $1 billion unrealized gain on the convertible debs alone? Only of value to us if Prem acts to lock in those gains. Would you be okay if he does not act? If he lets this opportunity pass us by?

 

I don't expect them to monetise. Sharp moves like this don't usually offer big shareholders the chance to liquidate.

 

Normally you may not, but this is not a normal situation.  The volume today is again HUGE.

 

 

Fair point.

[bluedevil]

LOL:

 

WATERLOO, ON, Jan. 25, 2021 /PRNewswire/ -- BlackBerry Limited (NYSE: BB; TSX: BB) is issuing this press release in response to a request by the Investment Industry Regulatory Organization of Canada ("IIROC") to comment on recent trading activity of its stock.

 

The Company is not aware of any material, undisclosed corporate developments and has no material change in its business or affairs that has not been publicly disclosed that would account for the recent increase in the market price or trading volume of its common shares.

 

It is possible this has something to do with FFH and desire to monetize?  I'm probably just being hopeful

[Xerxes]

This morning i almost choked when i saw BB. Ran to my computers, couldnt log in to RBC Direct Investing; some IT issue.

Try different computers same freaking IT problem. Try mobile App; barely working. Was really pissed. I dont know how can RBC run its brokerage like this on a normal day.

 

Finally took me an hour to put through 4 orders:

- Sold the rest of my BB shares at $25 CAD (cost at $10 CAD)

- Sold few 02/19 Expiry call option on BB that I bought a week ago

- Bought more FFH

- Unrelated sold Uber completely

 

I don't know what to say about BB that is now largely unhinged, but really feel bad for the insider that sold last week.

It would really suck if FFH after so many years hedged all 100% of it in a way that cap the upside.

 

[petec]

 

- Sold the rest of my BB shares at $25 CAD (cost at $10 CAD)

- Sold few 02/19 Expiry call option on BB that I bought a week ago

- Bought more FFH

 

 

Congrats!

[ourkid8]

I wish i did the same and great move!!!!  I am still holding my shares with a book of $5.XX.  I did add to my Fairfax position earlier today.

 

This morning i almost choked when i saw BB. Ran to my computers, couldnt log in to RBC Direct Investing; some IT issue.

Try different computers same freaking IT problem. Try mobile App; barely working. Was really pissed. I dont know how can RBC run its brokerage like this on a normal day.

 

Finally took me an hour to put through 4 orders:

- Sold the rest of my BB shares at $25 CAD (cost at $10 CAD)

- Sold few 02/19 Expiry call option on BB that I bought a week ago

- Bought more FFH

- Unrelated sold Uber completely

 

I don't know what to say about BB that is now largely unhinged, but really feel bad for the insider that sold last week.

It would really suck if FFH after so many years hedged all 100% of it in a way that cap the upside.

[cwericb]

So the BB convertible debs are now worth $1 billion (55m shares x $18)?

 

Speechless.

SJ

 

How quickly things change! That was this morning when we thought BB pricing was nuts. Mid afternoon and BB is up nearly another 30% ($23.00).

[Xerxes]

Thanks guys,

Of course BB could go $100 (ala AMD) and FFH could be hedging 100% of its position on BB, which would cap their upside, in which case i did something dumb.

 

I got to say this, eventhough it will be for Q4 results, i never been so excited to get to the FFH conference call, just to see how they think of the recent moves on BB and what they are doing about it.

 

 

 

[bluedevil]

So at this point today over 315m shares have traded at prices between 16-19 dollars -- trading volume is 10x normal.  Seems like enough volume for BB to move their 47m shares if they wanted--represents only about 15% of today's volume.

[barminov]

A side note, but an interesting one:

 

Eurobank span out 75% of its Cairo mezzanine and junior NPE tranche in September. These are listed on the Athens exchange as Cairomez and Fairfax has about 30%. As of today this stake is currently worth approximately nothing.

 

However, I believe the underlying portfolio has:

- c. E12bn of credits.

- c. E7.5bn of credits after provisions.

- c. E4bn of real estate collateral, and this may be rising with Greek real estate prices which have turned the corner.

- c. E2.4bn of senior debt.

 

It's not impossible that Cairomez is worth the value of the real estate less the value of the senior tranche (the mezz get paid after the senior tranche has been repaid in full with interest, and after all admin and servicing fees). God knows what that's worth now: I have no idea how long it will take to work out, what the fees are, or what discount rate to use. But these notes are a potentially valuable option on the Greek economy reflating. It has basically been in a depression for a decade and has done a lot of hard policy homework in that time. There is evidence that it has turned (loan books growing despite covid, real estate prices rising). 

 

doValue, the servicer, owns 20% of the mezz/junior. Eurobank retained 5%.

 

Slight correction: they sold 20% of the mezzanine and 50.1% of the junior to the servicer (see: https://www.eurobankholdings.gr/en/grafeio-tupou/etairiki-anakoinosi-24-07-20).

 

So, Cairo Mezz retained 75% of the mezz and 44.9% of the junior (the other 5% of each are at Eurobank). The notional amounts of Cairo senior, mezzanine and junior notes are as follows: €2.4 billion, €1.5 billion and €3.6 billion respectively. Using those numbers, Cairo Mezz has €1.125b of mezz at notional value and €1.62b of juniors at notional value.

 

The press release (https://www.eurobankholdings.gr/en/grafeio-tupou/etairiki-anakoinosi-05-06-20/) that announced the deal with the servicer said:

- 20% of the mezzanine notes and the minimum required percentage of the junior notes are sold to doValue for a consideration in cash. The implied valuation based on the nominal value of the senior notes and the sale price of the mezzanine and junior notes corresponds to 33.3% of the total gross value of the securitized portfolio.

 

If I'm understanding this correctly, they got paid cash of €97.5m for 20% of the mezz and 50.1% of the juniors. (Edit: I wasn't understanding it correctly because Eurobank got paid €14m for them according to the Q3 report). The remaining 75% of the mezz and 44.9% of the junior, with a combined notional of €2.75b, are currently trading at around €30m.

[Ballinvarosig Investors]

I really hope that Prem is standing on a table somewhere in Fairfax HQ with his team of traders around him, beating his chest and telling the assembled traders that he wants them to ram shares of Blackberry down the necks of the WallStreetBets crowd. Epic Wolf of Wall Streets-style ;D

 

Seriously though, this is a once in a lifetime opportunity for Fairfax. We've stood by this thing for 8 years for no reward. If the market wants to take us out, then let it take us out.

[petec]

I'm in two minds.

 

For several years here Blackberry has basically been an option on whether or not the company can build an automotive SAAS business with a big TAM.

 

It just might be doing that, and if it is then it is too early to sell.

 

Prem is somewhat damned if he does and damned if he doesn't.

- If he sells and Blackberry succeeds then he will forego billions in gains that would be absolutely transformative for FFH, and I guarantee that this board will look back in 5 years and call him names for not having a crystal ball despite being on the board.

- If he holds and Blackberry goes back to what it was, then he can't fund quite as much underwriting in a hard market, and I guarantee that this board will call him names for not locking in a billion dollar gain.

 

I genuinely don't know which I would pick. I will be fascinated to see what he does!

[no_free_lunch]

Where did the 47m shares of BB cone from?  I had it at over 60m based on the reported value of the BB stake in the 2019 AR.

[petec]

They’ve had 47m plus the convert for a while I think. Not sure how you got to 60? Possibly dividing the CAD share price into a USD number for the position size?

[petec]

Scratch that. That error would go the other way.

[Thrifty3000]

"Dear Prem,

 

Sell BlackBerry.

 

Sighned,

 

- God"