Fairfax stock positions

[Hoodlum]

On 1/8/2025 at 3:42 PM, gfp said:

Look at Eurobank breaking out!  I hadn't noticed until your post

 

 

it is Interesting that Go Digit has gone in the opposite direction the past few weeks and is now back to the IPO price.  I wonder what that is about.

[TwoCitiesCapital]

7 hours ago, Hoodlum said:

 

it is Interesting that Go Digit has gone in the opposite direction the past few weeks and is now back to the IPO price.  I wonder what that is about.

I know I saw India's GDP growth is expected to slow some in 2025 - perhaps thats weighing on the market as a whole? The NIFTY index is down 10-12% since September?

 

Also, while dangerous to apply generalizations to individual circumstances, my understanding is that MOST IPOs return to their IPO price, if not lower, within 3-years of the IPO once the hype and limited volume/access has faded. This is precisely why I have a rule to not buy IPOs in the first 2-years in place for my portfolios. 

Edited January 10, 2025 by TwoCitiesCapital

[Hoodlum]

Fairfax is selling 2.2% of Eurobank to meet regulatory ownership requirement of minority ownership to be below 33%.  Price will be announced tomorrow.

https://www.tovima.com/finance/eurobank-prem-watsa-s-fairfax-reducing-stake-to-33/

 

Canadian billionaire investor and businessman Prem Watsa commenced the placement of 2.2% of Greek systemic lender Eurobank’s shares – some 80 million shares in total – on Wednesday, with the price per share to be announced on Thursday morning.

 

According to sources from within the bank, the founder and CEO of Fairfax Financial Holdings was reducing the holding company’s stake in ATHEX-listed Eurobank to meet regulatory conditions – which mandate a minority stake of no more than 33.3% – and is not part of any change in the composition of the bank’s main shareholders.

 

According to market watchers, the price per share was expected to be just under of the current market rate.

 

According to a Reuters dispatch, demand for the placement is already oversubscribed.

Watsa had previously received a special exemption from banking regulators to own a stake higher than 33.3% but without retaining board voting rights. That exemption was recently rescinded.

[nwoodman]

53 minutes ago, Hoodlum said:

Fairfax is selling 2.2% of Eurobank to meet regulatory ownership requirement of minority ownership to be below 33%.  Price will be announced tomorrow.

https://www.tovima.com/finance/eurobank-prem-watsa-s-fairfax-reducing-stake-to-33/

 

Canadian billionaire investor and businessman Prem Watsa commenced the placement of 2.2% of Greek systemic lender Eurobank’s shares – some 80 million shares in total – on Wednesday, with the price per share to be announced on Thursday morning.

 

According to sources from within the bank, the founder and CEO of Fairfax Financial Holdings was reducing the holding company’s stake in ATHEX-listed Eurobank to meet regulatory conditions – which mandate a minority stake of no more than 33.3% – and is not part of any change in the composition of the bank’s main shareholders.

 

According to market watchers, the price per share was expected to be just under of the current market rate.

 

According to a Reuters dispatch, demand for the placement is already oversubscribed.

Watsa had previously received a special exemption from banking regulators to own a stake higher than 33.3% but without retaining board voting rights. That exemption was recently rescinded.

That sounds more like they are taking money off the table to me than compliance.  The upside is that that it will free up Eurobank to repurchase shares.  

 

Definitely closer to FV than it was but still cheap. Should give Fairfax around 80mx€2.40/.96=$USD200m pre-tax 

 

Edit: it gives them a mark too

 

https://www.eurobankholdings.gr/en/investor-relations/shareholders/shareholding-structure

Edited January 22, 2025 by nwoodman

[dartmonkey]

If Fairfax had 32.89% on 2024-12-31, how did they get over 33.3%, requiring a 2.2% reduction? Eurobank repurchased shares in 2023, but not in 2024, as far as I can tell, and I don't see any repurchase announcement for 2025.

 

 

[Viking]

35 minutes ago, nwoodman said:

That sounds more like they are taking money off the table to me than compliance.  The upside is that that it will free up Eurobank to repurchase shares.  

 

Definitely closer to FV than it was but still cheap. Should give Fairfax around 80mx€2.40/.96=$USD200m pre-tax 

 

Edit: it gives them a mark too

 

https://www.eurobankholdings.gr/en/investor-relations/shareholders/shareholding-structure

 

@nwoodman, thanks for highlighting magnitude... US$200 million is a meaningful amount. At what point would something like this require Fairfax to update its carrying value on Eurobank (to their selling price)? That would trigger a massive unrealized gain. 

 

I wonder if this also ties into capital return at Eurobank moving forward. We will find out shortly what Eurobank has planned (for 2024 earnings): 

• Continue with dividend
• Buy back stock

Perhaps Eurobank wants to buy back stock. Perhaps the Greek regulator signalled that Fairfax would need to get their ownership position below 33% before approving a buyback. 

 

It is nice that Fairfax was able wait a year to do this - Eurobank's stock is much higher.  

 

[nwoodman]

Looking at this more closely, I don't think the sale gives them the ability to mark to market because of the rules around equity method accounting:

 

"To capture the excess of fair value on their balance sheet, Fairfax would need to:

1. Reclassify the Eurobank stake as a financial asset (FVTPL or FVOCI).

2. Lose significant influence over Eurobank (e.g., reduce stake or governance involvement).

3. Take an impairment reversal under IFRS if applicable.

 

Absent these changes, the excess fair value can only be disclosed but not formally reflected in the balance sheet under the equity method."

 

However, the gain on sale of the 80m shares does flow through the P&L.  Roughly (2.4-0.92)*80m/0.96=123.3 m =123.3/22=5.6 per share 

Edited January 22, 2025 by nwoodman

[Viking]

6 minutes ago, nwoodman said:

Looking at this more closely, I don't think the sale gives them the ability to mark to market because of the rules around equity method accounting:

 

"To capture the excess of fair value on their balance sheet, Fairfax would need to:

1. Reclassify the Eurobank stake as a financial asset (FVTPL or FVOCI).

2. Lose significant influence over Eurobank (e.g., reduce stake or governance involvement).

3. Take an impairment reversal under IFRS if applicable.

 

Absent these changes, the excess fair value can only be disclosed but not formally reflected in the balance sheet under the equity method."

 

However, the gain on sale of the 80m shares does flow the P&L.  Roughly (2.4-0.92)*80m/0.96=123.3 m =123.3/22=5.6 per share 

 

@nwoodman , got it! Thanks for the explanation. 

 

In terms of how much of Eurobank that Fairfax owns, perhaps we can use the dividend payment as a guide. Fairfax received 34.6% of the total dividend payment ($128/370).

 

From Fairfax's Q3 earnings report.

 

"On July 31, 2024 Eurobank paid a dividend of approximately $370 (€342). The company’s share of that dividend was approximately $128 (€118), which will be recorded in the company's consolidated financial reporting in the third quarter of 2024 as a reduction of Eurobank's carrying value under the equity method of accounting."

[nwoodman]

@Viking, when this came up a while back there was a view that they were over the reported 33.29%.  That div calculation suggests the same

[Hoodlum]

1 hour ago, nwoodman said:

That sounds more like they are taking money off the table to me than compliance.  The upside is that that it will free up Eurobank to repurchase shares.  

 

Definitely closer to FV than it was but still cheap. Should give Fairfax around 80mx€2.40/.96=$USD200m pre-tax 

 

Edit: it gives them a mark too

 

https://www.eurobankholdings.gr/en/investor-relations/shareholders/shareholding-structure

 

It certainly looks like this was driven by compliance.  The link I provided specifically mentioned that the exemption to hold over 33.3% was recently rescinded.  The link you referenced displays the current voting rights for Fairfax, not the ownership of shares. 

 

This was how the regulators allowed Fairfax to own over 33.3%, by limiting their voting right.  This sale will now bring their shares ownership in line with their voting rights, meeting the regulator requirements.

[Hoodlum]

1 hour ago, Viking said:

 

@nwoodman , got it! Thanks for the explanation. 

 

In terms of how much of Eurobank that Fairfax owns, perhaps we can use the dividend payment as a guide. Fairfax received 34.6% of the total dividend payment ($128/370).

 

From Fairfax's Q3 earnings report.

 

"On July 31, 2024 Eurobank paid a dividend of approximately $370 (€342). The company’s share of that dividend was approximately $128 (€118), which will be recorded in the company's consolidated financial reporting in the third quarter of 2024 as a reduction of Eurobank's carrying value under the equity method of accounting."

That would suggest their shares would be brought down  to 32.4% (34.6-2.2).  Fairfax may have decided to bring their ownership to below 33.3%, so they would not need to immediately adjust after any Eurobank buybacks. 
 

 

Edited January 23, 2025 by Hoodlum

[SafetyinNumbers]

1 hour ago, Hoodlum said:

That would suggest their shares would be brought down  to 32.4% (34.6-2.2).  Fairfax may have decided to bring their ownership to below 33.3%, so they would not need to immediately adjust after any Eurobank buybacks. 
 

 

They could participate pro rata in buybacks much like Exxon does when imperial Oil does buybacks.

[nwoodman]

Nice numbers from Digit

 

https://www.business-standard.com/markets/news/go-digit-general-insurance-shares-rally-9-after-strong-q3-details-here-125012300348_1.html

 

https://www.ndtvprofit.com/markets/go-digit-general-insurance-share-price-jumps-as-q3-profit-nearly-triples

 

Market loving it after the recent Indian sell off

[Hoodlum]

Here is the press release from Eurobank on the Fairfax shares that were sold today.  Shares closed at Euro 2.39 today.

 

https://www.eurobankholdings.gr/en/grafeio-tupou/etairiki-anakoinosi-23-01-2025

 

Eurobank Ergasias Services and Holdings S.A. (“Eurobank”) announces that it has been informed by the official announcement of its shareholder, Fairfax Financial Holdings Limited (“Fairfax”) of the following:

 

Fairfax has successfully sold 80 million ordinary shares (the “Shares”) of Eurobank, corresponding to approximately 2.2% of Eurobank’s share capital, at a price of Euro 2.33 per Share, through an accelerated book building procedure reserved for qualified investors (the “Transaction”).

 

The total proceeds of the Transaction amount to approximately 186 million euros. Settlement is expected to occur on or around January 27th, 2025.

 

This disposal represents a mandatory technical adjustment to Fairfax’s significant equity holding in Eurobank and does not reflect in any way a view on Eurobank’s valuation or long-term prospects. Following the Transaction, Fairfax will retain an equity stake of around, but below 33% of Eurobank’s share capital and will continue to remain a long-term, committed reference shareholder of Eurobank. Fairfax has also agreed to a 180-day lock-up period from the closing of the Transaction with respect to its remaining shares in Eurobank, subject to customary exceptions.

[petec]

20 hours ago, nwoodman said:

That sounds more like they are taking money off the table to me than compliance.

 

Highly unlikely that they would outright lie about the reason. Should be easy enough to check whether the regulator did rescind permission.

 

20 hours ago, nwoodman said:

The upside is that that it will free up Eurobank to repurchase shares.

 

I'd rather they flowed dividends to Fairfax to redeploy. Long term I think that's more tax efficient - I don't think FFH pays tax on dividends received (?) but presume it does on constant sales of shares to stay below the threshold. Not sure though.

[petec]

20 minutes ago, Hoodlum said:

Fairfax has successfully sold 80 million ordinary shares (the “Shares”) of Eurobank, corresponding to approximately 2.2% of Eurobank’s share capital, at a price of Euro 2.33 per Share, through an accelerated book building procedure reserved for qualified investors (the “Transaction”).

 

It's actually really good to see that they can liquidate chunks of this holding reasonably close to the market price. I have always felt there was a risk around that. 

Edited January 23, 2025 by petec

[villainx]

8 hours ago, petec said:

I have always felt there was a risk around that. 

 

That's partly why I haven't sold my 2.2% position in  ...   okay, I don't have 2.2% in any non controlling corporation.

[SafetyinNumbers]

8 hours ago, petec said:

 

It's actually really good to see that they can liquidate chunks of this holding reasonably close to the market price. I have always felt there was a risk around that. 

It’s the biggest company in the Greek ETF. It’s like saying it would be hard to do a secondary in Royal Bank. 

[villainx]

What's Royal Bank?  A UK thing?

[mananainvesting]

16 minutes ago, villainx said:

What's Royal Bank?  A UK thing?

Its a canadian Bank, #1 in marketcap on the TSX. 

[ValueNation]

19 minutes ago, villainx said:

What's Royal Bank?  A UK thing?

Biggest bank in Canada

[Dazel]

Viking,

 

Our work horse.

 

What number should we expect for annual earnings…unless Bradstreet sold bonds at the beginning of the quarter  they will be down in the fourth quarter mark to market…$800m paper gain in the third quarter.

[dartmonkey]

21 hours ago, petec said:

 

It's actually really good to see that they can liquidate chunks of this holding reasonably close to the market price. I have always felt there was a risk around that. 

I dunno, count me as disappointed - I don't see why they would expose themselves to being a forced seller below market prices. Sure, a 5-10c discount on 80m shares is just EU4-8m, but that shouldn't happen. I wonder why they couldn't get a friendly partner like OMERS to 'buy' them with a deal to buy them back at some point, but maybe it's not enough money to be worth the bother. It seems like such a good deal, I have bought a few shares recently, so it kind of grates to see them selling them below market price.

[KFRCanuk]

16 hours ago, ValueNation said:

Biggest bank in Canada

 

Yoga pants are 18th. FFH is 24th.

Edited January 24, 2025 by KFRCanuk

[Viking]

5 hours ago, Dazel said:

Viking,

 

Our work horse.

 

What number should we expect for annual earnings…unless Bradstreet sold bonds at the beginning of the quarter  they will be down in the fourth quarter mark to market…$800m paper gain in the third quarter.

 

@Dazel , my last earnings update was mid-November. My guess then was basic earnings would come in around $160/share. I think $160 to $165/share is a reasonable number to use as a 'normalized' level of earnings for Fairfax today. 

 

There will be lots of puts and takes in Q4 (some of these have not been incorporated into my mid-Nov update);

- do we see growth resume in net premiums at Odyssey and Brit?

- spike in interest rates further out on the curve will likely be a modest headwind (unrealized losses on bonds > IFRS impact on insurance liabilities).

- mark to market investment gains = $200 million?

- Stelco sale  = $366 million gain

- Peak revaluation = ? gain

- AGT Food Ingredients sale of rail business = ? gain

- currency will be a headwind, perhaps meaningful (US$ strength) 

- adverse development at runoff of $150 to $200 million?

- tax rate has been a headwind (22 to 25% guide, from low 20%)

- fall in shares outstanding is a tailwind

 

Bottom line, my guess is we get a good quarter. 

 

Edited January 24, 2025 by Viking