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When looking at book value per share, wouldn't it be fair to adjust the Investments in Associates to Fair Value. ($4,684.7 carrying value - $3,669.0 fair value = $1,087 impact to Common Equity ... $11,458.7 common equity - $1,087 = $10,371.7 adjust common equity divided by 26.487 shares outstanding = $391 adjusted BV per share ... $313 share price / $391 is 0.8x book value). Still cheap at 0.8x but not as cheap. Thoughts?

 

I think you need to tax effect the loss that you are embedding, but this is how I think about it as well.

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When looking at book value per share, wouldn't it be fair to adjust the Investments in Associates to Fair Value. ($4,684.7 carrying value - $3,669.0 fair value = $1,087 impact to Common Equity ... $11,458.7 common equity - $1,087 = $10,371.7 adjust common equity divided by 26.487 shares outstanding = $391 adjusted BV per share ... $313 share price / $391 is 0.8x book value). Still cheap at 0.8x but not as cheap. Thoughts?

 

I think you need to tax effect the loss that you are embedding, but this is how I think about it as well.

 

Thx. Would have to do that with gains as well. Including share-based payment awards, BV per share is closer to $376 which would be 0.83x BV.

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When looking at book value per share, wouldn't it be fair to adjust the Investments in Associates to Fair Value. ($4,684.7 carrying value - $3,669.0 fair value = $1,087 impact to Common Equity ... $11,458.7 common equity - $1,087 = $10,371.7 adjust common equity divided by 26.487 shares outstanding = $391 adjusted BV per share ... $313 share price / $391 is 0.8x book value). Still cheap at 0.8x but not as cheap. Thoughts?

 

I think that’s a valid and necessary exercise, but it does miss the fact that the holdings might be undervalued. I think many are, and I can’t be bothered (or just can’t) to assemble that portfolio myself, so occasionally when I need some good news I calculate Fairfax’s book value on a look through basis for Eurobank and Atlas ;)

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Yep, the BB shareholders are up in arms.  I guess their underlying assumption was that either BB doesn't need the liquidity or that there is a long line-up of potential lenders who would be prepared to lend a half-billion at 3.75% with no conversion privilege.  I am from the school of thought that FFH's last note flotation was at 4 5/8%, so if that's what FFH pays for debt, what should a riskier outfit like BB pay?  Maybe 7%?  Seriously, a 15 minute walk through their financials for the past 3 or 4 years is enough to make a guy want to puke. 

 

Maybe there is a long line-up of outfits wanting to lend money to companies that have drastically transformed their business and are cashflow negative?  I don't see it, but I've been wrong plenty of times before...

 

 

SJ

 

 

 

Blackberry shareholders are still up in arms about this: 

 

 

https://www.newswire.ca/news-releases/concerned-shareholder-objects-to-blackberry-s-related-party-transactions-with-fairfax-851354230.html

 

 

 

SJ

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Yep, the BB shareholders are up in arms.  I guess their underlying assumption was that either BB doesn't need the liquidity or that there is a long line-up of potential lenders who would be prepared to lend a half-billion at 3.75% with no conversion privilege.  I am from the school of thought that FFH's last note flotation was at 4 5/8%, so if that's what FFH pays for debt, what should a riskier outfit like BB pay?  Maybe 7%?  Seriously, a 15 minute walk through their financials for the past 3 or 4 years is enough to make a guy want to puke. 

 

Maybe there is a long line-up of outfits wanting to lend money to companies that have drastically transformed their business and are cashflow negative?  I don't see it, but I've been wrong plenty of times before...

 

 

SJ

 

 

 

Blackberry shareholders are still up in arms about this: 

 

 

https://www.newswire.ca/news-releases/concerned-shareholder-objects-to-blackberry-s-related-party-transactions-with-fairfax-851354230.html

 

 

 

SJ

 

Your prior actions tend to form your reputation...

 

"Fairfax and Mr. Watsa have a history, when presented with a conflict of interest, of working against the interests of minority shareholders and for the benefit of Fairfax. In September 2019, the Québec Superior Court rendered a judgment in which it found that Mr. Watsa and Fairfax, as insiders of Fibrek Inc., acted in a "blatant conflict of interest situation" for the benefit of Fairfax by enabling the acquisition of Fibrek at the "lowest cost possible," to the detriment of Fibrek's minority shareholders who were bought out at an unfairly low price. The Court also found that despite the trust and confidence Fibrek placed in Mr. Watsa and Fairfax, Mr. Watsa purposely refrained from disclosing Fairfax's true intentions to Fibrek management."

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Yep, the BB shareholders are up in arms.  I guess their underlying assumption was that either BB doesn't need the liquidity or that there is a long line-up of potential lenders who would be prepared to lend a half-billion at 3.75% with no conversion privilege.  I am from the school of thought that FFH's last note flotation was at 4 5/8%, so if that's what FFH pays for debt, what should a riskier outfit like BB pay?  Maybe 7%?  Seriously, a 15 minute walk through their financials for the past 3 or 4 years is enough to make a guy want to puke. 

 

Maybe there is a long line-up of outfits wanting to lend money to companies that have drastically transformed their business and are cashflow negative?  I don't see it, but I've been wrong plenty of times before...

 

 

SJ

 

 

 

Blackberry shareholders are still up in arms about this: 

 

 

https://www.newswire.ca/news-releases/concerned-shareholder-objects-to-blackberry-s-related-party-transactions-with-fairfax-851354230.html

 

 

 

SJ

 

Your prior actions tend to form your reputation...

 

"Fairfax and Mr. Watsa have a history, when presented with a conflict of interest, of working against the interests of minority shareholders and for the benefit of Fairfax. In September 2019, the Québec Superior Court rendered a judgment in which it found that Mr. Watsa and Fairfax, as insiders of Fibrek Inc., acted in a "blatant conflict of interest situation" for the benefit of Fairfax by enabling the acquisition of Fibrek at the "lowest cost possible," to the detriment of Fibrek's minority shareholders who were bought out at an unfairly low price. The Court also found that despite the trust and confidence Fibrek placed in Mr. Watsa and Fairfax, Mr. Watsa purposely refrained from disclosing Fairfax's true intentions to Fibrek management."

 

Your prior actions tend to form your reputation!  More examples please, because if you are going to point to 2 transactions out of some 300-400 conducted over 30 years...please!  The only reason  Blackberry is even around is because of Prem putting John Chen in charge.  Cheers!

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“The only reason  Blackberry is even around is because of Prem putting John Chen in charge.”

 

Oh I don’t disagree with that, it’s like when he had Bill Gregson turn around The Brick. However unfortunately, one tends to get remembered for the less savory things one does more than the good one does. Just saying.

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“The only reason  Blackberry is even around is because of Prem putting John Chen in charge.”

 

Oh I don’t disagree with that, it’s like when he had Bill Gregson turn around The Brick. However unfortunately, one tends to get remembered for the less savory things one does more than the good one does. Just saying.

 

True.  Cheers!

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Yep, the BB shareholders are up in arms.  I guess their underlying assumption was that either BB doesn't need the liquidity or that there is a long line-up of potential lenders who would be prepared to lend a half-billion at 3.75% with no conversion privilege.  I am from the school of thought that FFH's last note flotation was at 4 5/8%, so if that's what FFH pays for debt, what should a riskier outfit like BB pay?  Maybe 7%?  Seriously, a 15 minute walk through their financials for the past 3 or 4 years is enough to make a guy want to puke. 

 

Maybe there is a long line-up of outfits wanting to lend money to companies that have drastically transformed their business and are cashflow negative?  I don't see it, but I've been wrong plenty of times before...

 

 

SJ

 

 

 

Blackberry shareholders are still up in arms about this: 

 

 

https://www.newswire.ca/news-releases/concerned-shareholder-objects-to-blackberry-s-related-party-transactions-with-fairfax-851354230.html

 

 

 

SJ

 

Your prior actions tend to form your reputation...

 

"Fairfax and Mr. Watsa have a history, when presented with a conflict of interest, of working against the interests of minority shareholders and for the benefit of Fairfax. In September 2019, the Québec Superior Court rendered a judgment in which it found that Mr. Watsa and Fairfax, as insiders of Fibrek Inc., acted in a "blatant conflict of interest situation" for the benefit of Fairfax by enabling the acquisition of Fibrek at the "lowest cost possible," to the detriment of Fibrek's minority shareholders who were bought out at an unfairly low price. The Court also found that despite the trust and confidence Fibrek placed in Mr. Watsa and Fairfax, Mr. Watsa purposely refrained from disclosing Fairfax's true intentions to Fibrek management."

 

Your prior actions tend to form your reputation!  More examples please, because if you are going to point to 2 transactions out of some 300-400 conducted over 30 years...please!  The only reason  Blackberry is even around is because of Prem putting John Chen in charge.  Cheers!

 

Its not just 2-3 transactions..look at what they are doing with Atlas Mara. In May2020 ATMA controlled by fairfax reported tangible book value around 2.50 and now they are selling it  to themselves for 40 cents . with zero explanation.  They gave a ratchet clause while jacking up value of bangalore airport. With no explanation. There is a reason market does not trust them anymore . FIH, FAH trading at 50% of reported BV and FFH probably off 20-25% too.

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Yes. The “Fair and Friendly” portion of Fairfax has left the building long ago. The judge’s remarks in the Fibrek case and Prem’s performance at the trial has caused further substantial damage to the reputation of both Prem and Fairfax. It is quite unfortunate given their previous reputation.

 

I would humbly suggest that Fairfax would be well advised to get to work on their PR for starters. And secondly to clean up their act and give a little more thought to appearances.

 

I am not going to pretend to tell Prem how to run his business, but appearance are important. If you are going to operate close to the line in some instances, at least try to do it with a little guile.

 

Leadership was once defined as ... “The art of telling a man to go to Hell - in such a way as he cannot wait to get there.”

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Yep, the BB shareholders are up in arms.  I guess their underlying assumption was that either BB doesn't need the liquidity or that there is a long line-up of potential lenders who would be prepared to lend a half-billion at 3.75% with no conversion privilege.  I am from the school of thought that FFH's last note flotation was at 4 5/8%, so if that's what FFH pays for debt, what should a riskier outfit like BB pay?  Maybe 7%?  Seriously, a 15 minute walk through their financials for the past 3 or 4 years is enough to make a guy want to puke. 

 

Maybe there is a long line-up of outfits wanting to lend money to companies that have drastically transformed their business and are cashflow negative?  I don't see it, but I've been wrong plenty of times before...

 

 

SJ

 

 

 

Blackberry shareholders are still up in arms about this: 

 

 

https://www.newswire.ca/news-releases/concerned-shareholder-objects-to-blackberry-s-related-party-transactions-with-fairfax-851354230.html

 

 

 

SJ

 

Your prior actions tend to form your reputation...

 

"Fairfax and Mr. Watsa have a history, when presented with a conflict of interest, of working against the interests of minority shareholders and for the benefit of Fairfax. In September 2019, the Québec Superior Court rendered a judgment in which it found that Mr. Watsa and Fairfax, as insiders of Fibrek Inc., acted in a "blatant conflict of interest situation" for the benefit of Fairfax by enabling the acquisition of Fibrek at the "lowest cost possible," to the detriment of Fibrek's minority shareholders who were bought out at an unfairly low price. The Court also found that despite the trust and confidence Fibrek placed in Mr. Watsa and Fairfax, Mr. Watsa purposely refrained from disclosing Fairfax's true intentions to Fibrek management."

 

Your prior actions tend to form your reputation!  More examples please, because if you are going to point to 2 transactions out of some 300-400 conducted over 30 years...please!  The only reason  Blackberry is even around is because of Prem putting John Chen in charge.  Cheers!

 

Its not just 2-3 transactions..look at what they are doing with Atlas Mara. In May2020 ATMA controlled by fairfax reported tangible book value around 2.50 and now they are selling it  to themselves for 40 cents . with zero explanation.  They gave a ratchet clause while jacking up value of bangalore airport. With no explanation. There is a reason market does not trust them anymore . FIH, FAH trading at 50% of reported BV and FFH probably off 20-25% too.

 

Given that ATMA is trading at 32c, are you suggesting they underpaid or overpaid? Bearing in mind there are minorities on both sides of the transaction?

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Yep, the BB shareholders are up in arms.  I guess their underlying assumption was that either BB doesn't need the liquidity or that there is a long line-up of potential lenders who would be prepared to lend a half-billion at 3.75% with no conversion privilege.  I am from the school of thought that FFH's last note flotation was at 4 5/8%, so if that's what FFH pays for debt, what should a riskier outfit like BB pay?  Maybe 7%?  Seriously, a 15 minute walk through their financials for the past 3 or 4 years is enough to make a guy want to puke. 

 

Maybe there is a long line-up of outfits wanting to lend money to companies that have drastically transformed their business and are cashflow negative?  I don't see it, but I've been wrong plenty of times before...

 

 

SJ

 

 

 

Blackberry shareholders are still up in arms about this: 

 

 

https://www.newswire.ca/news-releases/concerned-shareholder-objects-to-blackberry-s-related-party-transactions-with-fairfax-851354230.html

 

 

 

SJ

 

Your prior actions tend to form your reputation...

 

"Fairfax and Mr. Watsa have a history, when presented with a conflict of interest, of working against the interests of minority shareholders and for the benefit of Fairfax. In September 2019, the Québec Superior Court rendered a judgment in which it found that Mr. Watsa and Fairfax, as insiders of Fibrek Inc., acted in a "blatant conflict of interest situation" for the benefit of Fairfax by enabling the acquisition of Fibrek at the "lowest cost possible," to the detriment of Fibrek's minority shareholders who were bought out at an unfairly low price. The Court also found that despite the trust and confidence Fibrek placed in Mr. Watsa and Fairfax, Mr. Watsa purposely refrained from disclosing Fairfax's true intentions to Fibrek management."

 

Your prior actions tend to form your reputation!  More examples please, because if you are going to point to 2 transactions out of some 300-400 conducted over 30 years...please!  The only reason  Blackberry is even around is because of Prem putting John Chen in charge.  Cheers!

 

Its not just 2-3 transactions..look at what they are doing with Atlas Mara. In May2020 ATMA controlled by fairfax reported tangible book value around 2.50 and now they are selling it  to themselves for 40 cents . with zero explanation.  They gave a ratchet clause while jacking up value of bangalore airport. With no explanation. There is a reason market does not trust them anymore . FIH, FAH trading at 50% of reported BV and FFH probably off 20-25% too.

 

Given that ATMA is trading at 32c, are you suggesting they underpaid or overpaid? Bearing in mind there are minorities on both sides of the transaction?

 

ATMA is controlled by FairfaxAfrica , ATMA reports a tangible book value of $2.50, Wilkerson who is incharge both at ATMA and Fairfax africa defends the book value in annual reports, AGM 2020 call and at ATMA earnings. At the same time there is a transaction going on where they are happy to sell ATMA for 40 cents to FFH. FFH gets the asset at 0.25 * TBV which helps them make up for losses in Fairfax Africa investment. Farifax Africa shareholders get screwed.

 

or

 

Helios, their new investment guide in africa,  really wants ATMA off the books and they are happy to sell it to FFH even at 0.25*TBV since they see no value in the equity. FFH screw their own shareholders by buying a worthless asset for 40M.

 

or

 

Tangible Book Value of ATMA was always overstated and was being falsely being defended by Wilkerson and co.

 

Either of these scenarios does not make Fairfax paragon of transparency or ethical behaviour

 

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Yep, the BB shareholders are up in arms.  I guess their underlying assumption was that either BB doesn't need the liquidity or that there is a long line-up of potential lenders who would be prepared to lend a half-billion at 3.75% with no conversion privilege.  I am from the school of thought that FFH's last note flotation was at 4 5/8%, so if that's what FFH pays for debt, what should a riskier outfit like BB pay?  Maybe 7%?  Seriously, a 15 minute walk through their financials for the past 3 or 4 years is enough to make a guy want to puke. 

 

Maybe there is a long line-up of outfits wanting to lend money to companies that have drastically transformed their business and are cashflow negative?  I don't see it, but I've been wrong plenty of times before...

 

 

SJ

 

 

 

Blackberry shareholders are still up in arms about this: 

 

 

https://www.newswire.ca/news-releases/concerned-shareholder-objects-to-blackberry-s-related-party-transactions-with-fairfax-851354230.html

 

 

 

SJ

 

Your prior actions tend to form your reputation...

 

"Fairfax and Mr. Watsa have a history, when presented with a conflict of interest, of working against the interests of minority shareholders and for the benefit of Fairfax. In September 2019, the Québec Superior Court rendered a judgment in which it found that Mr. Watsa and Fairfax, as insiders of Fibrek Inc., acted in a "blatant conflict of interest situation" for the benefit of Fairfax by enabling the acquisition of Fibrek at the "lowest cost possible," to the detriment of Fibrek's minority shareholders who were bought out at an unfairly low price. The Court also found that despite the trust and confidence Fibrek placed in Mr. Watsa and Fairfax, Mr. Watsa purposely refrained from disclosing Fairfax's true intentions to Fibrek management."

 

Your prior actions tend to form your reputation!  More examples please, because if you are going to point to 2 transactions out of some 300-400 conducted over 30 years...please!  The only reason  Blackberry is even around is because of Prem putting John Chen in charge.  Cheers!

 

Its not just 2-3 transactions..look at what they are doing with Atlas Mara. In May2020 ATMA controlled by fairfax reported tangible book value around 2.50 and now they are selling it  to themselves for 40 cents . with zero explanation.  They gave a ratchet clause while jacking up value of bangalore airport. With no explanation. There is a reason market does not trust them anymore . FIH, FAH trading at 50% of reported BV and FFH probably off 20-25% too.

 

Given that ATMA is trading at 32c, are you suggesting they underpaid or overpaid? Bearing in mind there are minorities on both sides of the transaction?

 

ATMA is controlled by FairfaxAfrica , ATMA reports a tangible book value of $2.50, Wilkerson who is incharge both at ATMA and Fairfax africa defends the book value in annual reports, AGM 2020 call and at ATMA earnings. At the same time there is a transaction going on where they are happy to sell ATMA for 40 cents to FFH. FFH gets the asset at 0.25 * TBV which helps them make up for losses in Fairfax Africa investment. Farifax Africa shareholders get screwed.

 

or

 

Helios, their new investment guide in africa,  really wants ATMA off the books and they are happy to sell it to FFH even at 0.25*TBV since they see no value in the equity. FFH screw their own shareholders by buying a worthless asset for 40M.

 

or

 

Tangible Book Value of ATMA was always overstated and was being falsely being defended by Wilkerson and co.

 

Either of these scenarios does not make Fairfax paragon of transparency or ethical behaviour

 

Or, Fairfax see value, Helios don’t, so they transfer at/above market, thereby doing ok by both sets of minorities.

 

There are better examples of Fairfax being less than perfect.

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Or, Fairfax see value, Helios don’t, so they transfer at/above market, thereby doing ok by both sets of minorities.

 

There are better examples of Fairfax being less than perfect.

 

The airport transfer is a pretty obviously egregious one. They marked it at a high mark to get fees, and only got that high mark by using sub shareholder money to guarantee the buyer their price was money good. They should have had to mark what was effectively a put option on a high volatility illiquid asset separately.

 

After that experience I'd shake hands with FFH management, but would count my rings after.

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Yep, the BB shareholders are up in arms.  I guess their underlying assumption was that either BB doesn't need the liquidity or that there is a long line-up of potential lenders who would be prepared to lend a half-billion at 3.75% with no conversion privilege.  I am from the school of thought that FFH's last note flotation was at 4 5/8%, so if that's what FFH pays for debt, what should a riskier outfit like BB pay?  Maybe 7%?  Seriously, a 15 minute walk through their financials for the past 3 or 4 years is enough to make a guy want to puke. 

 

Maybe there is a long line-up of outfits wanting to lend money to companies that have drastically transformed their business and are cashflow negative?  I don't see it, but I've been wrong plenty of times before...

 

 

SJ

 

 

 

Blackberry shareholders are still up in arms about this: 

 

 

https://www.newswire.ca/news-releases/concerned-shareholder-objects-to-blackberry-s-related-party-transactions-with-fairfax-851354230.html

 

 

 

SJ

 

Your prior actions tend to form your reputation...

 

"Fairfax and Mr. Watsa have a history, when presented with a conflict of interest, of working against the interests of minority shareholders and for the benefit of Fairfax. In September 2019, the Québec Superior Court rendered a judgment in which it found that Mr. Watsa and Fairfax, as insiders of Fibrek Inc., acted in a "blatant conflict of interest situation" for the benefit of Fairfax by enabling the acquisition of Fibrek at the "lowest cost possible," to the detriment of Fibrek's minority shareholders who were bought out at an unfairly low price. The Court also found that despite the trust and confidence Fibrek placed in Mr. Watsa and Fairfax, Mr. Watsa purposely refrained from disclosing Fairfax's true intentions to Fibrek management."

 

Your prior actions tend to form your reputation!  More examples please, because if you are going to point to 2 transactions out of some 300-400 conducted over 30 years...please!  The only reason  Blackberry is even around is because of Prem putting John Chen in charge.  Cheers!

 

Its not just 2-3 transactions..look at what they are doing with Atlas Mara. In May2020 ATMA controlled by fairfax reported tangible book value around 2.50 and now they are selling it  to themselves for 40 cents . with zero explanation.  They gave a ratchet clause while jacking up value of bangalore airport. With no explanation. There is a reason market does not trust them anymore . FIH, FAH trading at 50% of reported BV and FFH probably off 20-25% too.

 

Given that ATMA is trading at 32c, are you suggesting they underpaid or overpaid? Bearing in mind there are minorities on both sides of the transaction?

 

ATMA is controlled by FairfaxAfrica , ATMA reports a tangible book value of $2.50, Wilkerson who is incharge both at ATMA and Fairfax africa defends the book value in annual reports, AGM 2020 call and at ATMA earnings. At the same time there is a transaction going on where they are happy to sell ATMA for 40 cents to FFH. FFH gets the asset at 0.25 * TBV which helps them make up for losses in Fairfax Africa investment. Farifax Africa shareholders get screwed.

 

or

 

Helios, their new investment guide in africa,  really wants ATMA off the books and they are happy to sell it to FFH even at 0.25*TBV since they see no value in the equity. FFH screw their own shareholders by buying a worthless asset for 40M.

 

or

 

Tangible Book Value of ATMA was always overstated and was being falsely being defended by Wilkerson and co.

 

Either of these scenarios does not make Fairfax paragon of transparency or ethical behaviour

 

Or, Fairfax see value, Helios don’t, so they transfer at/above market, thereby doing ok by both sets of minorities.

 

There are better examples of Fairfax being less than perfect.

 

Prem Watsa - chariman of FFH and chairman of FAH..you cannot have it both ways

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@hobbit - what would you have had Prem do? Pay 250, thereby shafting FFH minorities? A transaction at or around market is entirely reasonable in the circumstances (which include an overall merger of FAH which Prem presumably thinks will work out well for FAH minorities).

 

@bizaro - the BIAL deal certainly looks weird, but are we sure it was done for the fee? Prior to covid, the IPO was meant to be done in 2020, and the fee isn’t actually payable until the end of 2020. So the only benefit is being able to book the fee a year early, and since it’s not really big enough to move the FFH needle I don’t really see why they’d have bothered. I wonder if we are missing something.

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@hobbit - what would you have had Prem do? Pay 250, thereby shafting FFH minorities? A transaction at or around market is entirely reasonable in the circumstances (which include an overall merger of FAH which Prem presumably thinks will work out well for FAH minorities).

 

@bizaro - the BIAL deal certainly looks weird, but are we sure it was done for the fee? Prior to covid, the IPO was meant to be done in 2020, and the fee isn’t actually payable until the end of 2020. So the only benefit is being able to book the fee a year early, and since it’s not really big enough to move the FFH needle I don’t really see why they’d have bothered. I wonder if we are missing something.

 

Occam's razor says it was the fee. Why else would he do it? If the IPO was actually imminent, why not just put OMERS in the IPO with a big allocation. Discount them the I-banker fee or something.

 

The only way I can see the deal structure making sense is that it was specifically designed to get OMERS to agree to a higher price than they otherwise would have been willing to pay to get the fees to print. The timing fits that, it was right at the last minute for this years fee calculation. The deal has no downside for OMERS, if the airport ends up being less valuable (for some unknowable reason like a pandemic, for instance) they just get more shares to make them whole. No downside for FFH, they got their fee already. All the downside is at FIH, who could end up giving up a huge chunk of their best asset at a low price, right after paying fees for selling it at a high price. Seems pretty win-lose for minorities to me.

 

I guess the other possible motivation is that Prem just wants to do a favor for his friends at OMERS. Sort of like the Torstar deal, maybe he's doing a favor for a friend with shareholder's money. That seems less likely to me, but even if its true I don't think its any better.

 

Can you think of another motivation for doing the deal? I can't imagine anyone would seriously suggest it was a good deal structure for FIH shareholders...

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@hobbit - what would you have had Prem do? Pay 250, thereby shafting FFH minorities? A transaction at or around market is entirely reasonable in the circumstances (which include an overall merger of FAH which Prem presumably thinks will work out well for FAH minorities).

 

@bizaro - the BIAL deal certainly looks weird, but are we sure it was done for the fee? Prior to covid, the IPO was meant to be done in 2020, and the fee isn’t actually payable until the end of 2020. So the only benefit is being able to book the fee a year early, and since it’s not really big enough to move the FFH needle I don’t really see why they’d have bothered. I wonder if we are missing something.

 

Thats excatly the point. Its a messy deal and could use with far more transparency like a shareholders call or a disclosure explaining why it had to be done. Its not like FAH is running out of time with 100 mil in cash and zero debt.

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@hobbit - what would you have had Prem do? Pay 250, thereby shafting FFH minorities? A transaction at or around market is entirely reasonable in the circumstances (which include an overall merger of FAH which Prem presumably thinks will work out well for FAH minorities).

 

@bizaro - the BIAL deal certainly looks weird, but are we sure it was done for the fee? Prior to covid, the IPO was meant to be done in 2020, and the fee isn’t actually payable until the end of 2020. So the only benefit is being able to book the fee a year early, and since it’s not really big enough to move the FFH needle I don’t really see why they’d have bothered. I wonder if we are missing something.

 

Occam's razor says it was the fee. Why else would he do it? If the IPO was actually imminent, why not just put OMERS in the IPO with a big allocation. Discount them the I-banker fee or something.

 

The only way I can see the deal structure making sense is that it was specifically designed to get OMERS to agree to a higher price than they otherwise would have been willing to pay to get the fees to print. The timing fits that, it was right at the last minute for this years fee calculation. The deal has no downside for OMERS, if the airport ends up being less valuable (for some unknowable reason like a pandemic, for instance) they just get more shares to make them whole. No downside for FFH, they got their fee already. All the downside is at FIH, who could end up giving up a huge chunk of their best asset at a low price, right after paying fees for selling it at a high price. Seems pretty win-lose for minorities to me.

 

I guess the other possible motivation is that Prem just wants to do a favor for his friends at OMERS. Sort of like the Torstar deal, maybe he's doing a favor for a friend with shareholder's money. That seems less likely to me, but even if its true I don't think its any better.

 

Can you think of another motivation for doing the deal? I can't imagine anyone would seriously suggest it was a good deal structure for FIH shareholders...

 

The simplest explanation from my perspective is that Fairfax thought it would IPO at the named price and therefore the downside protection offered to OMERS wouldn’t pay out. Bear in mind the fee was booked but not paid. It’s possible to unwind it until it’s paid and that’s what would have happened if the IPO has been a bust. So I don’t think your scenario of FFH getting the fee *and* shareholders giving more of BIAL to OMERS was likely, but correct me if my understanding was wrong.

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@hobbit - what would you have had Prem do? Pay 250, thereby shafting FFH minorities? A transaction at or around market is entirely reasonable in the circumstances (which include an overall merger of FAH which Prem presumably thinks will work out well for FAH minorities).

 

@bizaro - the BIAL deal certainly looks weird, but are we sure it was done for the fee? Prior to covid, the IPO was meant to be done in 2020, and the fee isn’t actually payable until the end of 2020. So the only benefit is being able to book the fee a year early, and since it’s not really big enough to move the FFH needle I don’t really see why they’d have bothered. I wonder if we are missing something.

 

Thats excatly the point. Its a messy deal and could use with far more transparency like a shareholders call or a disclosure explaining why it had to be done. Its not like FAH is running out of time with 100 mil in cash and zero debt.

 

If your point is about transparency, then fine. I thought it was about shafting minorities.

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Yep, the BB shareholders are up in arms.  I guess their underlying assumption was that either BB doesn't need the liquidity or that there is a long line-up of potential lenders who would be prepared to lend a half-billion at 3.75% with no conversion privilege.  I am from the school of thought that FFH's last note flotation was at 4 5/8%, so if that's what FFH pays for debt, what should a riskier outfit like BB pay?  Maybe 7%?  Seriously, a 15 minute walk through their financials for the past 3 or 4 years is enough to make a guy want to puke. 

 

Maybe there is a long line-up of outfits wanting to lend money to companies that have drastically transformed their business and are cashflow negative?  I don't see it, but I've been wrong plenty of times before...

 

 

SJ

 

 

 

Blackberry shareholders are still up in arms about this: 

 

 

https://www.newswire.ca/news-releases/concerned-shareholder-objects-to-blackberry-s-related-party-transactions-with-fairfax-851354230.html

 

 

 

SJ

 

 

And the story continues to evolve.  Now it looks like BB and FFH have downsized the convertible debenture issue:

 

https://www.newswire.ca/news-releases/blackberry-announces-redemption-of-existing-convertible-debentures-and-provides-update-on-issuance-of-new-convertible-debentures-832813324.html

 

 

I guess the downside to this for FFH shareholders is that BB traded at US$5.23 yesterday, so the option to convert has become a bit more valuable over the past 6 weeks...

 

 

SJ

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On top of the future conversion he could get at $6 a piece from the recent debt deal, Prem loaded up on BB on Sept. 1st to increase his stake:

https://finance.yahoo.com/news/prem-watsa-continues-bet-blackberry-165153198.html

 

It means something? .... I think BB's time is finally coming.

 

Thougts?

 

 

My view is that the linked article is written by a poorly programmed AI.

It randomly attached facts to make a business article. 

 

The AI is a far cry from the Skynet that was suppose to take over the world by now.

 

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