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List of Sh*t Actors In the Public Markets


BG2008

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Former management team of Forestar

 

This was a real estate company in Texas that had a land lot business, water rights, etc.  I think ThePupil was very involved with.  They somehow got into the O&G business and their performance metrics was trying to double or triple their EBITDA.  Sure EBITDA from O&G production and EBITDA from RE are comparable.  Activists eventually got involved and one of the big home builders bought them

 

Got involved in low mid teens, very involved in high single digits company was bid@ $14/5, sold most around there, eventually went for $17 and change to DR Horton but not for all of the company. Stock got as high as $20’s and is now $16 again (ticker FOR) as a land company for DR Horton

 

Forestar had incompetent management and activist got them out / to change / sell company. I wouldn’t call them bad actors. There’s a long thread on it. It’s pure 100% pure pupil (hodge lodge real estate, starter position “hey there could be some value here, 30-50% drawdown, “well that escalated quickly”, but I think there’s still value here, and value was realized at slight premium to initial entry but high premium to average cost)...I think I should just short my starter positions, then go long.

 

Bad management, not bad actors in the criminal or extremely parasitic sense though and they eventually got what small crap value activist target managements get: paid off and laid off.

 

I was going to do a big write up on it and couldn't finish it.  That is usually a sign that the investment is not as good as is.  I tried to do it for Macy's once and my intern spend a month figuring which mall Macy's owns.  At the end of the day, I didn't feel comfortable sharing it.  That was my cue that it wasn't as good of an idea as I thought. 

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David Sokol buying Lubrizol stock before the deal

 

Sokol owned Lubrizol before he took it to Buffett.  He didn't lie to Buffett, nor did he hide the fact that he owned shares.  The BRK Audit Committee says they interviewed him three times, yet there is no record that they did.  The SEC investigated the whole matter, with both Berkshire's and Sokol's willing participation, and they did not pursue anything. 

 

The only discrepancy in the whole debacle is that Sokol said it was his idea, while the idea was originally brought to him by some Citi bankers.  If that was a factor, then why bring it to Sokol?  Why didn't Citi take it to Buffett...because they knew that there was a better chance of the idea being pursued if Sokol took it to Buffett. 

 

This can't even be construed as insider trading, because he didn't act on non=public information that Berkshire was going to acquire Lubrizol.  There was no guarantee Buffett would have found the idea compelling, so his ownership of shares in Lubrizol is a non-starter.  Cheers!

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Monty Bennett of Ashford. Crazy management agreements makes him drown listed REITs in debt. Then he drowns the management Company in preferred shares handed to himself and his father through two acquisitions of their private companies. He's the worst I've come across. Which is why it seems like poetic justice that slimebag Brookfield is coming for him.

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EZPW, a lot of MLP companies investing for growth, many O&G companies/frackers/drillers going into bankruptcy coming out and then going back again such as CJ, mostly shipping companies where corp. governance is a joke, a lot of Chinese listed ADR's, some of the consumer finance non bank lending companies.

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If person X is on your side of the book, they are genius.

If person Y is on the other side of your book, they are sh*t actor.

 

Really?

 

Although I get your point - sometimes people think shareholders are fair partners, which is often not the case. Hence, I steer clear of majority ownership with few exceptions.

 

On the other hand, I think it's entitled for "value investors" or rather "value vultures" to take advantage of short-term moves and profit with essentially no work. I know I do sometimes.

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A minority stake is worth less for a reason, and the shareholder is comped for it via a higher yield.

If shareholders don't like the arrangement, they are free to sell. If shareholders didn't understand, or didn't sell - they accept the behavior. Hence if a shareholder does not do his/her DD, its on them. 

 

A great many value investors enter minority stakes in private partnerships, thinking they are equals. They aren't.

In a takeout, for a company valued at $10/share. ALL the shareholders will be offered the take-out premium (assume 35%) or a price of 13.50/share, but the 49.9% minority will have to accept a minority discount (assume 30%) to sell their shares. 'Cause the fact is, they are a liability, and for control purposes their 49.9% isn't required - so they get a very reluctant and begrudging bid of just $9.45 (70% x $13.50).

 

The takeout was executed because the majority shareholder signed a lock-up agreement.

Hence, to address the 'fairness' issue, the majority shareholder will often privately offer the minority a 16% premium, or a price of $11.00. Accept the takeout, and the minority shareholders make $49.99/100 shares, the majority shareholder makes $125/100 shares (175-50); but often more, depending on the terms of the lock-up. Perceived as 'unfair', when actually it is 'more than fair'.

 

Point is .... most often it is the greed of the actor staring back at you in the mirror.

The company executing the take out, may also be a separate entity, 100% owned by the majority interest.

 

SD

 

 

 

 

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Great idea for a thread

 

1.  Oaktree - Screwed minority bondholders in a variety of ways in PHI Bankruptcy - made super complex filings, opaque, high fees for capital and high percentage of equity at low valuation for new money. 

2.  I would basically add almost all other distressed debt players - or at least be super cautious of them.

3.  I would also be very careful of any P/E company  - they typically gut the company and jack up prices and load up the company with debt. 

All else equal most companies are worth less owned by a P/E firm than not.

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Great idea for a thread

 

1.  Oaktree - Screwed minority bondholders in a variety of ways in PHI Bankruptcy - made super complex filings, opaque, high fees for capital and high percentage of equity at low valuation for new money. 

2.  I would basically add almost all other distressed debt players - or at least be super cautious of them.

3.  I would also be very careful of any P/E company  - they typically gut the company and jack up prices and load up the company with debt. 

All else equal most companies are worth less owned by a P/E firm than not.

 

I would hesitate to call distressed debt investors bad actors (am I one?!?), although there certainly are those who are worse than others. The grievances mentioned in this thread so far...I mean, they are just another part of the analysis you do and a risk that is understood. Someone else mentioned that if it is on your side it is genius, and if on the other side it is bad acting. That's probably a fair way to look at it. I am under no illusion that because me and Mark Brodsky own the same bond we are on the same side. So, I just don't do that. Or if I do, call a lawyer first :) Maybe because I'm exposed to it so often I'm a little desensitized for it. For example, I thought the Brookfield thing with TOO was pretty smart and don't blame them.

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If person X is on your side of the book, they are genius.

If person Y is on the other side of your book, they are sh*t actor.

 

If person X is on your side of the book, they make money but you still don't, they are sh*t actor.

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EZPW, a lot of MLP companies investing for growth, many O&G companies/frackers/drillers going into bankruptcy coming out and then going back again such as CJ, mostly shipping companies where corp. governance is a joke, a lot of Chinese listed ADR's, some of the consumer finance non bank lending companies.

 

Good list

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I want to bump this list because I think it is great resource.  For those arguing whether this is or isn't mistreatment of minority, I respectively suggest that you refrain from that discussion as it may clog up the thread.  The goal is to curate a list that we can add to and share and act as a reference.  If you really wanted to debate that, you can create a different thread.  We are all "big boys and girls" here on this forum and we can decide whether or not certain players are Sh*t actors on our own.  But curating a preliminary list that comprehensive is important and achieves a valuable goal.  Thank you. 

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Toss WXMN and the Waxman family on the list. They tried an egregious take under going private stunt at $1.87 when book value was $15ish. Oh and coincidentally, something material was disclosed in the next financial report, though they claimed they didn't learn of it until after the take under letter was sent. The timing looks suspicious to me.

 

They backed down after many perfected dissenters rights. I was looking forward to the court case.

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I don't know, as I don't think I was a member while it was an active thread. However, when looking at Senvest, for sure it's cheap on a tangible book basis, however, any closing of share price to book value typically goes towards the managers of Senvest, and not the common shareholder. Not sure if it is different today, but I'm venturing a guess that the behaviour I described above has not changed, hence the stock is not worth discussing.

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RMR the worst REIT manager I've seen.

Capital allocation is just more assets/debt/equity...management fees.

 

Well, there is clny to give them some stiff competition though the egregious behaviour with regards to excessive compensation and a general lack of shareholder respect was more obvious when it is was Northstar realty prior to becoming Colony.

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RMR the worst REIT manager I've seen.

Capital allocation is just more assets/debt/equity...management fees.

 

Well, there is clny to give them some stiff competition though the egregious behaviour with regards to excessive compensation and a general lack of shareholder respect was more obvious when it is was Northstar realty prior to becoming Colony.

 

Colony has been pitched so many times by value investors.  It really should also be a case study on "how to bait value investors"

 

It is truly a crap show

 

Keep it up guys.  This is great. 

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