Fairfax 2021

[Parsad]

Ha. I particularly liked the time when Prem took the opportunity to sell JNJ and short the entire stock market just before the biggest rally of all time.

 

Also when he bought Blackberry and not Microsoft.

 

He *never* misses an opportunity.

 

::)

 

Prem is well capable of missing an opportunity. He is human. But my personal, unprovable assessment is that he is unlikely to have missed it due to vanity or some misplaced nationalism. If he's missed it it's because he genuinely thinks BB at $20 offers a good risk/reward.

 

When we say that he doesn't miss an opportunity, we're talking about positions they already have...not missed opportunities.  He generally finds a way of monetizing an asset they own, even though hopes for that asset might not be so great in the eyes of the general public.  Cheers!

[StubbleJumper]

This doesn't look so good for FFH's BB investment:

 

https://web.archive.org/web/20210201190101/https://www.theglobeandmail.com/drive/technology/article-ford-vehicles-will-use-androids-operating-system-as-part-of-a-new-six/

 

 

Ford has selected Google and Android as the cloud service provider and operation system for its cars. 

 

 

 

SJ

[petec]

This doesn't look so good for FFH's BB investment:

 

https://web.archive.org/web/20210201190101/https://www.theglobeandmail.com/drive/technology/article-ford-vehicles-will-use-androids-operating-system-as-part-of-a-new-six/

 

 

Ford has selected Google and Android as the cloud service provider and operation system for its cars. 

 

 

 

SJ

 

 

Yeah this is interesting. I can't read this article but have read others.

 

A couple of years back Ford selected QNX as the OS for all its cars at a rumoured $20/car. Now this. I wonder if a nuance is getting lost here. My understanding is that Android is not as secure as QNX. In fact some time ago I was told that Android wasn't even pursuing safety-critical applications in automotive. If that's right then it is not an appropriate platform for safety-critical features, including anything to do with automated driving. Bearing in mind cars don't just run one platform, I wonder if QNX has been selected for the safety-critical features and Android for other features like infotainment. But I am speculating and may well be wrong.

[DooDiligence]

From one of the horses mouthes,

 

https://s23.q4cdn.com/799033206/files/doc_news/2021/02/Ford-Connectivity-Release-February-1-2021.pdf

[Pedro]

If security costs more per unit then it's no suprise to me that Ford went with Android. Ford = cheaply made car in my car buying experience so I'm not suprised if their budget mentality would carry over to software purchases.

 

Wade Burton selling his BB shares and not the mother ship would be concering to me. Wade is clipping 20% a year and if he's selling I would want to follow my lieutant's lead based on his past returns alone. I really wish FFH would issue a press release on the BB status but I'm impatient.

[Santayana]

Change the names and it sounds just like the BB/AMZN story.  Clearly there's a market for what BB is doing, the question will be what kind of share can they get.  Google on one side and Amazon on the other.  Should be interesting.

[DooDiligence]

It'll be an interesting race with a lot of winners. I think the consumer stands to gain the most.

 

www.bloomberg.com/news/articles/2021-01-13/iphone-assembler-foxconn-sets-up-auto-venture-as-apple-car-looms

[Dazel]

There is angst among Fairfax shareholders it is obvious the share price has tanked 10% while the market booms..it barely went up during the BB frenzy.

 

Here is why I think they are doing this:

 

I just reread the Fairfax standstill agreement for the second time...Fairfax is doing the right thing...it’s not required but good form to hedge the shares and NOT sell them before the standstill agreement is over 6 months from the debenture deal. They are not sold...and Fairfax could cover the short sales and keep the shares at its option and there would not have been a sale of their stake. The convertibles are not converted yet and it is common practice to hedge convertible bonds with short sales. The fact that Fairfax is in the standstill agreement it covers all of their 16.5% BB stake (if converted). It just does not look professional to sell the shares outright during the standstill period.

 

 

I think these are important press releases the second one more important...This would let the public know that there is no non public information being withheld that warrants the share rise. In other words buyer beware the shares are rising without a material reason so we are going hedge you have been warned!

 

https://www.blackberry.com/us/en/company/newsroom/press-releases/2021/blackberry-expands-partnership-with-baidu-to-power-next-generation-autonomous-driving-technology

 

 

 

https://www.blackberry.com/us/en/company/newsroom/press-releases/2021/blackberry-comments-on-trading-activity-at-request-of-the-industry-regulatory-organization-of-canada

[StubbleJumper]

Change the names and it sounds just like the BB/AMZN story.  Clearly there's a market for what BB is doing, the question will be what kind of share can they get.  Google on one side and Amazon on the other.  Should be interesting.

 

 

I'm not sure that it would be a good thing for BB to be caught in the middle of two oligopolists battling for market share.  Those kinds of battles sometimes result in irrationally low prices as each side stakes its claim.  AMZN and GOOG can easily play that game because neither needs to make money from the auto market any time soon, but short-term profitability is probably a bit more important to BB.

 

 

SJ

[SharperDingaan]

There is angst among Fairfax shareholders it is obvious the share price has tanked 10% while the market booms..it barely went up during the BB frenzy.

 

Here is why I think they are doing this:

 

I just reread the Fairfax standstill agreement for the second time...Fairfax is doing the right thing...it’s not required but good form to hedge the shares and NOT sell them before the standstill agreement is over 6 months from the debenture deal. They are not sold...and Fairfax could cover the short sales and keep the shares at its option and there would not have been a sale of their stake. The convertibles are not converted yet and it is common practice to hedge convertible bonds with short sales. The fact that Fairfax is in the standstill agreement it covers all of their 16.5% BB stake (if converted). It just does not look professional to sell the shares outright during the standstill period.

 

 

I think these are important press releases the second one more important...This would let the public know that there is no non public information being withheld that warrants the share rise. In other words buyer beware the shares are rising without a material reason so we are going hedge you have been warned!

 

https://www.blackberry.com/us/en/company/newsroom/press-releases/2021/blackberry-expands-partnership-with-baidu-to-power-next-generation-autonomous-driving-technology

 

 

 

https://www.blackberry.com/us/en/company/newsroom/press-releases/2021/blackberry-comments-on-trading-activity-at-request-of-the-industry-regulatory-organization-of-canada

 

Going by last year, 2019 YE results were announced Feb-13.

Most would expect an update either in the MD&A, or in a related press update as soon as they exit the lock-up period.

 

Our own thoughts are that BB tech is the preferred choice for security sensitive auto applications, and the choice of Tesla and the other high-end car makers. Sold as the standard in luxury brands, where price is not an issue. Purely speculation, but if it is correct - it is worth a great deal.

 

SD

 

 

 

[petec]

I’m going out on a limb here.

 

I don’t believe Fairfax sold or shorted.

 

As they say in the (British) Army: as you were.

[doc75]

From one of the horses mouthes,

 

https://s23.q4cdn.com/799033206/files/doc_news/2021/02/Ford-Connectivity-Release-February-1-2021.pdf

 

It's unclear to me from this PR exactly what this relationship entails, and it may differ a great deal from the BB offering, to the point that they may not be mutually exclusive.  The BB Ivy project sounded to me more related to analytics involving sensor data as opposed to consumer-facing stuff like Maps or whatnot. 

[ourkid8]

I think I agree with you as well  :'( 

 

I’m going out on a limb here.

 

I don’t believe Fairfax sold or shorted.

 

As they say in the (British) Army: as you were.

[Parsad]

I’m going out on a limb here.

 

I don’t believe Fairfax sold or shorted.

 

As they say in the (British) Army: as you were.

 

I think they bought put options.  That way they don't sell the position, aren't tripping any clauses in their standstill agreement, and would benefit from any correction in the BB stock price.  No way they didn't capitalize on it somehow.  Even I would be greatly disappointed if nothing was gained!  Cheers!

[Xerxes]

Agree .... ^^

 

My question to myself would have been, knowing this is a bubble in the BB name, who would want to take the counter-party risk to those put options and sell those to FFH. But then i figured it must be a market maker that would be short BB at the same time as it would be selling puts to FFH.

 

And i think this is absolutely way the right way to use derivative for FFH, use them seldom and against individual name that you know deeply well on isolated situations. Precision is the key.

 

What is always back of my mind is the following nightmare and specifically what happened in 2013, where i think the long bets (J&J, Bancorps etc.) were liquidated to offset the realized losses. Even if the shorts worked, than those gains would have been offsetting the longs that were crushed by a downturn. A broadly applied short on a long portfolio just puts you in a trading range. No gain and no losses either. A precision short can deliver good return on some occasion, more than enough to to offset the times it didn't.

 

Realized Shorts

2011:  zero

2012:  $6.3 million

2013:  ($1.350) billion

2014:  $13 million

2015:  $126 million

2016:  ($2.634) billion

2017:  ($553) million  (almost all of it in Q4 2017!)

2018:  ($248) million

2019:  ($20.7) million

2020 (through Q3): ($327) million

 

Realized Long

2011:  $703 million (equity) + $424 million (bond)

2012:  $470 million (equity) + $566 million (bond)

2013:  $1,324 million (equity) + $65 million (bond)

2014:  $596 million (equity) + $103 million (bond)

2015:  $818 million (equity) + $26 million (bond)

2016:  ($184) million (equity) + $648 million (bond)

2017:  $200 million (equity) + $419 million (bond)

2018:  $1,326 million (equity) + $106 million (bond)

2019:  $792 million (equity) + ($55) million (bond)

2020 (through Q3): $371 million

[maxthetrade]

No way they didn't capitalize on it somehow.  Even I would be greatly disappointed if nothing was gained!  Cheers!

 

Completely agree. This opportuinity was such a gift, they may make mistakes but they are not dumb! I would be extremely surprised and disappointed if they didn't somehow capitalized on it.

[Daphne]

Sanjeev

Do you think it’s possible for FFH to purchase enough put contracts to cover 100 million shares?

[Parsad]

Sanjeev

Do you think it’s possible for FFH to purchase enough put contracts to cover 100 million shares?

 

From the volumes of various BB puts that traded in the last two weeks, I could see them covering 40-50M of the shares.  100M might be tough.  I still think they found some way to lock in a significant amount of the gains.  Someone would have underwritten the risk that the price could continue to get squeezed while FFH locked it in at say $18-20.  The underwriter would benefit from the increase above $18-20 and probably offset their short position.  Fairfax has enough connections whether here or abroad to find someone to take that bet.  Again, I would be hugely disappointed if they didn't capitalize on this somehow...they must have made or locked in something!  Cheers!

[Sullivcd]

I didn't follow option pricing in bb during the squeeze but gme options were priced at insanity levels. $800 calls were trading for $81 a contract one week out with gme at $330.

[StubbleJumper]

Sanjeev

Do you think it’s possible for FFH to purchase enough put contracts to cover 100 million shares?

 

 

How much money could FFH have received if they sold 100 million covered calls?

 

 

SJ

[Viking]

The upcoming Q4 earnings release (released Feb 13 last year) will be full of important information for investors. Here is what i will be watching. What are other board members watching?

 

1.) was BB position monetized in some way in past month?

2.) total mark to market gains on equity investments in Q4? ($350 million or more?)

3.) status of mystery short? Big losses or was the position largely exited in Q3 or Q4?

4.) where does company wide CR come in? Is it lower than PY?

5.) status of reserves? Are we still see a couple of points of redundancies?

- do we see any more big covid losses at Brit or other insurance subs?

- do we see another asbestos top up in run off (it was $200 million in 2020)?

6.) do we get an update on Digit valuation (given recent round of fundraising)? (Bump BV by +$300-$400 million?)

 

Other items:

- closing of Riverstone UK sale? Planned use of $750 million in proceeds?

- status update of Anchorage transaction?

- status update of asset monetization: Farmers Edge IPO?

[Xerxes]

Fear not my 'value' brethren, BB is still up 50% since early Jan  !!!

[Viking]

Regarding Blackberry, it makes sense to me Fairfax would want to stay out of the media spotlight right now. Shares could easily come back down to US$7 level in the coming weeks (if not sooner). Fairfax would not want to be painted as being responsible for tanking the shares (with a large, publicized sale). Wouldn’t sit well with the investing public or Blackberry employees (those with stock options). Now if it came out that Fairfax profited AFTER BB shares tank then that would likely be reputation enhancing. We can all hope :-)

[bearprowler6]

https://www.fairfax.ca/news/press-releases/press-release-details/2021/Fairfax-Announces-Conference-Call/default.aspx

[Dazel]

https://www.fairfax.ca/news/press-releases/press-release-details/2020/Fairfax-Announces-Entering-Into-Swap-Contracts-in-Respect-of-Common-Shares-of-Ensign/default.aspx

 

They are experts in these type of transactions...I expect them to have done something in BB shares....as I keep bringing up! Lol