FBK

[tyska]

Same thing for me as of yesterday.

Tyska : I suggest you call your broker if the rights don't show up in your account by Monday.

 

Not necessarily in a rush for them to show up, although they were going for 6 cents when I first noticed  :( . More just curious about seeing them trading a few days ago already and not being in any ones accounts. Was wondering how that is possible and were did those shares come from just to get an understanding on how things work.

 

Was going to add that even if you factor in the concern on pulp prices sliding. There seems to be no value given for their power generation that will come on line, with a good chunk of the capital provided through federal grants. If the rates for their "green" power is anything like what I have seen being given for wind and solar. One has to wonder at what point if pulp does slide does it make sense to shut down the plant and divert all the power into the grid.

[nodnub]

Same thing for me as of yesterday.

Tyska : I suggest you call your broker if the rights don't show up in your account by Monday.

 

More just curious about seeing them trading a few days ago already and not being in any ones accounts. Was wondering how that is possible and were did those shares come from just to get an understanding on how things work.

 

I don't have a definite answer for you.  However, the fact that they didn't show up in retail investor accounts until recently doesn't mean that some holders (maybe instituational) didn't get theirs as early as June 21st.  Perhaps rights transaction like this require some paper shuffling at the backoffice of the broker/carrying broker. It might not happen as quickly for retail investors?

[alertmeipp]

A bullish article on Domtar but it applies quite nicely on FBK.

 

http://www.istockanalyst.com/article/viewarticle/articleid/4243146#

 

 

"$100-$200/Tonne Pulp Correction Seen: As they have written, Credit Suisse sees a second half 2010 pulp-price correction followed by rising prices for most of 2011 and 2012. They even build in some impact on uncoated prices. Yet, their 2010 and 2011 EPS estimates are the highest on the Street."

 

"Free Cash Flow Exceeds Stock Price"

 

[Guest Dazel]

http://www.pulpandpapercanada.com/press-releases/story.aspx?id=4247508

 

 

Abitibi will emerge out of Bankruptcy in the fall...If Fibrek is still here it will be gone...pieced up and sold..they will keep the NBSK mill and use their own wood chips...effectively making it a low cost producer.The hydro Quebec revenue's will also be added.  Fairfax is taking some heat here but they will effectively control both companies.....they will create value. Lindsay Morden did not have any physical assets....that is the major difference.

THIS SHOULD HAVE ALREADY BEEN DONE!!!!!!SHAREHOLDERS SPEAK UP.

 

This is of course unless someone else figures out that this is trading for a fraction of assets, fully financed, with cash. This company will be bought by someone bigger with more financing options (and wood chips), the U.S mills will be sold individually. The managements sadly obvious lack of interest in a sale is killing the stock.

 

dazel.

[alertmeipp]

Day low of 1.04...  :-\

 

[Cardboard]

By the time rights finally show up in our accounts, they may have no value and the stock could be trading below $1.01. It is unbelievable. Even Mercer Int'l (MERC) which is by the way on Forbes top 50 list of companies at risk has not even seen such hammering.

 

So who wants to subscribe now and even over-subscribe to this rights offering?

 

Fairfax will then have a chance to acquire a massive block or 39.6 million shares at a low price of $1.01 since no one with their right mind will subscribe if the stock is trading below the rights subscription price on July 15. Cheaper to buy on the market! However for Fairfax, that is something they cannot do without moving the price up with such low volume. It is also the case for big holders, but who is that? Who will be interested to plow more money into this company with a continually declining stock price, with no liquidity and no say on where they are going?

 

This will give them 43.85% of all shares outstanding and effective control of Fibrek. They will own 57 million shares at an average cost of around $120 million.

 

They could not have predicted such outcome with any certainty, but I would bet that someone at Fairfax had likely compiled a list of previous rights offerings on small cyclical and resource companies and figured the odds of something like that happening in this environment with this type of pricing. They were part of the negotiation after all. They had to handicap the odds of them having to put up $40 million more into this venture, the likely dilution, consequences of taking control (equity accounting, consolidation), can't get out by selling stake on the market, the end game and resulting return.

 

Cardboard

[tyska]

They showed up in my TD account today.

 

Cardboard, interesting take on how FFH may have played it, because yes, who in their right mind would subscribe if it's trading below the subscription and will anyone start buying the shares on the market that they would have subscribed to. But then who is driving the price down with the continuous stream of shares for sale. Very interesting indeed.

[Myth465]

I think this was or could have been part of the plan. Offerings usually drag a stock down unless they are done fast, this is why I never really understood the discount, its more like an anchor.

[alertmeipp]

I don't think FFH will get much shares.

 

Some may still subscribe. For example, if u own 1 million shares, buying 300k in the market without driving up the price is impossible given the light volumes we have had. Then some may oversubscribe.

 

The valuation is very cheap. 1.5x CF. Hard for me to sell.

 

So far this investment has been a disaster. I think some are selling because of the additional subscription options as well.

 

 

[alertmeipp]

To better illustrate how the right offering had impacted the pps:

 

May-12 Current Percent

SFK 1.58 1.06 -32.91%

CFX 16.18 14.96 -7.54%

MERC 4.58 4.34 -5.24%

TMB 2.35 2.12 -9.79%

UFS 70.41 51.69 -26.59%

 

So the average drop (excluding SFK) is ~12%. SFK dropped additional 20% since the right offering news.

 

It's also likely that balance sheet had further improved by 20 millions in Q2. I think this price gives excellent risk/reward ratio.

[Uccmal]

 

So far this investment has been a disaster. I think some are selling because of the additional subscription options as well.

 

 

 

You are right on the money on that one Alertmeipp.  I sold 10000 shares yesterday to make room for the newer shares (at a profit I might add).  The stock price is not going to work itself out until the rights are all exercised.  I didn't want this position getting too outsized on me relative to others in my own holdings.

 

Prior to selling the shares I had bought additional rights before I realized I was overdoing it.  

[Rabbitisrich]

Uccmal, are you underwater on the lots you sold? If so, do you get the tax loss even if you exercise the rights?

[Uccmal]

No, about 36-37 cents per share profit.  

 

Had it have been a loss I think I could demonstrate to Revenue Canada that there was no issue.  In practice I already owned the shares via the rights issue before I sold the extra shares.  

 

Nevertheless I would not have sold the shares if they were at a loss.  I didn't want to be restricted by our 30 day rule in any case.  

[Uccmal]

Abitibi will emerge out of Bankruptcy in the fall...If Fibrek is still here it will be gone...pieced up and sold..they will keep the NBSK mill and use their own wood chips...effectively making it a low cost producer.The hydro Quebec revenue's will also be added.  Fairfax is taking some heat here but they will effectively control both companies.....they will create value. Lindsay Morden did not have any physical assets....that is the major difference.

THIS SHOULD HAVE ALREADY BEEN DONE!!!!!!SHAREHOLDERS SPEAK UP.

 

This is of course unless someone else figures out that this is trading for a fraction of assets, fully financed, with cash. This company will be bought by someone bigger with more financing options (and wood chips), the U.S mills will be sold individually. The managements sadly obvious lack of interest in a sale is killing the stock.

 

dazel.

 

Dazel, I am not sure I am following you here.  Is this what you are getting at:

 

- FFH owns Abitibi-Bowater and management operates at FFHs allowance.

- FFH controls 19.9% (perhaps more fbk) so they have a strong sway on the company plus alot of influence with the other senior shareholders - i.e. Cundill Fund

 

So:  

1) Will FFH sell FBK at a discount to ABH?

2) Will FFH get a premium for FBK assets from ABH?

3) Will FFH have to get a third party opinion on FBKs value and take that price to avoid accusations of a conflict of interest?  Will said 3rd party opinion at least reflect BV for FBK?

4) Will ABH be able to finance a purchase such as FBK right out of the gate?

 

Thoughts, Al.

 

[vinvest09]

FYI, if you reside in the United States, you will not be eligible to receive any of the rights from the offering.  I received the following email from my broker - TD Ameritrade - today. :(

 

"Regarding their rights offering, I have received confirmation that holders in the United States were not made eligible.  What the company will do is sell your due rights in the Canadian market and then distribute the cash proceeds.  It would be coded in your account as 'sale of rights'.  Your account will be credited as soon as the payment is received.  Let us know if you have any additional questions."

 

Sincerely,

 

Derek Whitehill

Apex Corporate Actions and Dividends, TDA

Division of TD AMERITRADE, Inc.

 

[Myth465]

I figured that would happen, based on the release. They had some legal stuff about maybe being able to participate if you were in the US.

 

I think alot of this was planned and may work out in our favor.

 

FFH gets a huge chunk of FBK and gets basic control, we can buy cheaper on the open market if we want. Less float, any good news will shoot up the share price due to the float.

 

This has kinda played out how I thought it would. Now the question is do you buy?

[Cardboard]

FYI, you can still receive and exercise FBK rights in the U.S. if you can demonstrate that you are an "accredited investor". It is based on your family income and/or liquid assets.

 

Cardboard

[Myth465]

I bought my last little chunk today. Hopefully this mini correction ends soon, it seems like all my small cap holdings are getting killed. Though I am not sure what will break the sentiment. Maybe earnings season?

[SharperDingaan]

 

The price drop was purely arbitrage.

We, & I'm sure we're not the only ones, have been selling common & buying rights in quantity.

Sell shares early @ >1.15, Buy rights as late as possible @< .02, Subscribe @ 1.01. For every 10,000 shares sold the gain was around 942 less commission [10000*1.15-22900@.02-10000@1.01]. FFH is not going to be taking up much via the backstop.

 

If you rolled your entire position, you ended up with the same share count & a cash gain well over the theoretical value of the rights at issue. Using Fridays closing price, the arbitrage produces a loss.

 

Bid up the rights, & watch what happens to the share price ;)

 

SD

[nodnub]

I am a little curious as to who is selling rights at $0.01?

 

I seems unlikely to be the small shareholders.  Say one had 5,000 common shares and then received 5000 rights. The rights would have sold for $50 today. After they subtract commission costs it is hardly worth the time it takes to log in to their accounts and click on 'sell'.

 

 

[Myth465]

I will likely order my rights to be sold. I just received the paperwork and will be calling my broker. It also looks as though I could tell them to exercise (based on a review of the paperwork). I have about 8000 rights and bought additional shares at .98 cents. No point in buying rights for me. Selling shares to buy rights was a shred move and may have something to do with the share price.

 

I would rather have the $50 than nothing at all.

[doc75]

Yet another pulp increase:

 

 

http://www.foex.fi/default.asp?navigate=pix_pulp_select.asp

[Uccmal]

Execised my rights today.  I am told it will take 10-15 days to settle.  Seems strange. 

 

So here goes nothing.... no margin used on this one:-).

[cwericb]

Also exercised most of my rights today, however I hold some FBK in my TFSA and since it is maxed out I would have to transfer those rights out which would take several days and since tomorrow is the last day, I guess I'll let them go. I probably have enough in FBK already. As Uccmal says - here goes nothing!

 

I really feel that the rights offering has artifically lowered the price on FBK and after a couple of weeks I would hope to see at least some increase in share price. The biggest problem that I see is in what goes on with the markets and economy on a global scale. My optomistic side says that we are on the tail end of a correction and hopefully it should level out soon and reverse itself by mid September. Then again, I have been wrong before.

[alertmeipp]

the current exchange rate is great for converting US debt to CDN.