Comments on: Workouts Work Out In Down Markets – Part 2 http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2/ Value Investing Blog Mon, 16 May 2011 10:55:06 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Joe Ponzio http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2/#comment-2935 Joe Ponzio Thu, 09 Jul 2009 17:13:17 +0000 http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2#comment-2935 Allen, The problem with this particular workout was the size/limited liquidity of the two companies. Normally you would buy one and short an equal amount in the other. In very thinly traded stocks like these, selling short is very difficult, if not impossible. In general, brokerage firms will allow you borrow shares to short a stock only if one of their other customers owns the stock in a margin account. (They will only "locate" shares outside their own firm to borrow shares from other firms for their large institutional customers.) In the case of this merger arbitrage, the thinly held/traded nature of these companies made the possibility of shorting highly unlikely. In that case, your only option would be to go long and hope to sell upon completion/conversion. I didn't make that clear in the article - sorry! Allen,

The problem with this particular workout was the size/limited liquidity of the two companies. Normally you would buy one and short an equal amount in the other. In very thinly traded stocks like these, selling short is very difficult, if not impossible.

In general, brokerage firms will allow you borrow shares to short a stock only if one of their other customers owns the stock in a margin account. (They will only “locate” shares outside their own firm to borrow shares from other firms for their large institutional customers.) In the case of this merger arbitrage, the thinly held/traded nature of these companies made the possibility of shorting highly unlikely.

In that case, your only option would be to go long and hope to sell upon completion/conversion. I didn’t make that clear in the article – sorry!

]]> By: Allen http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2/#comment-2920 Allen Fri, 26 Jun 2009 10:48:16 +0000 http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2#comment-2920 So in this example of TRFX, I know it's a late. But to hedge the risk of New Motion price moving down, wouldn't you just short New Motion shares based on the number shares you would have gotten after your TRFX position is converted to New Motion shares? So in this example of TRFX, I know it’s a late. But to hedge the risk of New Motion price moving down, wouldn’t you just short New Motion shares based on the number shares you would have gotten after your TRFX position is converted to New Motion shares?

]]> By: Joe Ponzio http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2/#comment-1396 Joe Ponzio Mon, 11 Feb 2008 17:03:21 +0000 http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2#comment-1396 Mike, Sorry to hear about TRFX. We can't be right all the time. The important thing is to get back on the horse because, over the long term, carefully approached workouts can be a goldmine, even after the occasional (and sometimes substantial) loss. Mike,

Sorry to hear about TRFX. We can’t be right all the time. The important thing is to get back on the horse because, over the long term, carefully approached workouts can be a goldmine, even after the occasional (and sometimes substantial) loss.

]]> By: Mike http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2/#comment-1379 Mike Sat, 09 Feb 2008 00:34:01 +0000 http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2#comment-1379 Had my luch handed to me holding on to my TRFX shares. Wish i would have found this analysis first. Good stuff, keep it up. Had my luch handed to me holding on to my TRFX shares. Wish i would have found this analysis first.

Good stuff, keep it up.

]]> By: Joe Ponzio http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2/#comment-1236 Joe Ponzio Mon, 21 Jan 2008 04:47:23 +0000 http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2#comment-1236 Mark: Even at the risk of missing a potentially handsome return, I won't jump in until after Step 5. ask1000: I'll take a look at it. There is often a nice gap right up until the last few days or weeks. Casey: (MikeR) posted a nice article (above) on it. At this point, I feel this deal is more speculation than workout. That's not to say money can't be made, but it doesn't seem to meet that "virtually risk-less" status yet. Mark: Even at the risk of missing a potentially handsome return, I won’t jump in until after Step 5.

ask1000: I’ll take a look at it. There is often a nice gap right up until the last few days or weeks.

Casey: (MikeR) posted a nice article (above) on it. At this point, I feel this deal is more speculation than workout. That’s not to say money can’t be made, but it doesn’t seem to meet that “virtually risk-less” status yet.

]]> By: (MikeR) http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2/#comment-1232 (MikeR) Sun, 20 Jan 2008 05:06:53 +0000 http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2#comment-1232 Casey, You will find this WSJ article useful concerning the BAC/CFC deal entitled "Doubts Over Deal Hits CFC Shares." http://online.wsj.com/article/SB120070492065001981.html?mod=googlenews_wsj Casey,

You will find this WSJ article useful concerning the BAC/CFC deal entitled “Doubts Over Deal Hits CFC Shares.”

http://online.wsj.com/article/SB120070492065001981.html?mod=googlenews_wsj

]]> By: ask1000 http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2/#comment-1230 ask1000 Sun, 20 Jan 2008 03:21:50 +0000 http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2#comment-1230 Have you, Joe, or anyone else been following the Nokia/Navteq acquisition? As far as I know, the proposed price per share of Navteq is 78. At the moment, it is trading at 72.51, and the closing date is scheduled for this first quarter (and it has been approved by Navteq shareholders). This provides a sizable annualized gain. Does anyone have some idea as to why there is such a large discrepancy between the current trading price and the offer price? Is it merely due to the overall market situation? Have you, Joe, or anyone else been following the Nokia/Navteq acquisition? As far as I know, the proposed price per share of Navteq is 78. At the moment, it is trading at 72.51, and the closing date is scheduled for this first quarter (and it has been approved by Navteq shareholders). This provides a sizable annualized gain. Does anyone have some idea as to why there is such a large discrepancy between the current trading price and the offer price? Is it merely due to the overall market situation?

]]> By: Casey Mattson http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2/#comment-1228 Casey Mattson Sat, 19 Jan 2008 04:34:25 +0000 http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2#comment-1228 I am interested in watching the BAC / CFC merger. It appears the market doesn't think it will happen or get repriced down from the current arrangement. I know this is not your preferred method (stock for stock), but I would be interested to see what you have to say. I do think for the long term, it is a good acquisition. People seem to think that none of the CFC assets are worth anything. I have no idea, nor does anyone really, that will be bourne out in time. But to say the book value of the company needs to drop by 60% or more, seem irrational to me. Any FWS reader or comments from Joe? I think this is a good topic, considering, some folks, (Buffett, for example) have been buying BAC, it might be a cheap way to pick up some shares, or the Short term Arb play. Obviously it has a long way to go to get through the checklist Joe has. Anyway, some random thoughts from a cold cold man in MN. -14 degrees as we write, I don't even want to know what the windchill is today. I am interested in watching the BAC / CFC merger. It appears the market doesn’t think it will happen or get repriced down from the current arrangement. I know this is not your preferred method (stock for stock), but I would be interested to see what you have to say. I do think for the long term, it is a good acquisition. People seem to think that none of the CFC assets are worth anything. I have no idea, nor does anyone really, that will be bourne out in time. But to say the book value of the company needs to drop by 60% or more, seem irrational to me.

Any FWS reader or comments from Joe? I think this is a good topic, considering, some folks, (Buffett, for example) have been buying BAC, it might be a cheap way to pick up some shares, or the Short term Arb play. Obviously it has a long way to go to get through the checklist Joe has.

Anyway, some random thoughts from a cold cold man in MN. -14 degrees as we write, I don’t even want to know what the windchill is today.

]]> By: mark http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2/#comment-1227 mark Fri, 18 Jan 2008 20:37:53 +0000 http://www.fwallstreet.com/article/102-workouts-work-out-in-down-markets-part-2#comment-1227 Joe, Thanks for the blog as always it has proven invaluable. I have only been at this stuff for a year now and seem to find the most valuable-straight forward info here. Any thoughts on the HUNTSMAN-APPOLLO aquisition. Everything i have looked at seems like it has all the check list covered except regulatory approval. Thanks again for the great site! Mark Joe,

Thanks for the blog as always it has proven invaluable. I have only been at this stuff for a year now and seem to find the most valuable-straight forward info here. Any thoughts on the HUNTSMAN-APPOLLO aquisition. Everything i have looked at seems like it has all the check list covered except regulatory approval.

Thanks again for the great site!

Mark

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