August 30, 2008
Interesting article by Joe Nocera (the editor of Smartest Guys in the Room) about Carl Icahn’s reputation as “an activist investor” and his dealings at XO Communications. “Activism” in this case meaning to the benefit of the bulk of shareholders, which I find a somewhat degraded version of the word already.
Guys like Carl Icahn like net operating losses. If they can get their hands on them — which they can if they control 80 percent of the company with the losses — they can apply the losses against their corporate tax bill. So in November 2005, at a time when XO’s stock was around $3 a share, Mr. Icahn proposed the following deal: He would buy the company’s fiber optic assets for $700 million and take the net operating losses as well. The other XO shareholders would be left with the worthless wireless frequency — and they would have to use most of the $700 million to pay off the debt it owed to … Carl Icahn!
Let’s dwell on this for a minute. In his role as board chairman, Mr. Icahn was telling XO’s shareholders that it was in their best interests to sell. And yet, he was also saying that it was in his best interest to buy. It couldn’t really be both. Naturally, Mr. Icahn’s cronies on the board agreed to the deal. R2 Investments, however, reacted by filing a lawsuit, claiming that Mr. Icahn and the board were violating their fiduciary duty to the company’s shareholders.
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Posted by Nelson Yee
August 14, 2008
Solar stocks have been a big sector in the past year or so, although to be honest I have been out of the loop with them as they took off in the wake of rising oil prices and the increased emphasis on alternate forms of energy. That said, I started to take an interest in Timminco in April or May, I believe, when there were reports of a major short seller disputing a lot of the claims of the company. I’m not always quick to listen to the various talking heads that get quoted in media reports, but I’ve found a lot of short sellers do a lot more research about companies — obviously, publicizing their doubts would have helped them in their quest to profit, but there was enough there that I started to wonder myself.
Since then, Timminco appears to be not as pretty as people thought, with the head of the solar silicon division and the guy whose name is on their process patents, Rene Boisvert, claiming that people were overreacting by selling the stock (it dropped about 24% on Tuesday). For me, the best part of the article I linked is the reaction from a Sprott fund manager; Eric Sprott and co. were the biggest proponents of Timminco on its rise from penny stock to 2007’s stock market darling:
Yet even Timminco’s biggest backer, Sprott Asset Management Inc., is now taking some money off the table. At least one portfolio manager at the investment firm, which in May said it owned 17 per cent of Timminco’s stock, is reducing his position.
Fund manager Jean-François Tardif, who oversees three funds housed under the Sprott Opportunities Hedge Fund banner, says Timminco once made up 4 per cent of his portfolio but is now down to just 0.6 per cent after he sold the company’s shares in June and July.
“I sold most of my stuff on the way up and that’s my style,” Mr. Tardif said.
Perhaps something isn’t being conveyed in quotation, but how awesomely nonchalant is that quote? Isn’t this a tacit admission that he thinks the stock isn’t going to go up anymore? I mean, if you really believe in the future of this stock, with its talk of this super effective and cheap method to produce solar silicon from metallurgic-grade silicon, why would you sell off the bulk of your position? I mean, if the forecasts of Timminco are true, it would be worth a great deal more, no? To me, this signals a lack of faith and/or an ability to capitalize on hype.
Anyhow, I will continue to watch this stock and be entertained.
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Posted by Nelson Yee
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