Author Topic: CKTM - Commerce Bank of Temecula Valley Merger Arbitrage  (Read 4251 times)



writser

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Re: CKTM - Commerce Bank of Temecula Valley Merger Arbitrage
« Reply #11 on: May 02, 2018, 05:19:36 AM »
I didn't post anything in this topic because I'm skeptical of the added value of sharing an illiquid merger on a public forum. Nevertheless this was one of my largest positions during the start of the year. I bought a bunch in January around $13.35 and bought more in March around $13.45 when I had more buying power because some other special situations played out. A 7.5% return in a few weeks is insane - I think this was severely mispriced (though I realize that is easy to say after the deal has closed). Maybe a large shareholders wanted to cash out some shares instead of receiving illiquid shares in Nano financial? Not sure who was selling.

This deal ticked a lot of boxes I like:

- A timeline was provided.
- Founders / large shareholders were on board, the vote was basically a formality.
- Lack of liquidity means that this was almost only interesting to retail investors and maybe some small ball funds. Not much competition - it wasn't too hard to pick up some shares on the bid at very attractive prices.
- The lack of liquidity, a lack of detailed information, CKTM being an OTC stock, the uncertainty about the deal price possibly being adjusted, the uncertainty regarding certain investors receiving shares instead of cash and a previous deal failing were possible causes for a mispricing (though I didn't think these were serious issues).
- Company management was nice and helpful.
- Downside was somewhat protected - the deal was at a juicy premium but the underlying bank looked solid and was a takeover target before.
- As far as I know regulators aren't really interested in investigating a microcap banking deal.
- During the first weeks of the year all information that was available was one press release and one shareholder letter. I like these situations where there is limited information, no news for weeks and some uncertainty. Easy to analyse and make a decision - I don't mind reading two press releases and buying this at a 8% discount while waiting for a proxy but apparently others do.

Absolute no-brainer as far as I was concerned - within 15 minutes it was obvious that I was going to buy it - the only thing I had to think about was position sizing.
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

zippy1

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Re: CKTM - Commerce Bank of Temecula Valley Merger Arbitrage
« Reply #12 on: May 02, 2018, 06:18:36 AM »
Really appreciate that you share this idea!

Foreign Tuffett

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Re: CKTM - Commerce Bank of Temecula Valley Merger Arbitrage
« Reply #13 on: May 02, 2018, 06:31:31 AM »
Really appreciate that you share this idea!

Thank you. Glad it worked out for everyone.

fishwithwings

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Re: CKTM - Commerce Bank of Temecula Valley Merger Arbitrage
« Reply #14 on: May 04, 2018, 06:38:26 AM »
I didn't post anything in this topic because I'm skeptical of the added value of sharing an illiquid merger on a public forum. Nevertheless this was one of my largest positions during the start of the year. I bought a bunch in January around $13.35 and bought more in March around $13.45 when I had more buying power because some other special situations played out. A 7.5% return in a few weeks is insane - I think this was severely mispriced (though I realize that is easy to say after the deal has closed). Maybe a large shareholders wanted to cash out some shares instead of receiving illiquid shares in Nano financial? Not sure who was selling.

This deal ticked a lot of boxes I like:

- A timeline was provided.
- Founders / large shareholders were on board, the vote was basically a formality.
- Lack of liquidity means that this was almost only interesting to retail investors and maybe some small ball funds. Not much competition - it wasn't too hard to pick up some shares on the bid at very attractive prices.
- The lack of liquidity, a lack of detailed information, CKTM being an OTC stock, the uncertainty about the deal price possibly being adjusted, the uncertainty regarding certain investors receiving shares instead of cash and a previous deal failing were possible causes for a mispricing (though I didn't think these were serious issues).
- Company management was nice and helpful.
- Downside was somewhat protected - the deal was at a juicy premium but the underlying bank looked solid and was a takeover target before.
- As far as I know regulators aren't really interested in investigating a microcap banking deal.
- During the first weeks of the year all information that was available was one press release and one shareholder letter. I like these situations where there is limited information, no news for weeks and some uncertainty. Easy to analyse and make a decision - I don't mind reading two press releases and buying this at a 8% discount while waiting for a proxy but apparently others do.

Absolute no-brainer as far as I was concerned - within 15 minutes it was obvious that I was going to buy it - the only thing I had to think about was position sizing.

I thought the same and bought in, however, I sold around 2/17/18 because a friend sent me this from SNL (for some reason it wasn't posted as a news release):

Irvine, Calif.-based Nano Financial Holdings Inc. has resubmitted an application for itself and Allegiant United Holdings LLC to become bank holding companies through Nano's acquisition of Commerce Bank Temecula Valley, Nano's lawyer confirmed.

The Federal Reserve Board of San Francisco returned the application Feb. 6. Nano Financial submitted a revised application Feb. 13, Nano's lawyer Gordon Bava, a partner at Manatt, Phelps & Phillips LLP, wrote in an emailed statement to S&P Global Market Intelligence.

Bava said the application was returned with a request to reorganize and reformat the responses for easier retrieval of information.

"In no way was this action a rejection of the application on the merits," he wrote.

He said Nano will provide any additional information regulators reasonably request. "Nano has no reason to believe that the application will not be approved in the usual and normal course because on the merits it is a strong application," Bava added.

A returned application is neither approved nor denied. Applications can be returned for technical deficiencies or as an indication regulators are lukewarm on the proposal. Returns are relatively rare: The Fed received 554 applications and returned two of them in the first six months of 2017.

writser

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Re: CKTM - Commerce Bank of Temecula Valley Merger Arbitrage
« Reply #15 on: May 04, 2018, 07:12:46 AM »
Thanks for the information. So maybe I was the fish at the table after all? :P Always hard to judge after the fact. As far as I can see on the FED website the application was returned February 6th and approved March, 27 (link). Seems like both events didn't really cause the stock to move so I guess the news wasn't really considered important (or most shareholders didn't know about it). I agree that it looks a bit suspicious and I might have kept my position somewhat smaller had I known this. Good reminder that you never know as much as you think you do. Or, at least, I don't. I should have spotted that information somehow.

Also, isn't it a bit strange that this wasn't mentioned in the proxy? The proxy was dated March, 7, a month after the return. As far as I can see they only mention that Nano doesn't have a bank license yet, not that their application had been returned a month ago. Does seem kind of material to me.

Interesting stuff. Always hard to judge if you are either lucky or good.
« Last Edit: May 04, 2018, 07:24:58 AM by writser »
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

writser

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Re: CKTM - Commerce Bank of Temecula Valley Merger Arbitrage
« Reply #16 on: May 14, 2018, 11:35:17 AM »
I waived my appraisal rights to get a faster payout. Money hit my account today. IRR: 29.9%
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

Og

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Re: CKTM - Commerce Bank of Temecula Valley Merger Arbitrage
« Reply #17 on: May 14, 2018, 01:03:28 PM »
I waived my appraisal rights to get a faster payout. Money hit my account today. IRR: 29.9%

Same here. Cash in all my accounts today.

chesko182

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Re: CKTM - Commerce Bank of Temecula Valley Merger Arbitrage
« Reply #18 on: May 16, 2018, 07:11:08 AM »
Excuse my ignorance, but how did you guys do that?

If I didn't when should I expect my cash to come in?
Thanks
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Jurgis

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Re: CKTM - Commerce Bank of Temecula Valley Merger Arbitrage
« Reply #19 on: May 16, 2018, 07:18:57 AM »
So I called Fido yesterday and they told me that there was a tender offer that was valid until yesterday and they put my shares into that. They told me to expect cash sometimes this week or next week, though I would not put 100% guarantee on their expectation.

Not sure if that's the same thing that writser and Og did.

Presumably this is closed now. I'd think you'll still get cash, but not sure how/when it will happen.

Thanks for the idea Foreign Tuffett and all who contributed.
« Last Edit: May 16, 2018, 07:21:18 AM by Jurgis »
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