Author Topic: RSYS - Radisys  (Read 4266 times)

Gregmal

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Re: RSYS - Radisys
« Reply #20 on: August 06, 2018, 12:51:31 PM »
Thinking out loud here...but:

Doesn't loss aversion suggest that current shareholders will want to hold and therefore will want to vote against the acquisition?

Or does the 45.28% institutional ownership negate that fact?

Or, assuming $.70 was fair value before the merger, would current shareholders losing 2.95 mil due to the termination fee (thus causing the share price to drop below $.70 per share) hate losing that much more? Are they willing to cut their losses (since the share price hasn't been this low in years!)?

I would think the frustrations of owning this the past year would be the primary reason one would just throw in the towel.

That said it's surprising the spread keeps widening. End of the day, who knows? I can't really see any reason, barring this entire buyout being one giant fraud, for this not closing. If it doesn't, I'll live.


Gregmal

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Re: RSYS - Radisys
« Reply #21 on: August 09, 2018, 12:39:21 PM »
Sold out today. Gut instinct move. Still feel there is no reason it shouldn't close. But my price action feeling is causing skepticism, which matches my skepticism of the characters involved on both sides, and heeding those things in the past has saved me a lot of money. I've also seen this type of price action associated with rumored leaks involving this company before, so better safe than sorry.

porcupine

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Re: RSYS - Radisys
« Reply #22 on: August 10, 2018, 08:00:50 AM »
Sold out today. Gut instinct move. Still feel there is no reason it shouldn't close. But my price action feeling is causing skepticism, which matches my skepticism of the characters involved on both sides, and heeding those things in the past has saved me a lot of money. I've also seen this type of price action associated with rumored leaks involving this company before, so better safe than sorry.

Kind of a self fulfilling prophecy, no?

You may very well be correct... people are legitimately selling based on the rumor of a deal not going through.

Or... as the spread widens, more and more people continue to sell based on the fear that the deal won't go though... whether that fear is justified or not... time will tell.

I really don't have much money invested in this... was prepared to lose a substantial amount from the start.  Just going to hold on and see what happens in the near future!
“Successful investing is having everyone agree with you — later.” –Joe Robillard.

Gregmal

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Re: RSYS - Radisys
« Reply #23 on: August 10, 2018, 09:01:03 AM »
Sold out today. Gut instinct move. Still feel there is no reason it shouldn't close. But my price action feeling is causing skepticism, which matches my skepticism of the characters involved on both sides, and heeding those things in the past has saved me a lot of money. I've also seen this type of price action associated with rumored leaks involving this company before, so better safe than sorry.

Kind of a self fulfilling prophecy, no?

You may very well be correct... people are legitimately selling based on the rumor of a deal not going through.

Or... as the spread widens, more and more people continue to sell based on the fear that the deal won't go though... whether that fear is justified or not... time will tell.

I really don't have much money invested in this... was prepared to lose a substantial amount from the start.  Just going to hold on and see what happens in the near future!

I mean, it's complicated and best summed up just as gut feeling which I've always found to be fairly accurate for no distinguishable reason other than maybe luck or things I can't put into words.

For instance, I'm not totally cool with the players involved in this on either side. But that by itself, I can live with because we have a binding agreement. The spread, as detailed before, I can justify. If this just sits there at a discount and acts like other pending deals, just with a wider spread, no biggie.

But I have spoke to several with backgrounds on this and particularly this time last year management is said to have royally screwed sharehholders by completely mishandling and misrepresenting the loss of a major, major contract. Leading up to this there was rumor or such being leaked, and rampant selling or shorting without any real news. It took about 6 months before everything was fully cleared up and the stock lost over 75% of it's value. I'm not waiting for the same to happen here. The is a business I want no part of as a stand alone company.

Additionally, as a sub 1% position, if I find myself devoting more time to it than it is proportionally worth, I usually find that an indication I should just get rid of it. So it's not all those things individually that bother me, but as they all come together and the price action indicates deliberate selling by somebody, that's enough for me. If it's just noise surely the price action would be a little more stable or there would be someone ready on the other side to step in at such a spread.

porcupine

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Re: RSYS - Radisys
« Reply #24 on: August 10, 2018, 09:54:50 AM »
Sold out today. Gut instinct move. Still feel there is no reason it shouldn't close. But my price action feeling is causing skepticism, which matches my skepticism of the characters involved on both sides, and heeding those things in the past has saved me a lot of money. I've also seen this type of price action associated with rumored leaks involving this company before, so better safe than sorry.

Kind of a self fulfilling prophecy, no?

You may very well be correct... people are legitimately selling based on the rumor of a deal not going through.

Or... as the spread widens, more and more people continue to sell based on the fear that the deal won't go though... whether that fear is justified or not... time will tell.

I really don't have much money invested in this... was prepared to lose a substantial amount from the start.  Just going to hold on and see what happens in the near future!

I mean, it's complicated and best summed up just as gut feeling which I've always found to be fairly accurate for no distinguishable reason other than maybe luck or things I can't put into words.

For instance, I'm not totally cool with the players involved in this on either side. But that by itself, I can live with because we have a binding agreement. The spread, as detailed before, I can justify. If this just sits there at a discount and acts like other pending deals, just with a wider spread, no biggie.

But I have spoke to several with backgrounds on this and particularly this time last year management is said to have royally screwed sharehholders by completely mishandling and misrepresenting the loss of a major, major contract. Leading up to this there was rumor or such being leaked, and rampant selling or shorting without any real news. It took about 6 months before everything was fully cleared up and the stock lost over 75% of it's value. I'm not waiting for the same to happen here. The is a business I want no part of as a stand alone company.

Additionally, as a sub 1% position, if I find myself devoting more time to it than it is proportionally worth, I usually find that an indication I should just get rid of it. So it's not all those things individually that bother me, but as they all come together and the price action indicates deliberate selling by somebody, that's enough for me. If it's just noise surely the price action would be a little more stable or there would be someone ready on the other side to step in at such a spread.

Well said.
“Successful investing is having everyone agree with you — later.” –Joe Robillard.

writser

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Re: RSYS - Radisys
« Reply #25 on: August 14, 2018, 07:19:31 AM »
I agree that the price action around the close looked a bit suspicious the 9th. Volume wasn't that big though. But frankly, if you see 'no reasons for this not to close' and are 'looking to add soon' yet you sell your position on a gut feeling a few days later when it is down 5% or so intraday on no news or rumours I can't help feeling a bit skeptical. Aren't these exactly the short term price adjustments you wanted to trade around? Are you sure you are not rationalizing your decision after the fact? I bought a few extra shares last week. Stock is now up ~8% from those lows. Of course, that's easy to say in hindsight and this could have worked out poorly. But that is not my point (just a brag on the side).

The point I'm trying to make is, of course your gut tells you to dump this crap as soon as possible when the price action doesn't look good - happened here too. And you start thinking about the horrible insiders, the major contract loss, your lack of research, etc. It feels terrible. That's what happens if you trade against the consensus. However, if you immediately yield to that feeling and sell your sub 1% position the moment it trades down a few cents, without a rationalization, then why did you buy this in the first place? Probably you were better off buying and holding some quality companies? What did you expect? That this would trade up, in a straight line, towards the deal price? If you assume every downtick on no news means an insider with better knowledge than you is selling you should a) size down your positions b) work on your mental game or c) stop buying crap.

The market pays you for feeling like shit. Isn't that what value investing is all about? :)
« Last Edit: August 14, 2018, 07:41:41 AM by writser »
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Gregmal

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Re: RSYS - Radisys
« Reply #26 on: August 14, 2018, 07:48:31 AM »
I agree that the price action around the close looked a bit suspicious the 9th. Volume wasn't that big though. But frankly, if you see 'no reasons for this not to close' and are 'looking to add soon' yet you sell your position on a gut feeling a few days later when it is down 5% or so intraday on no news or rumours I can't help feeling a bit skeptical. Aren't these exactly the short term price adjustments you wanted to trade around? Are you sure you are not rationalizing your decision after the fact? I bought a few extra shares last week. Stock is now up ~8% from those lows week. Of course, that's easy to say in hindsight and this could have worked out poorly. But that is not my point.

The point I'm trying to make is, of course your gut tells you to dump this crap as soon as possible when the price action doesn't look good - happened here too. And you start thinking about the horrible insiders, the major contract loss, your lack of research, etc. It feels terrible. That's what happens if you trade against the consensus. However, if you immediately yield to that feeling and sell your sub 1% position the moment it trades down a few cents then why did you buy this in the first place? Probably you were better off buying and holding some quality companies? What did you expect? That this would trade up, in a straight line, towards the deal price? If you assume every block trade is an insider with better knowledge than you you should a) size down your positions b) work on your mental game or c) stop buying crap.

The market pays you for feeling like you hold a bag of dog shit that is about to explode any minute. Isn't that what value investing is all about? :)

Perhaps my knowledge of the company worked against me. I'm not averse to price swings. Stocks like CAB, BRCD, heck even NXP were God's gift to guys like us. I'm fine going to dirty places to get returns others just don't bother with. But one of my rules for self preservation in doing so is to move quick when something doesn't feel right. Feel right is obviously debatable and different to everyone; part of what's hard to put into words. I wouldnt expect a straight line up but given the discount I also wouldn't expect 10% down swings. Pattern recognition is an indicator I use often and this one fit a pattern that raised red flags for me. I mean you could blindly just hold through everything, but then you essentially force yourself to become a bag holder if you play the game enough. I think GNW is a good example. Look at all the crap that went on there and how long it dragged out. Anyone holding from near $5 down to the 2's wasn't doing so because they were smart. They were hoping for a hail Mary. They got it. But it would have been easier just to pull the plug early on and put the capital to better use elsewhere.

Generally the things you describe are the avenues you take to get the extra returns in stuff like this. Maybe just personal preference but typically when I'm no longer comfortable with an investment I get rid of it. Just not worth the headache. Look at RMGN. It's not even entirely about a deal break, but all sorts of holds up and going down some rabbit hole where you needs to dedicate an unproportionate amount of time and resources. I save that stuff for the core, higher quality parts of the portfolio.

Here I could just be the contrarian indicator. Always possible. Rather live to fight another day than hold on and potentially end up with a company I believe to be near worthless on a standalone basis.

Given I started the thread I felt compelled to let everyone know I'm no longer in it and the reasoning why as best I could.

Foreign Tuffett

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Re: RSYS - Radisys
« Reply #27 on: August 14, 2018, 07:54:59 AM »
I'm still hodl-ing too. No clue caused the stock to sell off, but as writser points out it has bounced back somewhat since the definitive proxy was filed on Friday.

https://www.sec.gov/Archives/edgar/data/873044/000119312518246139/d502287ddefm14a.htm

More generally, and as I mentioned earlier in this thread, I think proper position sizing is of paramount importance in merger arbitrage situations, as the risk of significant permanent capital impairment is nearly always present. I almost always keep individual merger arbitrage positions quite small as a % of my total portfolio. Why this may not maximize risk adjusted returns, it really helps both behaviorally and psychologically.

Obviously individual risk tolerances vary. I think Munger put everything he had in a merger arbitrage situation in the 1960s.

cameronfen

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Re: RSYS - Radisys
« Reply #28 on: August 14, 2018, 08:05:03 AM »
When a stock with a simple story like rsys moves down significantly, I always wonder if someone smarter or with better info than me is privy to something I'm not.  With a situation like this, where the parties are neither honest or forthright, this could be a significant problem.  This is a small position for me and I hold a lot of positions and devote little time to investigate, and so I often look at price action as well to tease out if I'm wrong in lieu of more research. 

writeser this stratagy may not work for you, and certainly is antithetical to traditional value investing, but it works for me.  I dont know if gregmal uses a similar stratagy, but I think I would definitely question why people are selling if the thesis is so obvious. 

That being said, it could be lots of people selling who were down big on the stock and selling on a 100% pop on theacquisition.  .

writser

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Re: RSYS - Radisys
« Reply #29 on: August 14, 2018, 08:30:43 AM »
Sure, I agree. As I said the price action looked a bit suspicious and that's always a difficult battle: you need to have some conviction in your own assessment but you should be flexible enough to admit you are wrong at times. Maybe selling RSYS was the right thing to do last week. I was just a bit surprised because Greg seemed quite optimistic in his first few posts and then sold his entire position a few days (without news) later. I'm skeptical of trades based on 'gut feeling' or 'pattern recognition' - easy to delude yourself into thinking you are making good decisions while you are just following your emotions. But probably I overreacted. Don't take it personal.
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.