Author Topic: SYTE - Enterprise Diversified  (Read 217595 times)

Sunrider

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Re: SYTE - Sitestar
« Reply #220 on: September 20, 2016, 11:37:29 PM »
Agree with one caveat - pre Alluvial BV matters, not value after, which is contingent on the raise. Also straight after the raise, the company has not economically diluted shareholders, provided it issues at BV and BV is appropriate. The decision as to what to do with the cash raised is a secondary matter.

I do agree, by the way, with the notions expressed here that the private placement doesn't just smell fishy (including justifications provided) but stinks.

C.


A somewhat simple question on the dilution point - there are 100 shares and the book value is $100, assume all in cash. Management raises new funds to invest in [hedge fund] or [toilets] or [mars greenhouses]. The total size is 1000 shares for $1000.

Effect immediately after:

1100 shares with cash book value (=equity value) of $1100.

No dilution - but of course investing that cash into [] may or may not be a good use of funds.

... just wondered why people complain about 'dilution' for the Alluvial raise - shares get issued for cash, which accrues to equity value, so that's not really dilution, no?

In the case of all cash you are correct.  There is no dilution.  The reason that there is no dilution is not that the issuance is at book value, it is that intrinsic value and book value are "identical" in your scenario.  That is rarely the case.  If you believe intrinsic value is substantially higher than book value you will believe you are being diluted.  The challenge with Sitestar is what is/was intrinsic value as a going concern?  What is/was it in liquidation?  What is it after the HVAC deal?  What is it after the Alluvial deal?     


hillfronter83

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Re: SYTE - Sitestar
« Reply #221 on: September 21, 2016, 07:00:04 AM »
The whole market cap of Sitestar is only a few millions. I found it hard to believe people, especially successful aspiring money managers, would risk their reputation for such amount. While I understand why minority holders are frustrated with lack of transparency, I would give them the benefit of doubt given some respected people from this board are involved such as Keith, Dave, etc.

Foreign Tuffett

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Re: SYTE - Sitestar
« Reply #222 on: September 22, 2016, 01:17:03 AM »
Is part of the shareholder unhappiness that what was originally thought of as a value investment has turned into something more reminiscent of a venture capital fund?

Disclosure: I have never held a position in this and don't plan to.

Spekulatius

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Re: SYTE - Sitestar
« Reply #223 on: September 22, 2016, 03:50:40 AM »
Is part of the shareholder unhappiness that what was originally thought of as a value investment has turned into something more reminiscent of a venture capital fund?

Disclosure: I have never held a position in this and don't plan to.

Yes, that is how I see it. The direction of the company was completely changed (scope of business, capital raises) and with none of the changes, existing minority shareholders had a say. That's said, those that don't like it, can exit their position at a fair price (imo) right now.

FWIW, I don't own this (never did), nor do I plan to.
« Last Edit: September 22, 2016, 03:52:45 AM by Spekulatius »
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andgroup

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Re: SYTE - Sitestar
« Reply #224 on: September 27, 2016, 05:40:56 PM »
I have just gotten a chance to sit down and read thru all of these messages.  I have a few things to say.

1.) I invested in this stock after I found out that Steven Kiel was getting involved, I have followed him for 3-4 years now.
2.) If I only thought the stock would go from 4.8 cents per share to 6.6 cents per share, I would have never purchased it to begin with.
3.) Here you have a man who has brought tremendous resources to bare in cleaning everything up, and installing control systems, and preparing this company for the future.
4.) You now have an operator with a tremendous track record.
5.) You have his word that he will not invest in these private companies unless he can see more potential in them than in public markets, and his track record prior to this investment operation was phenomenal.
6.) You have a tremendous amount of capital being attracted to this company relative to what it was just a few months back.

If you do consider this to be your company, as I do, I cannot for the life of me see why you would be anything but grateful that the stagnant asset you held continues to mushroom in future potential.

If you are that concerned about the 4.8 cents to the 6.6 cents differential, you are probably not a long term investor and not suited for this stock anyways.

My opinion is that Steven Kiel honestly believed he could not do the things he needed to do for the company without making a huge statement about who the new sheriff in town was - both to current shareholders and to the former CEO, and he might have even been struggling with a bit of insecurity in the sense that he did not want to take any chances of losing control over something he has put so much effort into (without pay no less), especially if it is going to be a vehicle into which he will be depositing some of his best ideas.

At this juncture, I personally believe that the company and its expanding assets are in excellent hands, and further, I believe that Steven knows very well, that if he should permanently lose his reputational advantage (which may have taken a small hit here in the beginning -- but I believe will be fully regained in time), that he will lose far more in the long run, than any temporary advantages that strategy would grant him in the short run.

I believe this because after my interactions with Steven, I do not regard him to be a small minded, short term, range of the moment thinker.  I believe he has a much larger vision in mind for this company, and I am glad to be a part.

For the record Buffett completely changed the scope and direction of Berkshire Hathaway as well, and I don't see many people who started with him in the beginning who are bitching now.

"I have yet to find the man, however exalted his station, who did not do better work and put forth greater effort under a spirit of approval than under a spirit of criticism."   --- Charles Schwab

Sincerely,
John Woods
« Last Edit: September 27, 2016, 05:51:08 PM by andgroup »

LR1400

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Re: SYTE - Sitestar
« Reply #225 on: September 27, 2016, 09:11:30 PM »
I like the idea of freeing up capital and moving it toward seemingly higher value assets/companies. I am still curious as to why they chose HVAC.

Not a shareholder, but learning a lot and would like to follow some of this path in the future. The dilution item is still troubling even if it does erode value per share.

They seem Iike good people who may have taken slight advantage of shareholders for their own benefit.

andgroup

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Re: SYTE - Sitestar
« Reply #226 on: September 28, 2016, 07:00:12 AM »
Right.  But here is the thing.  Steven is not just freeing up capital and moving towards higher value assets, that's one part of it to be sure. 

He is also adding additional capital itself into the mix, and on top of that he is locking in some tremendous brain power who now have skin in the game, and doing it at a reasonable price point which basically puts a floor under the stock, and will be used to our advantage going forward.

So you are either in one of two camps.

1.) You believe that Steven Kiel and his group are a bunch of crooks who took over a 3-4 million dollar company, put tons of time and resources into cleaning everything up and building a solid platform for future growth, and then added another 4 million, and now another 10 million in capital to this operation, just so he could figure out how to retroactively screw you out of a small slice of your original buy in at the 3-4 million dollar price level.

or

2.) You believe that Steven Kiel and his group took over a company, made substantial investments of time and resources and capital without drawing a salary and added a ton of brain power to the operational side and the capital allocation side, because he actually believes that they can do what they love to do, which is to compound money at a high rate of return for many years to come.

And to be honest... I remember that when I first bought into this deal, that I was worried that Steven's fund only owned 4-6% of the company, because it would be so easy for him to get frustrated, call it quits, and leave.  So the increase in his share of the company actually made me feel much safer, and showed a much higher degree of commitment to the future of this company than I had originally anticipated, and probably is one of the reasons that there has not been much volatility in the stock price.

So my message to Steven is that I trust your judgement, ignore the critics, and focus on what you are there to do, which is to compound money, using whatever vehicle you think gives us the best risk/reward profile.

Thanks,
John Woods

LR1400

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Re: SYTE - Sitestar
« Reply #227 on: September 28, 2016, 07:37:24 AM »
Right.  But here is the thing.  Steven is not just freeing up capital and moving towards higher value assets, that's one part of it to be sure. 

He is also adding additional capital itself into the mix, and on top of that he is locking in some tremendous brain power who now have skin in the game, and doing it at a reasonable price point which basically puts a floor under the stock, and will be used to our advantage going forward.

So you are either in one of two camps.

1.) You believe that Steven Kiel and his group are a bunch of crooks who took over a 3-4 million dollar company, put tons of time and resources into cleaning everything up and building a solid platform for future growth, and then added another 4 million, and now another 10 million in capital to this operation, just so he could figure out how to retroactively screw you out of a small slice of your original buy in at the 3-4 million dollar price level.

or

2.) You believe that Steven Kiel and his group took over a company, made substantial investments of time and resources and capital without drawing a salary and added a ton of brain power to the operational side and the capital allocation side, because he actually believes that they can do what they love to do, which is to compound money at a high rate of return for many years to come.

And to be honest... I remember that when I first bought into this deal, that I was worried that Steven's fund only owned 4-6% of the company, because it would be so easy for him to get frustrated, call it quits, and leave.  So the increase in his share of the company actually made me feel much safer, and showed a much higher degree of commitment to the future of this company than I had originally anticipated, and probably is one of the reasons that there has not been much volatility in the stock price.

So my message to Steven is that I trust your judgement, ignore the critics, and focus on what you are there to do, which is to compound money, using whatever vehicle you think gives us the best risk/reward profile.

Thanks,
John Woods

He's probably a decent guy that should've handled the rights offering differently. It makes sense that you feel safer with him having more skin in the game, he also has a relatively low risk opportunity to dramatically increase his net worth. I would forego a salary for that opportunity as well.

I personally don't put too much weight into brain power in mature industries. Certainly poor brain power can cause problems, however, great brain power in mature industries rarely makes much difference in my experience, meaning it won't lead to out-sized returns alone.

andgroup

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Re: SYTE - Sitestar
« Reply #228 on: September 28, 2016, 07:51:47 AM »
I agree with your comment that brain power in mature industries tends not to add much value.  Where I trust Steven is in this regard, that he has said that he would not commit capital unless he believed there was a chance for higher returns than he had been able to generate in the public markets.

So he has obviously seen something in this space that has convinced him that he can achieve high returns here, or at least that he cannot find better returns elsewhere that promise safety of capital.  None of this means that he will be right, but his judgement has been very solid in the past, and I think the bar has got to be pretty high for him to believe in something enough to commit capital.  He's human, he will make mistakes from time to time.

But based on all the information I can gather, I just happen to hold the view that he will be right more often than he is wrong.

Jurgis

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Re: SYTE - Sitestar
« Reply #229 on: September 28, 2016, 08:23:48 AM »
I should probably not post here, since I have no interest in SYTE (anymore). And I may remove this message in 10... 9...

In the meantime though, I don't see what's to be excited about. So a bunch of smart guys take over SYTE and the best idea they have is ... drumroll ... dilute and invest into a new hedge fund. I thought these are smart guys who are running their own hedge funds. If they wanted invest in stocks, why did they not invest in stocks directly from SYTE? If they have no good ideas where to invest money, then why do they believe that hiring another hedgie is a solution? Overall, what's the point of a structure where hedge fund invests in SYTE which in turn invests into another hedge fund that invests into some stocks? I guess it would look worse if their hedge fund would invest directly into another hedge fund - that would be admission that they don't have ideas themselves, no?

To make this post somewhat relevant, I've seen these gymnastics in other places that won't be named (apart from SYTE I'll criticize by category like Buffett ;)) and I haven't seen this lead to great results. IMO every layer added usually means worse results.
"Before you can be rich, you must be poor." - Nef Anyo
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