Author Topic: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?  (Read 175661 times)

bizaro86

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #530 on: March 29, 2019, 08:46:42 PM »
If you're going to value it as a sum-of-the-parts you should take an NPV of the cost of their management team/G&A out. A collection of investments that comes with a cost in perpetuity along with it is worth less than the value of those investments.

I'm not that concerned about "good news" risk in the short term. While I think the terminal value here is more likely to be zero than a double from here, I don't think their incentives are to release any good news now. I do think they'll do a tender for some of the common at some point here, probably not until the post-exchange capitulation. So it doesn't make sense for them to talk up the stock until then.

You can analyze all their actions with "what is the best for the Goodman's" and you'll come to the right conclusion 100% of the time, and if they are going to do a buyback (to keep their stake up) a lower price in the interim is better for them.

Earlier in the thread folks were asking why there was no management buying if management thought it was cheap, and the answer is they knew this was coming. As mentioned, trading $1.35 in stock (or $1.15, or less...) when you can get $2 in prefs in exchange for it is a good deal, but you wouldn't want to put your capital in front of the dilution.

I think its likely there will be a buying opportunity, but probably not until after the exchange offer shares have cleared. 


gokou3

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #531 on: March 29, 2019, 10:30:37 PM »
I notice Ned Goodman transferred his stakes to a trust just a couple days before the bloodbath:

https://www.canadianinsider.com/node/7?menu_tickersearch=DC+%7C+Dundee

Wonder if anyone knows the rationale / benefit for the Goodman for this transfer?

Rod

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #532 on: March 30, 2019, 09:14:21 AM »
If you're going to value it as a sum-of-the-parts you should take an NPV of the cost of their management team/G&A out. A collection of investments that comes with a cost in perpetuity along with it is worth less than the value of those investments.

I'm not that concerned about "good news" risk in the short term. While I think the terminal value here is more likely to be zero than a double from here, I don't think their incentives are to release any good news now. I do think they'll do a tender for some of the common at some point here, probably not until the post-exchange capitulation. So it doesn't make sense for them to talk up the stock until then.

You can analyze all their actions with "what is the best for the Goodman's" and you'll come to the right conclusion 100% of the time, and if they are going to do a buyback (to keep their stake up) a lower price in the interim is better for them.

Earlier in the thread folks were asking why there was no management buying if management thought it was cheap, and the answer is they knew this was coming. As mentioned, trading $1.35 in stock (or $1.15, or less...) when you can get $2 in prefs in exchange for it is a good deal, but you wouldn't want to put your capital in front of the dilution.

I think its likely there will be a buying opportunity, but probably not until after the exchange offer shares have cleared.

I don't think you're crazy to short it. I wouldn't do it myself. But you can make a decent case that selling pressure from the new shareholders will push down the stock and the Goodmans are unlikely to buy enough shares at a high enough price to put a big dent in that decline. You're right that the incentives are for them to buy cheap as possible.

I don't worry about management overhead in my valuation because I don't expect a bloated structure. If they become simply a passive investment company, then I think they will run with very few employees. Maybe half a dozen. As it is, their plans are to operate an active advisory business with multiple services. Obviously that would require more employees to run it. And that cost will get factored into the valuation of the advisory business they develop. They are going to be a hybrid structure, the investment holdings you could value at market, the advisory business is where you net out the bulk of the G&A and value that business based on the net earnings. So the costs are all accounted for. Currently much of the employee count is probably devoted to dealing with the legacy assets that are in the process of being disposed of. I expect that the numbers will continue to shrink.

The lack of insider buying was one of the reasons I believed that conversion of the E's was going to happen. The other major reason was the long delay in putting out a proposal to renegotiate.
« Last Edit: March 30, 2019, 09:19:59 AM by Rod »

Rod

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #533 on: March 30, 2019, 09:19:12 AM »
I notice Ned Goodman transferred his stakes to a trust just a couple days before the bloodbath:

https://www.canadianinsider.com/node/7?menu_tickersearch=DC+%7C+Dundee

Wonder if anyone knows the rationale / benefit for the Goodman for this transfer?

It looks like Ned is simply passing control onto his four sons, who are the trustees. So I guess it's a natural evolution. I doubt timing has anything to do with it. Ned has been silent for a long time and I wonder if he is experiencing declining health, either mental or physical. He may be getting his affairs in order.

lessthaniv

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #534 on: March 30, 2019, 10:36:15 AM »
Not an expert in trusts but likely the change of ownership would trigger a deemed disposition tax wise. It would be strategic to do that along the lows in the stock.
<IV


sculpin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #536 on: April 01, 2019, 11:53:42 AM »
If they sell Blue Goose & CSX exchange holdings and succeed in refinancing Parq over the next 2 months would like to see them take the $30 to $40 million and do a substantial issuer bid in the range of $1.25 to $1.50 for 25 million shares.

Once this is complete put in a normal course issuer bid to opportunistically buy back up to 10% of 75mm or so shares left outstanding after the Dutch auction bid.

bizaro86

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #537 on: April 01, 2019, 01:15:41 PM »
Not an expert in trusts but likely the change of ownership would trigger a deemed disposition tax wise. It would be strategic to do that along the lows in the stock.

I think the question was why do that before the exchange was announced, as there would be a predictable drop after the announcement. Then you could lock in an even lower price for the deemed disposition.

I think it's possible that the answer is that Ned has a loss on his shares. Given the size of the position and Canadian tax law, realizing a larger loss may not make sense. So doing it earlier might eliminate a tax loss he can't use while giving the trust a higher coat basis.

That's just speculation, but the furthest back I could find a DC.A chart was 1995, when it traded at $1.86. I know there have been some distributions that would have split a cost basis since then (Dream née Dundee Realty for example) but it's also possible he's got some high cost shares added along the way.

That's just idle speculation, but it seems to fit the fact pattern. They would have definitely know the exchange offer was coming and that it would hurt the price of the common...

Cardboard

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #538 on: April 01, 2019, 01:19:22 PM »
"I took a pretty good short position this AM."

By the way, which broker got you a large number of shares to short of an illiquid stock, trading below $2 hence not marginable and usually unavailable for retail accounts?

Cardboard

bizaro86

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #539 on: April 01, 2019, 04:15:42 PM »
"I took a pretty good short position this AM."

By the way, which broker got you a large number of shares to short of an illiquid stock, trading below $2 hence not marginable and usually unavailable for retail accounts?

Cardboard

Large means different things to different people, naturally, and I meant relative to how I would normally size a naked short, not large compared to the size of AUM some have on here.

That said, I got the borrow from interactive brokers, which had quite a bit of availability. It's been trickling down the last few days, and they only have 85k shares left now. You can check their availability online, which is one of the many reasons they're my favorite broker. (And why I have an IBKR long position).
« Last Edit: April 01, 2019, 04:19:02 PM by bizaro86 »