DIMEQ - Dime Bancorp Litigation Tracking Warrants

[JSArbitrage]

I take it they were deemed to be equity??

Yup.  I had no position in this stock but I thought it was a good thesis.  I read all the filings.  I think the ruling is a joke.  In bankruptcy cases, sometimes good litigation is "body bagged" for the sake of expediency.  That's basically what happened here.  The judge was forced to do some pretty funny acrobatics to ensure that JPM was able to get the litigation payout free-and-clear.

So, in the end, the warrant was deemed to be generic equity but somehow lost the rights that equity holders had during the merger (cash & stock consideration) and WMI giving JPM the future proceeds of the litigation for consideration was not deemed a transfer or sale.  Okie dokie.  Whatever you say.

I wonder why most companies don't start spinning-out their litigation claims.  SpinCo has claim to litigation and sells warrants to investors.  Have SpinCo take out debt to HoldCo. Pay HoldCo huge consulting fees until cash runs out. Put SpinCo into bankruptcy before litigation has ended but after payout is deemed a near certainty.  Transfer litigation claim back to HoldCo in bankruptcy.  HoldCo gets sale proceeds + the litigation back free and clear.

Basically what happened here except HoldCo became HoldCo1, HoldCo2, etc. down the line until it was JPM.

[enoch01]

Today's decision reminds me of the inimitable George Carlin: "It's a big club, and you ain't in it."

http://www.youtube.com/watch?v=i5dBZDSSky0

Although I suppose that to think about today's ruling in conspiratorial terms is probably trying to take the easy way out.  I've held these for a while now, and placed the odds of today's outcome at a very low level (<5%).  I'll have to go back and re-evaluate what/if I did anything wrong here.

[Hester]

Today's decision reminds me of the inimitable George Carlin: "It's a big club, and you ain't in it."

http://www.youtube.com/watch?v=i5dBZDSSky0

Although I suppose that to think about today's ruling in conspiratorial terms is probably trying to take the easy way out.  I've held these for a while now, and placed the odds of today's outcome at a very low level (<5%).  I'll have to go back and re-evaluate what/if I did anything wrong here.

That pretty much sums up why I just avoid these types of investments.

[ExpectedValue]

I think these types of investments are really hard for an ordinary investor to do because you are likely too inexperienced to actually gauge the probabilities properly to enable a robust expected value analysis.

Professionals on the other hand can tap the expertise of good bankruptcy/restructuring law firms that are going to have attorneys with the expertise and experience necessary to help you better make a decision.