June 15, 2020—Amateur Investors Pile Into Stock of Bankrupt Companies as Share Prices Skyrocket. Should You Follow Them?

Amsterdam-Based Food Delivery Company Just Eat Takeaway Announces Acquisition of GrubHub for $7.3 Billion. Why Didn’t Uber Buy the Company?

Electric Vehicle Maker Nikola Motors Closed its Business Combination with a SPAC and its Stock Surged. Is it the Next Tesla?

Shopping Mall Company Simon Sues to try to Wriggle Out of its Acquisition of Taubman. 

What are its Odds of Success?

SubscribeiTunes  Spotify | Google Play | Stitcher | Overcast | YouTube

Transcript: 

Welcome investors to the Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies. Your hosts Julian Klymochko and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.Accelerateshares.Com.

Julian Klymochko: Welcome podcast listeners to episode 72 of The Absolute Return Podcast. I am your co-host Julian Klymochko and our other co-host is? 

Michael Kesslering: I am Mike Kesslering. 

Julian Klymochko: Welcome to the podcast today, a pretty crazy market this week. We had a big drawdown on Thursday, VIX spiking into the forties, so Dow dropping about 1800 points, which was the fourth largest Dow drop point drop of all time. Yeah, that is right. I like the quote Dow in points, not percentages.  Good for a 7% decline, not quite topping the top 20 declines, but nonetheless, we did see a spike in volatility, but you’re seeing a market that’s really bifurcated where you’re having a lot of beaten down value stocks that really no one cares about. Then a complete opposite side, it is like a barbell where you are having insane speculation in the money losing company, somewhat no revenue and one of the main topics. 

    • I want to chat about this week is this incredible amount of speculation from unsophisticated Robinhood traders. Specifically how these amateur investors are piling into the stock of bankrupt companies and their share prices are skyrocketing, which is absolutely unprecedented. Should you follow these guys into names like Hertz or Whiting Petroleum, some of which shares have gone up 5, 10x. We are going to chat about what to do in that situation.
    • In another sign of speculative, excess electric vehicle maker, Nikola Motors, they closed its business combination with a SPAC and did this going public transaction in which its share price. Absolutely surged, I think it is up about 500%. Is it the next Tesla? 
    • Getting into some M&A this week. Amsterdam based food delivery company JUST EAT TAKEAWAY announced the acquisition of GRUBHUB for over $7 billion. We were just chatting about this lately. Why didn’t Uber buy the company? That was the rumour in the media. 
    • Lastly shopping mall company, Simon, they sued to wriggle out of their acquisition of Taubman. What are its odds of success? 

AMATEUR INVESTORS INTO STOCK OF BANKRUPT COMPANIES AS SHARE PRICE SKYROCKET

Julian Klymochko: But let’s really chat about what’s going on these bankrupts stocks.

It’s just absolutely mind blowing. I have never seen anything like this in my over 13 years in the market. What is happening here is as society slowly recovers from the coronavirus pandemic and perhaps combined with a little bit of boredom with the stay at home measures, no sports on people really need something to do during this lockdown. What has become a national pastime? Seemingly has been speculative stock trading. Day trading, as investor risk sentiment absolutely exploded as unsophisticated retail speculators have just flooded the market largely spurred by a free trading apps, such as Robinhood. They are the innovator, but you have also had E-Trade, Schwab. They are all now zero commission where you can effectively buy and sell all day on your phone. Really gamifying it or it’s basically just glorified gambling in the stock market. Now that you can’t bet on sports these days and it’s really these unsophisticated investors, gamblers are really drawn in by high risk bets, high volatility bets, and there’s nothing more high risk than bankrupt stocks.

That is right. In a move referred to by some as quote. “The most absurd moment in the history of capital markets, bankrupted vehicle rental company, Hertz, is capitalizing on recent speculative interest in its stock and proposing to issue up to $1 billion worth of new shares, which would effectively be used to pay off creditors and fund their bankruptcy proceedings. Now generally shares of bankrupt companies are worthless. Occasionally you get one where during the restructuring there is value left over for shareholders. i.e., creditors get fully paid and there’s sufficient capital left for equity holders. However, in this situation and Hertz, it seems like it’s a guaranteed zero practically, and the money it’s just a giant wealth transfer from unsophisticated investors to creditors, bankruptcy lawyers and investment bankers, which is somewhat of a sad state of affairs. Isn’t it?

Michael Kesslering: Yeah, it sure is. Like, this is one of the craziest things that I have seen in terms of bankruptcy and I will preface it. I am not a bankruptcy expert, so more, just a distress debt tourist, if you will. But you know, the whole idea of this is pretty wild and when Hertz went to their bankruptcy judge, they basically made the argument that raising equity was far superior to debtor in possession financing, which yeah, obviously it is. There is no obligations, there is no interest, it ranks junior to all of the unsecured debt. But right now, like, I mean, in terms of gauging what this. It was today that the bankruptcy judge actually did give them the go ahead to do an add the money at the market offering today as well as into Monday as well. What the market offering is for a little bit of background is basically the company just sells stock directly on the exchange through their broker. Increasing their amount of shares, whatever there is demand, so basically this is a way for them to sell directly to Robinhood accounts.

Julian Klymochko: Because there is no way an institutional investor would ever touch this financing. 

Michael Kesslering: Exactly and when we talk about institutional investors, so a traditional follow on offering is when an equity offering will be offered to institutional clients via brokers, and it will typically be syndicated. And it will be priced at a discount to the current price to entice these institutions. Could be basically be thought of as a big block trade. You would expect to take a little bit of a discount to trade a large block of shares. No different in this situation, well in this scenario, they are not pricing it at a discount. Whenever there is demand, they are going to slowly drip stock into the market. This is pretty crazy in terms of just looking at this whole scenario, where prior to Hertz filing for bankruptcy, they had about 2000 Robinhood account holders.

Now there is a cool website. I believe it is called Robintracker online that you can look at different stocks in the U.S. and how many Robinhood accounts the particular stock is held in. At that time when they filed, there was 2000 Robinhood account holders. Now you are looking at about 170,000 accounts, which is a pretty crazy uptick. I am putting it in. I believe it is in the top 20 of stocks on the Robinhood account, but the very interesting thing as well here is that the NYSE has already moved for delisting the Hertz shares. Now Hertz has appealed this, and so they will fight this, but if that does happen, these Robinhood account holders, they will no longer be able to buy. Like if you are a Robinhood account, you can’t buy OTC, which would happen. It would be an over the counter product if it was delisted from the NYSE. There really would be no more demand. Now you are able to sell on in Robinhood accounts, OTC products. At that point, the demand would have dried up, so really this is a scenario where the NYSE delist them. You know, it is going to be a big time, like a bag holder scenario where you are left holding the bag and not able to sell to anybody because there is really no demand for this. You know, like when you look at where the company’s unsecured debt is trading at 40 cents on the dollar, you know, a massive discount showing that it is very distressed. You know, it is just a pretty, pretty interesting scenario. And I think you had mentioned it earlier here is that part of the bear case here for Hertz is that sports come back and the day traders go back to sports gambling. 

Julian Klymochko: Yeah, there is perhaps one contingent and potential buyers, which would be hedge funds covering their shorts because I have heard that Capital Structure Arbitrageurs (i.e. hedge funds that are long the bonds, which as you indicated, are at 40 cents on the dollar and short the stock, which is at about a $400 million market capitalization). That is what we call a market inefficiency because the bonds are going to get paid off prior to any value going for the stock. Prior to the stock, even being worth one penny, the bonds would need to receive roughly hundred cents on the dollar in a restructuring scenario. However, the sophisticated hedge funds got absolutely run over by Robinhood traders, which are perhaps the most unsophisticated traders in the market. It is really just a reversal in traditional roles where you have the dumb money making all, all the gains and hedge funds just getting smoked on this one. Certainly Hertz is not a stock that you want to be short because they’d go up roughly tenfold trough to peak over the past week or two, which is just mind blowing.

What I found really interesting and indicative of your average buyer of Hertz bankrupt stock as per the Wall Street Journal. They indicated that a 23-year-old salesman in San Francisco bought 35,000 Hertz shares this week at a dollar and forty-three cents spending about $50,000, which he indicated was his entire life savings. And here’s a quote from him. He said, “I decided, you know, if I’m going to do it, I should do it big and I’ll make a play and see what comes out of it”. That is clearly doing absolutely no due diligence. However, he sold his shares the next day at $2 and 76 cents netting, nearly $50,000 in profit. Then after that he was kicking himself because he sold too early, could have held on for a $200,000 gain, which is just absolutely absurd in my opinion, putting your entire life savings into a bankrupt stock, doing zero due diligence, let alone having bankruptcy restructuring expertise is just no different than gambling in my opinion. And who would take their life savings of $50,000 go to the casino and put it all on black. I mean, that is just absurd as is what is happening in Hertz stock. Should you follow these guys into it? No, absolutely stay away from these bankrupt stocks. Unless in the rare case where you are a restructuring expert and you know exactly how the value’s going to flow, or have a good, well underwritten and well researched thesis behind that trade of a bankrupt stock. 

Michael Kesslering: Yeah, Julian. Some of our listeners may be wondering, you know, who are these Robinhood account holders buying their shares from? And I was reading this week that actually there’s been a ton of Hertz executive selling in the trading range of a dollar to five dollars. That is who you are buying from is Hertz executives as they have the most insight into the company and they are getting out of their equity stakes. You did mention the amount of short interests just seeing on the terminal here that there is a 37% of the float is held short right now by hedge funds. That is something to watch for as well.

Julian Klymochko: I heard barrel costs are north of a hundred percent, so that is another thing, a very, very expensive short, and really you’re just asking for trouble with that sort of volatility. The other thing to mention is, you know, one of the best distressed investors out there, uncle Carl Icahn sold his 40% stake at what, 70 cents. He really missed out on this Bonanza and Hertz stock, unfortunately, but that is all highly speculative and no one could have known that this phenomenon would occur. 

ELECTRIC VEHICLE MAKER NIKOLA MOTORS CLOSED ITS GO-PUBLIC TRANSACTION WITH A SPAC AND ITS STOCK SURGED  

Julian Klymochko: Another phenomenon happening in a super, super speculative stock is Nikola motors. That is right; everyone would know the inventor, Nikola Tesla of which the Tesla motors company is named after. We have a copycat ladies and gents in the market. What happened here was one week into its life as a publicly traded company on the NASDAQ stock exchange electric vehicle maker, Nikola. Now boast a market cap, a stunning market cap of $22 billion, not far behind that of Ford.

However, there is a major difference between Nikola and Ford is that Nikola has basically never manufactured anything and they have zero revenue. Meanwhile, Ford has been in business what a hundred years, over a hundred years and as billions of dollars in revenue. Nonetheless, Nikola is planning to build a 1 million square foot facility south of Phoenix and start making trucks, electric vehicles, electric trucks in 2021 expecting to reach full production of about 30,000 fuel cell electric vehicles by 2027. That is some serious future value, future potential value. However, at this point, no revenue, market cap north of 20 billion. They actually went public by doing a reverse merger with a blank check company. I.e. a SPAC headed by a former GM executive but since that SPAC, they announced the deal with the SPAC. The SPAC was around 10 bucks per share. Nikola stock since has skyrocketed up about 500% since announcing this in February, despite, you know, one of the swiftest bear markets of all time. And we’re practically in a massive recession. You are seeing crazy action in these highly, highly speculative stocks and what I think the dynamic is that the government sent out these stimulus checks and millennial are like, well, let’s throw it in a Robinhood account and see what happens. And I guess that is what’s happening with the share prices of these super speculative stocks. For some reason, they are not attracted to small cap value stocks, are they?

Michael Kesslering: No, they certainly aren’t and in terms of this company, I mean, like, they’re really just a very clear rip off of Tesla

Julian Klymochko: Shameless, rip-off. 

Michael Kesslering: Yeah, like every aspect and so in my colourful description that I typically have of companies like this. As I would kind of describe it as second derivative dog shit. Where this is just like, not even there, they are not really even a real company at this point in terms of their. There is no revenue, it is certainly a company that would be interesting from a venture capital standpoint but for, you know, a public company with a $30 billion market cap, you know, not really justified there. But looking at, you know, once again, the Robinhood effect is back when the stock was $35, which was already a pretty crazy run-up. They had 33,000 Robinhood holders.

Well now, with the stock over $60, they have 140,000 Robinhood holders and you know what is going on there? Like you look at the share price overlaid with the Robinhood account holders and it’s pretty much just moving up exactly in lock step. Up until really Wednesday but as well, looking at this name, like I saw that their founder is now worth, I think between 6 and $9 billion as I think he owns a pretty substantial stake of the company. I mean, this guy’s printing money right now. As well, he has had a lot of the same when we are talking about ripping off Tesla; he has had the exact same animosity towards short sellers as Elon Musk. Going after short sellers at this point, he should really just be focusing on building his company. No, never mind about short sellers. If you build your company in a good way, the short sellers will kind of blow themselves up. But you know, I think it was Matt Levine as well that he pointed out that thankfully Nikola Tesla, nobody knows what his middle name is, but if that is the case I’m sure we will see some sort of derivative, maybe a third derivative of this spy company.

Julian Klymochko: Yeah. There is a good company arbitrage in the market. Where you can take one of Nikola Tesla names, start an electric vehicle manufacturer. Even with no sales and then you too can become a billionaire. I have an idea to start an electric motorcycle company and name at Alset. Tesla backwards and now they are shameless rip off, but during the seed round at a $10 billion valuation, so reach out if you are interested, but nonetheless, on that file, we have another baby Tesla. Tesla, if you look at the price action, it actually hit roughly a thousand dollars per share, which is just more and more craziness in the market. Just indicative of the environment that we are in kind of a 99-2000 style tech bubble, where the best performing stocks are by far the most speculative. Who knows how long it will last, but really, you want to stay away from bankrupt company stocks. 

Stay away from highly, highly speculative stocks that are really just traded by unsophisticated day traders, such as Nikola Motors. I mean, be careful if you are going to get involved cause highly volatile. And when you have no underlying business and $22 billion market cap, if the crowd suddenly loses interest, it could be like tulip bulbs. One day you could be holding and not be able to sell for anything, but that is kind of my issue with highly speculative trading sardines, as a referred to. 

AMSTERDAM BASED FOOD DELIVERY JUST EAT TAKEAWAY ANNOUNCES ACQUISITION OF GRUBHUB FOR $7.3 BILLION 

Julian Klymochko: Want to touch on some M&A mergers and acquisitions action. This week, we did have a bit of consolidation in the food delivery sector. As Amsterdam based Just Eat Takeaway, announced a $7.3 billion dollar all share acquisition for Chicago based GrubHub. We recently talked about a potential deal for GrubHub by Uber, which did not pan out. We previously discussed there were major antitrust issues with that potential deal, so we did not see it getting done. And it looks like Just Eat Takeaway came out of nowhere and did the deal for GrubHub. Anyway, now this deal will create the world’s largest food delivery company outside of China and it is indicative of the much-needed consolidation in the food delivery sector. These companies have for years been suffering, ongoing losses, amidst just a really intense competitive environment. These two companies Takeaway and GrubHub both founded in the early 2000. Still struggling with profitability and their business model has really been copycatted by a number of other firms. Like Uber Eats, DoorDash, Deliveroo, Postmates, but the thing about this consolidation. It really doesn’t reduce competition in the U.S. because right now, Just Eat Takeaway, doesn’t really have a presence in the U.S. so this lack of geographical overlap means not much for synergies from this consolidation, and you still have an intensely competitive environment in the U.S. just because customers can jump freely between the services.

Mike, we have discussed this in the past. You know, you go to use Uber Eats, okay and tomorrow I will use a SkipTheDishes or DoorDash, whichever one is really offering the best economics. It is really highly commoditized business. The other issue right now with these companies, they have been getting a lot of regulatory pushback. Restaurants are complaining a lot, they are stating that these delivery apps are just taking way too much money from them for their services. A lot of negative pressure on these business models, so it is not very surprising to see this consolidation and it looks like so far, Just Eat Takeaways, looking to become the global leader. For example, just in January they did another massive deal. Nearly $8 billion where they bought Just Eat their British rival and then previously they acquired Winnipeg based, SkipTheDishes a number of years ago, who is the market leader in Canada, so really interesting deal. What are your thoughts on it? Where do you think this is going to go? You think we will see more consolidation in the space?

Michael Kesslering: Yeah, absolutely. It is a space that needs consolidation, which we have talked about before. We have also talked about the difficulty of the unit economics and that does not really change on a go-forward basis, is the unit economics of their business model still will be strained but you know, it is something they are hoping to overcome with scale. I’m a little bit pessimistic on it, but if they do execute there certainly is a possibility to do so, but really, you know, the way I’m looking at this is through the lens Just Eat Takeaway. That this is their entry into the U.S. By what I am reading is that they were looking to expand their platform organically into the ultra-competitive U.S. market I will add.

And GrubHub, I believe they have an estimated 23% market share which puts them as the second place in the U.S. market. Instead of taking, it from a four player market too really, a five-player market with their entry. By acquiring GrubHub, they are basically keeping it at a four player market. But you do have some upstarts still within, the U.S. market where, you know, Uber. We had talked about how they were looking to acquire GrubHub; obviously, they lost out on this bidding war and so far, have indicated that they are not interested in launching a competing bid at this point. The market for Uber, like yesterday, it did go down. Their stock did go down, but the market in general was going down yesterday.

But they were down over 10% yesterday, so perhaps just general market moving with general markets or investors, viewing it as a missed opportunity to acquire GrubHub for themselves. The question is who could Uber look at now, and Postmates is an option. They have 8% in the U.S. market as well as very little overlap with Uber. And so the issue with Uber acquiring GrubHub as you had mentioned, Julian, is the antitrust issues. That would not be as much of an issue or it would be very little issue with Postmates acquisition as there is little overlap, but keep in mind, yes, that is better from an antitrust standpoint with no overlap, but that means that there is likely to be a lot less synergies. That is something to keep in mind when looking at the potential for an Uber-Postmates combination but ultimately this is the rational move in this space where some of these players are consolidating. And it will be interesting to watch as this, move forward. I believe there is just specific to the Just Eat-GrubHub deal. I believe Julian, there is a buy-side vote. That will certainly be interesting to watch as well, won’t it?

Julian Klymochko: Yeah, certainly where you need approval of shareholders, both at the target GrubHub and the acquire Just Eat Takeaway. Now this M&A spread from a merger arbitrage perspective is pretty slim. Only a 2.5% merger yield that is the annualized return. If you would like the odds of success, comparing the upside versus the downside in this merger arbitrage, it is roughly implying a 94% chance of success and not really priced to perfection, but not really priced for an interloper becoming involved. Should disclose that we are short GrubHub stock, not from a merger arbitrage perspective, but in one of our systematic funds, it ranks quite poorly on the multifactor model. So got to disclose that, but truly an interesting situation and as a consumer. I hope that business continues to stay intensely competitive because it is nice getting my meals subsidized by investors and venture capitalists. 

SHOPPING MALL COMPANY SIMON SUES TO TRY TO WRIGGLE OUT OF ITS ACQUISITION OF TAUBMAN 

Julian Klymochko: Wanted to touch on another M&A situation this week, specifically Taubman and Simon. In another unfortunate example of buyer’s remorse, which we are seeing pretty often during this recession and coronavirus pandemic. Mall owner, Simon property group announced that he was attempting to terminate its friendly 3.6 billion acquisition of Taubman Centers. I should say previously friendly acquisition. Now this initial deal was announced February 10th of this year, after the coronavirus was already wreaking havoc in Asia, but had yet to affect the United States. It should not become that much of a surprise to Simon given that Taubman does have two malls in China, and those did suffer pretty greatly in Q1. However, they are fully up and running throughout Q2. Now on this deal specifically, Simon is claiming a material adverse effect has occurred of which Taubman disputes. Therefore, these companies are heading to litigation. That is right. They are heading to court. I did read Simon complaint. The TLDR version of it was there is a material adverse effect because Taubman malls are visited by wealthy people.

And Simon is saying, since the coronavirus happen, rich, people are only going to shop online. They are not going to go back to malls and therefore Taubman has been affected far worse than its competitors. The other thing is they are claiming I believe it is, a breach of the merger agreement from the perspective of operating in ordinary due course. Simon is claiming because Taubman did not make dramatic cost cuts, did not lower their spending significantly. They say that they’re not operating in normal due course, which in my opinion is kind of backwards logic because Taubman was saying, you know, business as usual, but Simon is saying that because they didn’t dramatically change their business during the pandemic that they’re not operating in normal dude courts. Some backwards logic there, I am quite sceptical that it will hold up in court, but these parties heading to litigation will follow that one closely, given the cyclical nature and what happened in the second quarter with respect to forced closures of businesses. Taubman of course, having to close down all of its US-based properties during the pandemic.

However, I have been following the reopening quite closely and they have actually reopened 92% of their malls over the past month or so, which is really odd timing on behalf of Simon. They got cold feet just as the American economy was recovering, which is a really strange time to renege on a deal. The other thing is the strategic rationale of this deal. These companies have been competing for a long time. In fact, nearly 20 years ago, Simon launched a hostile takeover of Taubman, which the Taubman family successfully defended. Simon was trying to buy Taubman about 20 years ago. They did it on a hostile basis or at least attempted and now the roles have completely reversed where the Taubmans are trying to force Simon to complete this acquisition that they potentially abandoned. Super interesting M&A dynamics there, Taubman responded by indicating it’s going to force Simon to complete the deal or pay for damages. Nonetheless, on a probability weighted scenario. I bet most likely we will see renegotiate deal. I threw up some quick and dirty analysis on Twitter today showing that. I think the most likely scenario is a recut deal. Perhaps in the $47 range, which would be a 10% price cut, 50% odds of that say 30% of the court forcing assignment to close at the 52/50 deal price and a 20% chance that Simon is effective in their litigation and allowing them to terminate the deal without paying any damages. What are your thoughts on another M&A situation that is ended up in court?

Michael Kesslering: Yeah, it is unfortunate to see, but somewhat expected with how wide merger ARB spreads blew out. You knew that some of these would go to court and whether it makes its way all the way through the court process, still remains to be seen. But I found it especially crazy that Simon used the fact that Taubman drew down their credit revolver during COVID as another justification for an MAE which, you know, this is despite them having given permission to do so.

Julian Klymochko: Yeah, exactly and the other interesting aspect about that credit line draw down is if we look at another M&A comp, which was Borg Warner acquisition of Delphi. Borg Warner was gunning for a price cut and what they did was when Delphi wanted to draw down on their facility, BorgWarner said, no. Delphi did it anyway, Borg Warner said, Hey, you did that without our permission, you breached the merger agreement, we’re going to terminate the deal in less securities and that forced the target to come back to the table and accept a price cut of which they settled onto a 5% price cut. So really misplayed by Simon here, if they did want to successfully negotiate or try to get out of the deal, the best leverage they had was that credit facility drawn, and they really missed their chance because in March, as you indicated, they granted permission to Taubman.

Michael Kesslering: Exactly, and as well, you gave the Delphi example. But as well many of Taubman competitors were doing the exact same and as we’ve discussed plenty of times on the podcast before for an MAE to be truly invoked and, validated within the court is you have to be doing something that is outside of normal course business and outside what competitors are doing. So the fact that other competitors are drawing down on their credit revolvers also just makes intuitive sense. That during a global pandemic just using a little bit of logic here that businesses that are impacted are going to be drawing down. Now, part of the game theory here some of the analysis that I have read points towards really that Simon, they’re getting cold feet, and perhaps this is a way to just, you know, really slow down the pace of this transaction, so even if they’d still do intend on, you know, dropping the case. That they will be able to slow it down enough, that we will just give them a bit longer to see how the Taubman business does evolve here in the next couple of months as things start reopening. But as well, you did lay out a very good scenario analysis on Twitter, as you had mentioned, Julian. I did notice that your downside case that you were expecting is $20. And just, when looking at this sort of scenario analysis I believe that is like a pretty conservative number and that typically is important to do when you’re looking at this. It does not really give you a lot of benefit to look at the downside case and be overly optimistic about it and in this scenario, you know, I have seen some estimates that are more in the $26 range, so just wanted to point out. Even with your downside case, you know, you are being quite conservative with this with this scenario analysis, which is the point of the entire scenario analysis. It will be interesting to watch if this deal does break. I am not sure what your opinion is, Julian, but I don’t think there’s any obvious other buyers that could provide a for price that would swoop in and acquire Taubman. I am not really sure what would happen in that scenario.

Julian Klymochko: I mean we have seen some pension fund interest buying, shopping malls. I remember a deal in Canada, a number of years ago, where he had some pension funds buying out the largest mall operators. They tend to like those assets, however, you know, the environment has changed for the worse. That is kind of another thing to consider you really have not seen much action out of institutional buyers. Buyers really kind of been scared by all the volatility, but who knows? I mean, someone like Brookfield, they are doing still a decent number of deals. I saw that they took a stake in what was it Superior Plus. They are also doing real estate deals and looking to capitalize. What is interesting comment from Brookfield is that they have actually transitioned them to buying public equities. Given the draw down in markets, they are actually finding better deals in public equities as opposed to private assets.

So not really speculating on anyone else coming into the picture here, however, should disclose. We are long Taubman stock. I think gets decent value here. Good chance that there is some upside from those different scenarios. If you are looking for a precedent court case to examine, you should check out Tyson and their acquisition of IBP back in 2001. Tyson actually tried to get out of the deal and fail that is right. The court forced them to close on this $3.2 billion deal. I believe they did claim a material adverse effect, which is notoriously difficult to be successful at, the court not having it. Forcing Tyson to close on that acquisition for $3.2 billion. There is precedence where the court has forced cooled footed buyers to actually complete the acquisition. That is something to keep in mind in terms of, you know, assisting you on that scenario analysis here.

But like I said, I think more lately is a renegotiated transaction with the stock. Now in the thirties, shareholders are probably pretty keen on getting that done should note that the votes coming up on June 25th and the most efficient way of getting this done would be to renew negotiate that prior to the boat at the 52-50 bucks per share. But that’s about it for us on episode 72 of The Absolute Return Podcast. If you enjoyed it, you can always check out at absolutereturnpodcast.com definitely follow us on Twitter, always putting out insights and analysis. If that is what you are into Mike, what is your Twitter handle? 

Michael Kesslering: My handle is M_Kesselering, K-E-S-S-L-E-R-I-N-G. 

Julian Klymochko: You can find me at @JulianKlymochko, K-L-Y-M-O-C-H-K-O definitely have a great week with all your trading investing and speculating, but for sure, stay away from the bankrupt stock. Stay away from the shameless rip-off stocks as well. Those are just straight up gambles. Try to stick with a good process in your investing, but that is all we got to say this week. Hope you enjoyed the podcast, wish you all the best of luck and we will chat with you soon. Cheers.

Thanks for tuning in to the Absolute Return Podcast. This episode was brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.AccelerateShares.com. The views expressed in this podcast to the personal views of the participants and do not reflect the views of Accelerate. No aspect of this podcast constitutes investment legal or tax advice. Opinions expressed in this podcast should not be viewed as a recommendation or solicitation of an offer to buy or sell any securities or investment strategies. The information and opinions in this podcast are based on current market conditions and may fluctuate and change in the future. No representation or warranty expressed or implied is made on behalf of Accelerate as to the accuracy or completeness of the information contained in this podcast. Accelerate does not accept any liability for any direct indirect or consequential loss or damage suffered by any person as a result relying on all or any part of this podcast and any liability is expressly disclaimed.  

Book a Meeting

Schedule a meeting, call or virtual
appointment with Julian Klymochko,
Maury Krupp or Sean Murray
BOOK NOW!
close-link
Book a Meeting!
Loading...