hedgebets: thank you for your valuable comments. Could you please simply comment on the potential impact of NOLs on the individual long shareholders like me and others. Are we at risk?
Pas, we are not giving management too much credit when talking about the realization of NOLs, we are giving the credit to passive activist opportunists...such as, Sandell, Loeb, and Cohen...because of their track records of making greedy self-serving c-suite occupants...offers they can't refuse!!! Now, if you want to argue that the process as a whole sells out long-term investors, reallocating their ROIC overtime into the pockets of the passive activist opportunists, as well as the management that helps facilitate the transfer...then, we can have a conversation about that...but, there are steps they can take to eliminate minority, or dissenting shareholders under section 368!!!
Quidquid Latine dictum sit altum videtur...And here I thought hypothesizing about Section 368 versus Section 351 mergers would sound like a foreign language to most...just like math...continuity of business ownership interest, continuity of business enterprise, valid business purpose, and step-transaction doctrine...or sidestepping section 382 NOL limitations through a stepped-up asset realization before a merger if both parties work together to sell unwanted assets prior to combining versus a tax-free acquisition status of a Type A, B, or C reorganization...statutory merger or consolidation, forward or reverse triangular merger...or maybe even bring up the timing of FNSR calling it's convertible notes due in 2029 after JDSU announced it's planned tax-free spin-off ...maybe to clean up it's balance sheet before some sort of future consolidation move within the industry...Que sçay-je???
Hey Hedge, good to see ya around...speaking English these days I see:-)....nice to see:-)) Feel'en OK?
GL to ya
I think you are giving jdsu management too much credit. As far as I can tell they don't think that far out or forward. UNLESS it is to increase their pay packages. They definitely have creative thoughts on that.
Dan Loeb's Third Point also holds a decent relatively new position in FNSR as well, last time I checked it was around 3.5 million shares...wouldn't surprise me to learn that he was pushing for a merger between FNSR and JDSU's CCOP...I am sure there are a few tricks available concerning accumulated NOLs that'll enable both sides of spin-off to capture appropriately allocated NOLs...especially with a sizable increase in underlying earnings from a merger of equals that could capitalize on economies of scale which keeps continuity-of-business intact...Que sçay-je???
The Swede at Sandell may be getting all the press here with his 4.2 million shares...but, the disclosed positions taken by Dan Loeb's Third Point with 2.5 million shares and Steve Cohen's Point72 Asset Management with 1.14 million shares...might have more to say about the type of muscle behind the moves being taken...my inner investment banker is telling me that they've given a lot of thought on how to spread representation around the hedges...thus not to trigger an "ownership change" event by one of the 5% shareholders which would put accumulated NOL at risk before it can be realized...
Thanks for the tax info, its not my strong point ... . All the same I'm going to give Sandell Management the benefit of the doubt that, rightly or wrongly, they did their home work before sending the letter to JDSU BOD. That is unless Sandell Management was trying to generate some excitement in JDSU to offload their holdings .... nowadays nothing would surprise me. This coming CC we should know how important the NOL carryovers are in the minds of JDSU mgmt and analysts alike.
well hope you keep it up hedgebets - these responses make a lot more sense than your Fibonacci commentary.
I think someone like Cisco looking to lower their tax bill could make an acquisition bid or, a reverse merger from a PE firm like Avaya owners...
I can't imagine anyone in JDSU related market like FNSR, AVGO, IIVI etc. to make a profitable play with NOLs.
Thanks, I have my moments...when mask comes off, and inner fool is kept at bay...You know, as well as I do, nothing brings out an army of lawyers like corporations using creative accounting that stretches boundaries trying to sidestep tax law...except maybe, a contested election!!!
wow... thats impressive hedgebets - very lucid response
The closest that I can think off is Icahn and XO Communications takeover and that is mired in lawsuits now.
That's because Section 382 of IRC limits a corporation's ability to utilize existing NOL carryovers once the corporation experiences an "ownership change"...it limits the amount that may be used annually to a percentage of the entity value of the corporation at the date of ownership change...usually around 2-3%...So worrying about income offset becomes a huge factor when considering continuity-of-business requirement...and then there is cancelled creditor claims, built-in losses, the presence of nonbusiness assets, stock redemptions, and other factors...the best way to avoid Section 382 is the "bankruptcy exception", Acterna comes to mind, a "toll charge" may cost some interest deductions and another ownership change could wipeout NOL altogether...hence, the dilemma and our split strategy being applied to try and combat various obstacles in the quest to realize built up NOL before it expires, typically 20 years...
you would be surprised how difficult it is to monetize NOL.
I can't think of any recent examples where NOL was valued in an acquisition. Do you know of any recent tech acquisition where this was valued as a net positive?
Re: Who cares how much they have, as long as they get that lazy board off their a$$e$!
Sandell Management may only have 2% but I would venture to guess they have a lot of allies. I can't see other major institutional investors being complacent and satisfied with over 8 billion dollars in tax credits being valued at next to nothing. It would not surprise me that extracting value from these tax credits is the number one priority for the board, and if not a very high priority. We are not talking about peanuts here and I can only see the board being under constant pressure. Could I see board members / senior executives fired over this ... absolutely. Too much money at stake.