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MFC Bancorp Ltd. (MXBIF) Message Board

  • edshepard edshepard Jul 6, 2005 8:21 PM Flag

    blue earth sale

    how do I arrive at a cost of acquisition if I sell buerf ?

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    • It didn't take a beating on the acquisition. Quite the reverse. They bought both Canadian and Ugandan companies for practically no money down with only contingent debt. The price of cobalt then went from $7/lb to $28. MFC stock went from $14 or so to $28.

      Where it lost was on the spin-off. They wrote down their books by the amount of the assets spun-off ($57 million or so). MFC's book value went down, and, as I've been trying to say, the stock price follows book value, so it went down, too. Of course the $28/sh was probably too high anyway on all the initial excitement over cobalt prices.

    • Thank you for the enlighting exchange.

      Just curious, did it distribute Blue Earth share for share? If so, MX must have taken a beating in that acquisition.

      Best, Sam

    • buffett=smith...yes indeed that was an overstatement i cant beleive i actually made the comparison..i well go to value investor hell for that im sure. doh! but rather some of the philosphies he borrows :) thats what i meant to say haha. i just hope all these stocks 5x. that would make me happy

    • Couple of good posts, Skillz. MFC makes you think, that's for sure.

      I'm unsure about the convertible aspect you mentioned. They have a credit arrangement that provides cash for shares at current market prices. Is that what you're about? I guess you're right, though, about farming out the risk and keeping a back-in right. They've done that several times with other companies.

      You said the same thing I did on the steady returns of MFC. Their book value in the earliest earnings report on 3/1/98 was $6.30/sh. The last report on 3/1/05 was $16.54. That's a 14.6% growth rate. BTW, the share price in 1998 was $6-11/sh, and currently is $16-19/sh. I.e., very close to book value with some buying spurts. So what you get with MFC is a 15% growth rate, and no taxes, and an occasional bone like Mymetics (bare) and Blue Earth(meaty). Sales and revenue don't really enter into the analysis.

      I wouldn't call Smith a Buffet. Buffet gets great businesses with great management during hard times, then keeps it almost forever as they bring the business back. Smith gets assets run by crooks or incompetents, cleans house, redeploys the assets and sells the business. Totally different mindset and that's why I think they've run into trouble lately. They don't know how to manage industrial production and those businesses didn't have good management or they wouldn't have fallen prey to MFC.

    • plus i forgot to mention but they have the whole sec 382 bs to deal with on the NOL tax assets which they would like to use...so they have to be careful aobut how much 'ownership' they actually have in cmq...and like i said...havin 23% or whatever on the books allows sec 382 limits to stand at bay..but in reality they ahve that convertible to own a shitload more if things go well...i think these guys are thinkin folks..you just gotta ask em and hear what they have to say.. i mean id take a mfc investmetn anyday evne if its valuation sucks cuz the thing has grown and has spectactular roe for long ass times..that keeps my taxes low and allows me to hold on to the same pile for a while...so we may not see mfc trade at 10x book then 1x book, etc..but you know they can grow their book year after year and that stuff is tax efficient . kind of like buffett philosphy...who knows maybe smith is the next buffett that hanst been found out and nobody is puttin any multiple on the value he really rpovides...

    • well. he has the best of both worlds. cuz they have convetible bond basically that allows them to own like 80%+ at current prices..so he can shed risk off to cmq and have option to take part if it kicks ass...plus like i have said in a previous post somewhere. they have this entity seperate because they want it t obecome the 'alternative energy PE vehicle in china" . I think they are finally realizing it makes sense to spin off apsects of mfc so its not a big convaluted log jam...easier to value and get respect when you have these vehicles in seperate entities even if they are all really controlled by same folks...that is what they are sayin so i mean this isnt me makin crap up either.

    • Your Blue Earth shares were not a dividend, they were a return of capital. Theoretically, your cost is the $4.50/share or so that MFC reduced its capital by when you got BE. However, you also have to reduce your cost in MFC by the same amount.

    • You arrive at your cost by saying what the acquisition cost you. If your cost is zero then that's what your cost is.

      Enjoy your 100% profit.

 

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