Likely max downside, over the next year, is $1.06. Likely max upside is probably $2.50. That's an excellent risk/reward, simply because the downside is so small. Caveat: a reverse split could upset this apple cart, in the short run, and cause a spate of selling. (Which is why I have explicitly urged management to NOT reverse this stock if it doesn't need to...even if such a selloff would represent a tremendous buying opportunity.)
Downside is far lower than $1.04 or $1.06......its funny that Buffet's disclosure of his stake in LEE debt has had a re-assuring effect on the common holders when the reaction should be the opposite. Clearly nobody here did any research.....simply sat back and continued making assumptions. Buffet bought the fulcrum debt.....admittedly its not his usual style but there is no doubt in my mind that he was/is anticipating that the current common is wiped out in a re-organization and that as holder of the last priority debt......he is converted into equity in the newly and far more healthy re-capitalized LEE. Unfortunately, for the slow ones in the class......this would mean that current common shareholders would be wiped out. Just my opinion.
Pure nonsense. If he's holding the "last in line" debt, you're saying he'd get equity, with $800 million worth of senior debt ahead of him?? He'd be seriously at risk of being wiped out, just like the common holders, holding the "fulcrum" debt, in any re-bankruptcy.
On the contrary, the truth of the matter is that Buffett expects Lee to remain fully solvent, and make his money as a long term investor in the debt, through both the high coupon, and capital appreciation on the debt he will achieve. It's an excellent investment....but the common is a better one, imho.
You have somepoint.
But remember, the wise one (WEB) preaches "margin of safety" in his investments.
Under a number of bankrupcty scenarios this "Fulcrum" debt could be worthless.
Long... about 3% of my portfolio. I was two percent until WEB debt purchase became known.... a little Bayem's Theorem at work here.
On the other hand if Lee improves the debt will be worth more and Buffett will make out even better. He has downside protection with upside potential. A typical Buffett move. But his investment certainly isn't bad news for Lee common.
Stop making a fool of yourself. Why wouldn't the downside be $1.04 and not $1.06? You really are a nut case if you believe that crap.
The only guarantee this year is that KIDE, right now at 55 cents (and I gave it out on this board at 9 cents), will pass LEE in price.
That is as close to 100 percent as you can get. The only way it wouldn't happen is if LEE does a reverse split.
So, KIDEQ will pass LEE very soon.