That was one trade, preceded by a trade at $1.96 for 66,000 shares at exactly 4:00. There are only five entities, Lee and four institutions that have that many shares to sell: Kingstown, Credit Suisse, Dimensional Fund and Private Management. Most likely it was a block offered and one of the investment banks' trading desk put in the bid at $1.96, expecting they can unload the shares in the next day or so for a 2-4 cent profit. But it is very clear that one of the big names decided this play ain't worth the candle.
One would think that at this late date and with the market demonstrating such a lack of confidence in the deal being completed, that there would be some sort of statement issued by one or the other company that would offer a progress report on meeting contract terms and providing an estimate for date of completion. That is, assuming both sides subscribe to such a progress report....
You are all over the boards with this P-n-D, lula! Peoplesway is trading at one penny you claim it will go to $2.50? Mind telling us what revenue Peoplesway has to share? The company has zero current assets and lots of current liabilities with negative net worth. Why don't you put your PLWY up where the sun don't shine and go away?
Seems that Upper Hudson is a small outfit that was owned by a private corporation called Cinium. Looking at Cinium's website, we find that the last news release came two years ago when -- ahem -- Tower International made an investment in Cinium of $7 million, purchasing 8.5% bonds maturing in 2026. Earlier, Cinium signed on as a managing general agent for -- ahem -- Tower International to put Tower on the hook for surety bonds. A great business except when it blows up. Upper Hudson is described on Cinium's website (you have to do a Google search on "Upper Hudson Insurance" to find it) as a reinsurer of -- ahem -- Tower Group. I can see where Berman might be miffed, but presumably UHI went into this deal with its eyes wide shut. After all, Tower is (was) rated A-, no? One might wonder as well how much in the way of surety losses Cinium stuck it to Tower.
Cinium has a FaceBook page but its last posting was over a year ago when it announced settlement of a $10 million surety claim against it. The heading of the FB page says "We Underwrite Character." Obviously, they left of the "s" at the end.
Cinium actually wound down its business last year. Berman currently is in a big fight with its (and his) former partners over ownership of the land where the HQ was located in Rock Hill, NY (former home to another colossal insurance failure, Frontier Insurance). Seems Berman wants to sell it to the Indians (oops -- "Native Americans") so that they can build a casino on it.
As an aside, one of Cinium's Board of Directors members was one "Jim Roberts" who is head of underwriting at -- ahem -- Tower Group. Take a look at Roberts' record -- it includes a long string of failed insurance companies, most recently the Trainwreck (Trenwick).
Conner, it passes the insolvency test at the moment because the amended agreement basically excuses all adverse development of SinkHole's finances from the date of the previously disclosed results. The insolvency events that will allow ACP to walk relate to regulatory action such as a seizure of any of the ten insurance underwriting units, as well as the adequacy of the statutory surplus that resides in those units. ACP had originally demanded that each unit have risk-based capital that met regulatory requirements, but subsequently amended this such that SinkHole only had to show aggregate surplus exceeding aggregate requirements, meaning that one or two or three units could fall short. Given the most recent GAAP results, there does appear that there is a significant question regarding SinkHole's ability to meet this last requirement. As to the former, the regulators really do not like to step in unless it is absolutely necessary, especially when there is some fool in the wings with cash who is wetting his pants to buy.
This one's a real prize! Currently trades at eight cents. Read the 10Q they just published -- no revenues, huge working capital deficit, rely on stock sales and loans from shareholders for operating cash. christianavans is probably a member of management, as his post is in the same broken english as the prose in the 10Q's MD&A.
Cash flow out the door is $450m at six months, about $259m in the second quarter -- $3m daily, Sundays, Saturdays and Memorial Day included.
Were it not for the ACP merger, this turd would be trading for pennies. Probably less.
Total of cash & investments falls about $200m short of the liabilities for loss reserves and UPR (net of reinsurance recoverables). Not a good position to be in, especially with $150m of debt payment coming due in four weeks. Surplus was already shaky and has clearly gotten worse and it becomes questionable if SinkHole can meet ACP's requirement that aggregate surplus exceeds aggregate minimum capital requirements. Will the $3m transferred to the Mass. entities be enough, or did the company pee that away in the quarter? The coming week should be fun to watch, not so much fun to be a part of.
You and I are generally in agreement, hearn, but at this point in time I am inclined to offer the view that SinkHole management has its private parts in a vice and that the squeeze is coming. Can't be sure, but I believe the fronting deal can be ended on short notice and while it may already have cost the Karfarckles millions, at least they will be able to limit the damage. I still think the price will come down and the leverage is significant.
Strange as it may seem, over time the shares of insurance underwriters, both life and property-casualty have traded more consistently on a price-to-book valuation methodology that is adjusted for the long term return on equity. Price/Earnings multiples fail because of the inherent volatility of insurance earnings, especially in the property-casualty markets. In addition to which, it becomes very difficult to estimate future cash flows because it is difficult to separate the cash that belongs to the shareholder from that which belongs to the policyholder.
Do some research on the sector before you make your snotty remarks about education. And on that subject, take a look at your last sentence and think a bit about sentence construction.
Debt comes due on Sept 15. Nov 15 is the "walk away" date -- if the deal does not get done by 11/15, then ACP can walk away from it. TWGP would certainly want the deal to get done before 9/15, so that the debt issue becomes ACP's problem. If the deal does not gt done before 9/15, then TWGP has to solve the problem all by itself and it does not have the resources to do this without triggering an insolvency event or violating the merger agreement in some other fashion.
Anyone want to make the case that this turd is trading as though it will fetch $2.50/shr in only a few weeks?
No? Didn't think so. Let's think about the debt that comes due in less than a month, and what that means.
First of all, the failure of SinkHole to file its 10Q is not an "insolvency event" -- this failure has already been excused in the terms of the merger agreement. But what we have not heard anything about is the discussions between the company and the regulators regarding the September debt payment that is due. How is the company going to pull this off? Under the terms of the merger agreement, SinkHole is precluded from issuing any new securities, so it cannot issue new debt. If it fails to pay off the debt, then that will likely create regulatory action and precipitate an involuntary bankruptcy petition, both of which are insolvency events.
The merger agreement says that ACP Re will stand for the debt IF the merger closes before Sept. 15, but it says nothing about paying or guaranteeing the debt if the merger has not closed by then.
My guess is that ACP is using this as leverage to try and work the price down.
This certainly has appeared to be the case in the past, that someone has an early heads-up that an SEC filing is in process. We know from the company's own admissions that its financial controls are weak, so perhaps the CFO's department is a place to start. The SEC filings also require legal action, so its also possible that someone in the general council's dept is getting a look and acting before the public.
With all of the reports in, we see some more changes. Rotella and Citadel (not exactly a shabby outfit they) both saw the light and blew out their positions entirely in the second quarter. KCG was apparently in the process, as they unloaded 379K shares, or 87% of their position. Renaissance Tech sold 51.5K shares, 8% of its holdings. Eventually, Blackrock and Toqueville will ask themselves "what the h*** were we thinking?"
Precisely what I said, that so long as the cash flow is positive, a company can, as Reliance did at the time, declare enormous profits. But when the cash flow goes negative, the company has little room to maneuver in its accounting ledgers. Until Johns Manville declared, no company in history ever declared bankruptcy with positive cash flow. Companies can operate for a long time with operating losses, but when the cash flow goes negative....
With the filings in, we find some interesting changes in ownership among the major holders in Q2:
Blackrock Fund Advisors clearly saw the light and blew out 94% of its position (2.5m shares)
Kingstown, that vaulted to the top with a new position in Q1, increased its holdings by 775K shares, 16%
Credit Suisse increased its holdings by a factor of 33x, going from almost 101K shares to almost 3.5 million. Bet they regret that!
Park West Asset opened a new position with 1.5 million shares, seeking to arb the buyout deal.
The Canadians (OMERS) increased their position by 20% to 1.9m shares while LSV sold 227K (12%) of its holdings and Vanguard dumped its position by 13%.