(LMCA) Is there hidden value in TruePosition?

I’m interested in the value of TruePosition since it may be a vehicle for hiding value in the proposed Liberty Broadband spinoff.  The real story seems to be complicated.

  1. The core business seems to be in decline.
  2. I have my doubts about Craig Waggy, the new CEO.  He was associated with improper accounting at Gemstar-TV Guide International.  The SEC brought a civil action against him.  Waggy paid a $25k civil penalty.
  3. The company has upside from patent trolling and from suing other companies for antitrust.

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John Malone’s insider trading

I’ve been trying to figure out why Malone sold shares of LMCA a few days ago.  (I don’t have a great answer.)  A year ago he bought a smaller number of shares in LMCA at prices very similar to his recent sale.

Note that you should not necessarily read too much into Malone’s insider trading.  In the market panic of 2008/9, you should have bought Liberty Capital (to make several times your money) despite Malone’s massive insider selling (due to a suspected margin call).  Some of his trades represent an immaterial portion of his overall stake in that particular company.  He may be simply “painting the tape” in the hopes that other people read too much into insider trading.

Here is a compilation of John Malone’s insider trading based on his SEC filings.

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Why redo a technical report?

Suppose that a junior and senior mining company have entered into a joint venture for a project.  Suppose that the junior has access to feasibility studies prepared for the senior miner.  NI 43-101 obligates the junior miner to file technical reports.  Management at the junior should be disclosing material information to shareholders anyways so they should be issuing technical reports even without 43-101.

The easiest and cheapest way for the junior to meet its obligations under 43-101 is to re-purpose the technical reports prepared for the senior miner.  However, many technical report authors hired by juniors choose to heavily modify the work given to them.  The technical report prepared for the junior will change the underlying assumptions.  In my opinion, the simplest and best explanation for this behaviour is that the junior is trying to inflate the technical report.  They are likely pressuring the technical report author into manufacturing higher numbers.

This is one of the reasons why I dislike the junior mining world.  Juniors are generally dishonest and extremely difficult to perform due diligence on.

Kobex Minerals (CVE:KXM)

Kobex Minerals is an illiquid $23.75M company that trades for less than cash.  The shares currently trade at around $0.52/$0.54 while the company has around $0.74/share in cash.  The company is currently buying back shares.

New management has taken control of the company.  They are turning the company into an investment company.  The CEO is Philip Du Toit (29 years old) and the Chairman is Paul van Eeden.  I think highly of Paul van Eeden and think that this company is in reasonably good hands.

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What I don’t say about short selling

This blog post is an attempt to clarify some things about this blog that may not be obvious.

I’m not a fan of writing about individual short positions.  You may see less of it in the future.  In general, I am trying not to get into conflicts with the wrong people:

  • CEOs who sue short sellers.
  • Eccentric CEOs who rant about Sith Lords, stalk short sellers, threaten their children, etc.
  • Regulators
  • The scumbags behind egregious frauds.
  • Etc. etc.

I really don’t want to get sued (or worse).  Often when writing about a bad company, I will tone down the rhetoric.  I won’t say that a particular company is clearly a fraud even if it ticks off almost every red flag that a fraud can have (see my post on spotting frauds).

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Unusual payments to suppliers

Most stock promoters will have a disclaimer stating how much they were paid and how they were paid.  Typically, they are paid with one or a combination of the following:

  • Cash
  • Stock
  • Stock options, warrants

Normally, the 10-K of the promoted company will mention the phrase “investor relations” or “investor awareness”.  In some cases however, neither of the two phrases will appear.  Instead, the 10-K will mention “consultants” that were paid in stock or stock options.  This is a red flag.  While it is possible that legitimate consultants to a company are willing to take payment in stock or stock options, such a practice is fairly unusual in the business world.

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