Kingsway Financial’s activist battle with Kobex Capital

(KXM is an illiquid Canadian stock with a market cap of $26M.)

Kingsway Financial’s plan:

  1. Buy back shares because this company trades below NAV- roughly seventy cents a share in NAV trading at 50-55 cents currently.
  2. Cut director’s salaries to $10k/person.
  3. Not issue options below intrinsic value.  On August 19, 2015 Kobex issued options at $0.55/share.

The incumbents’ plan:

  1. Waste shareholder money entrenching themselves against Kingsway Financial.

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Valeant: Is giving away cheap drugs a good business model?

Valeant has a reputation for significantly increasing the prices of its drugs.  The truth is a little more complex than that.

Through its so-called “specialty pharmacy” channel, Valeant engages in an unusual practice of sending drugs to consumers without a guarantee of receiving insurance reimbursement from private payors.  If the reimbursement claim is ultimately denied, Valeant ends up selling a drug at firesale prices.

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Kobex Capital: A pile of cash, trading at a discount, with an impending catalyst

(KXM is an illiquid Canadian stock with a market cap of $26M.)

Kobex’s liquidation value is in the ballpark of 70 cents/share and currently trades at 55 cents/share.

Kingsway Financial Services is going activist on Kobex Capital.  This makes me like the stock a little more as the catalyst of activism should raise the internal rate of return on a position in the stock.  However, I’m a little wary of activist investing mainly because management teams often like to fight activists with shareholder money. The legal fees and any severance payments will likely reduce the value that’s left for shareholders.

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