As a footnote to Jeff's DD on Phoenix (PHXS) and his speculation on what that implies for TSIG:
You suggest that George Soros stopped throwing good money after bad, halting his investment in Phoenix. In fact, the company S-C Phoenix, which is controlled by Soros and Purendu Chatterjee and which was a major investor in Phoenix, proposed that Phoenix be put under Chapter 11 protection and then offered $20 million to purchase the assets of Phoenix. A subsequent court case assessed whether this arrangement would stand in good faith; in this case, the Equity Committee argued unsuccessfully that the agreement was unfair because, among other things, Phoenix would have the potential to generate $100 million per year in revenue within the next six to eight months. This figure may or may not be correct; in fact, one would assume that they'd inflate the projection to serve their own purposes in a court proceeding. But it is also reasonable to assume that shrewd investors such as George Soros and Purendu Chatterjee saw good potential in Phoenix, or else they would not have thrown an additional $20 million at the company in order to acquire its assets. (For specifics, review the 8-Ks for PHXS.)
Having noted these facts, I have two essential points to make:
(1) The management team at Phoenix -- I use this vague designation because Mr. Gordon's specific role is in doubt -- seems to have built up assets that had some real, forward-looking value. Investors like George Soros and Purendu Chatterjee don't invest $20 million to acquire assets that are of insignificant value. So this management team does appear to have identified needs in the marketplace and to have developed solutions to address those needs. S-C Phoenix bet a substantial amount of money on this.
(2) The management team at Phoenix raised and spent a great deal of capital ($39 million) without bringing their products and services to market. They did not become a revenue-generating entity. I would never argue that a person's past business failure would necessarily suggest future business failures for that person. Jeff Berry tries hard, I think, to make us believe this is the case; and I just don't think the relationship between past and future is that simple. That said, I do believe it's important for each of us to confront the Phoenix story and to decide for ourselves how it fits into our sense of risk for TSIG. I do see risk here, and I am therefore keeping a close eye on TSIG and am engaging in an ongoing process of DD. For now, however, I still think the potential upside is greater than the potential downside, and so I have decided to invest in TSIG.
Jeff overstates his case, I think, but he does offer us an important reminder that we should examine and re-examine the risks associated with our investments. He has done us a service by laying out many areas of risk and potential risk. Now it is incumbent on each of us to do our own DD and to make our own decisions about how to invest our hard-earned money. Don't take Jeff's word for it, and don't take my word for it. Do your own digging and make up your own mind.
Best regards to all--
Lane |
