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OFF TOPIC: John and interested parties. This will take a bit of explaining, but may pay off big. The usual disclaimers apply, opinion is stated so and facts are to the best of my knowledge. The symbol is BENJ. Benjamin Franklin Savings and Loan. It does not exist, at least as an operating company. The Government seized it in Feb. 1990. They [and others] were hit by a change in the law by Congress in 1989 which retroactively took away the ability to amortize goodwill over 40 years which had been promised when they took over an ailing thrift in 1982 at the Governments behest. The BENJ immediately became insolvent and was shut down literally overnight. Others like Glendale of California continued to operated but were impaired. Lawsuits followed and the Government basically lost and appealed all the way to the Supreme Court. The Supreme Court rejected the Governments arguments, said there was breach of contract and now the only question is damages. The Glendale case has ended and the judge is expected to announce the damages be awarded around the end of the year or shortly thereafter. Estimates of total Government liability [all cases] are between 10 and 20 Billion $ as reported in the Portland Oregonian [Dec. 24, 1997]. The trial to determine damages for BENJ is scheduled to begin in a few weeks. Now to the fun part-how much will shareholders get? The short answer is no one knows, but there are some guidelines. First, the BENJ has 7.7mm sh. The plaintiff will be attempting to prove what the value of Ben Franklin would be today if it had not been seized in 1990 [it came public as a conversion from a mutual at around $7 per sh. They had 88 branches. The original suit sought $181 MM [$23.50 p/sh.] which was shareholder equity. A supplemental complaint seeks additional damages: for lost profits or fair marked value, or repayment of $343mm in lost capital. The presiding Judge in the Glendale case Judge Loren Smith has made statements in the past such as "Because the dollars at stake appear to be so large, the federal government has raised legal and factual arguments that have little or no basis in law, fact or logic," Oregonian, Dec. 24, 1997]. I believe he will be fair. As time has progressed, and the rulings have stacked up favorably, BENJ, has gone up, recently breaking to a new high of around $10. In my opinion only, the settlement could be between $30 to $60 or more per share What is the downside? I would think absolute worst case [low probability] would be where it is now or a little higher. The big risk IMO is time. The government is almost certain to drag it out by appealing, but in a conversation I had with Glendale, not to the Supreme Court, as the Court does not determine damage awards. I plan to hold for the big payoff, but if one wanted to be in for a shorter time, it is reasonable to assume that within the next couple of months, when the Glendale award is announced, and precedent set on how damages were determined, the market could react fairly quickly with BENJ. [Incidentally, in Dec.1997 when BENJ was around $4, an investment group from New York sent a proxy to all shareholders wanting to buy up to 1.75MM sh at $5.50 sh.]. How many stocks hit a new 12 mo high the past few days? BENJ did and technically acts well. The legal team is headed by Mr. Don S. Willner, Portland, Or. This is, for obvious reasons, not National Market NASDAQ, so care should be exercised in buying and selling. Since I already have quite a bit, I may wait to see if it pulls back a little before adding. I am comforted by the fact, that this is the only stock I own that I don't have to worry if key employees walk out the door, missing a quarters earnings, competitive threat, PE ratio getting high, or if we are in a bull or bear market. If there are questions, I will answer one time only, as I respect this is the SFE forum. Thanks, Mike |
