Vis the CC stock discussion:
Hi, Everyone,
Thanks to everyone -- and especially Rich, Paul, Larry, and Zeev -- for an interesting discussion about trying to tease out the current stock numbers. It's a perfect illustration of the value of the net -- a chance for lots of people to play with a topic. We see here that more cooks sometimes do improve the broth. While I will have a bit more to say about the matter in a post I am planning, let me now offer a suggestion, ask a question, and make a comment.
The suggestion I offer is that CC's status as a hedge fund may matter. I am almost certain that hedge funds operate under their own SEC and accounting rules, and those rules may have an effect here, which is to say, on the reporting of positions, transactions, beneficial ownership, and so forth.
I am led to think along such lines when I consider the extremes. For example, are day traders under the same set of requirements as long-term investors? I can imagine that they are not because their holding period is so short. A blizzard of SEC filings detailing the swings in and out would not seem to promote the general purpose behind the reporting requirements. (I realize few would be subject to the 5% rules in practice, but the questions arise in principle.) Likewise, I can imagine that hedge funds, in distinction to holding companies like Berkshire Hathaway, are subject to rules which may affect the discussion here. Hedge funds seem intrinsically different than holding companies, long-term investors (individuals, pension funds, mutual funds), and even day-traders. Those differences may be relevant. We certainly do need a securities lawyer on our thread.
My question is simpler: what does the discussion make of Friday's SEC filing? Is it indication that CC does intend to convert its preferred? How does this fit into the discussion?
Finally, a general comment about the Friday filing and CC. While I agree that CC was more likely to have entered its original investment on the expectation of benefiting from Valence's success than Valence's failure, I do not think this permits considering CC a long-term investor like, say, Berkshire. I view hedge funds as generally having a short to intermediate term investment horizon (months to a year or two). I can imagine that CC might hold a portion of its investment for long term gains, but I also have to think it will want to take some gains and free up its capital for other purposes; after all, it is a hedge fund and not a holding company. If this is the case, then the Friday filing seems a natural part of the exit strategy it obviously contemplated when it entered the agreement in July. It seems to me that the Friday filing is business as usual for CC and Valence alike.
Finally and parenthetically, it is interesting to note that, except for the floorless issue, CC's exit strategy has never been discussed here despite its implicit presence throughout the SEC documents. In that vein, I will offer one hypothesis. I think the floorless provision must be considered an emergency parachute within CC's overall exit strategy. While it is an appropriate safety feature, I doubt CC looks forward to using it. I suspect they would be much happier seeing the company succeed, than having to scramble to use the floorless to minimize their losses (even should it yield a bit of profit after all is said and done). It seems to me Friday's filing is our first real sense of CC's preferred exit strategy.
Regards, lws |
