Tuesday, November 6, 2012

Frankly, it is not right to take out all ICap's reps

In this coming AGM, 4 directors nominated by iCap are seeking re-appointments. 2 others are newly nominated by iCap while Laxey is trying to put in 3 directors. Total maximum directors iCap can have are 7 in total. My hope is not for all iCap's nominated directors to be taken out but rather to have some representatives from alternatives i.e. those representing shareholders.

It does not mean Laxey is preferred but since it is a substantial as well as largest shareholder, I believe the mindset for Laxey Partners is being more of a shareholder rather than the fund manager. The fund manager will have different mindset as compared to shareholders. As shareholder and especially when the fund manager has not done enough to close the gap of the NAV and share price, it is good that we as shareholders have representatives so that measures done by fund manager are kept in check. It should not be a open check book especially when the price of shares was way below the NAV.

As mentioned, I certainly think that as an investor what do you do when the share price was 25% or more below the NAV. Shares buyback is a very good, immediate and fantastic tool which was not taken. It is way better than issuing dividends. For a value investor, what is easier than to put in money to buy your own shares especially when it is way undervalued.

I will not agree if anyone is to say that the cash is kept (with 3% interests?) so that to wait for better opportunities especially when your own undervalued share is in front of you. By not doing that is an injustice to the shareholder itself.

However, I am not hoping for the management of iCap not to be represented as by not having representatives, it is like putting a gun in front of the fund manager and ask him to resign. He should be provided enough support to manage the fund.

8 comments:

Peter Lim said...

Laxey does not have the intention to liquidate the fund. They simply want the stock price to rise to reflect its NAV so that departing shareholders can sell them at its NAV, or somewhere near to it.

The best way to achieve this is thru share buybacks, which increases the NAV per unit for all maintaining shareholders, while provides a good price for departing shareholders.

The only bad thing is to CDAM or TTB, because with share buybacks, the fund shrinks (although the number of shares shrinks more, but that's not the concern of CDAM or TTB), since his management fee is calculated based on Fund Size, and NOT performance of NAV.

Here's the letters by Laxey : http://peterlim80.blogspot.co.uk/2012/11/letter-to-shareholders-of-icapitalbiz.html

Gark said...

If Laxey force dividend/share buyback, the NAV will be lesser and TTB will take a 30% salary pay cut. If Laxey propose the vote for dissolution goes through, then TTB will be effectively fired from the job.

If your employer threatens to give you 30% pay cut or intend to fire you, will you threaten to resign?

So far historically Laxey partners have a penchant to liquidate closed end funds as they done a few previously.

felicity said...

read the article on star below after interviewing TTB

http://biz.thestar.com.my/news/story.asp?file=/2012/11/7/business/12283320&sec=business

If this is true, remove all the current and prospective directors recommended by Capital Dynamics. Arrogance and confidence should not have crept into a person after success.
The costs incurred should not be borned by iCap, the fund anyway. Why bother to bring that topic out.

In fact, if the person resigns or attempted to threaten to resign, please close the fund.

K C said...

Great news to icap shareholders. TTB resigning if new board members elected. Then new board close the funds. You guys will instantly make another 20% from your icap holdings. Isn't that great? TTB is a great fund manager but hell of arrogant. I remember reading about he said he is the best fund manager in the world; and he is better than Warren Buffet. Yes, arrogance has no place in a fund management, a service to its investors.

Winnfield said...

I pretty surprised that TTB is threatening to quit the fund. It is a very irresponsible decision and a major let down to the shareholders who trusted their money with him.

Now, let's just look at the facts. Laxey partners are not proposing to liquidate the fund. What they want are a few board seats to make sure the discount narrows and this is where the present board failed. The board has not taken care of the shareholders in addressing the most important issue among the shareholders. While the payout to the fund manager increases every year, the shareholders have not enjoyed the same return. It is really a matter of incentives. I guess TTB will work harder if his payout is based on share price and not NAV.

felicity said...

Hi guys, whatever it is the directors recommended by iCap should be put up as well.

Basically both Laxey and Capital Dynamics have representatives and in fact 4 of CD's reps should be in. It should be either a 2:3 or 3:4 type of composition between Laxey: iCap.

I still do not agree on the threatening call to resign but it is a fund created and managed well to a certain extent all this while.

Big Sea said...

While I don't like TTB's arrogance, I respect his decision to quit if Laxey gathers enough support.

Basically shareholders are TTB's boss. Either you give him full support or you get someone else to do the job.

Peter Lim said...

Feeling lost and unsure what to vote in the coming Icapital.biz Bhd's AGM ? Do read what Buffett have to say, and i really hope Mr Tan Teng Boo will read this and act in the interest of the share owners, NOT JUST SAY (like mentioned by Buffett below).

"The companies in which we have our largest investments have all engaged in significant stock repurhases at times when wide discrepancies existed between price and value. As shareholders, we find this encouraging and rewarding for two important reasons - one that is obvious, and one that is subtle and not always understood. The obvious point involves basic arithmetic: major repurchases at prices well below per-share intrinsic business value immediately increase, in a highly significant way, that value. When companies purchase their own stock, they often find it easy to get $2 of present value for $1. Corporate acquisition programs almost never do as well and, in a discouragingly large number of cases, fail to get anything close to $1 of value for each $1 expended.

The other benefit of repurchases is less subject to precise measurement but can be fully as important over time. By making repurchases when a company’s market value is well below its business value, management clearly demonstrates that it is given to actions that enhance the wealth of shareholders, rather than to actions that expand management’s domain but that do nothing for (or even harm) shareholders. Seeing this, shareholders and potential shareholders increase their estimates of future returns from the business. This upward revision, in turn, produces market prices more in line with intrinsic business value. These prices are entirely rational. Investors should pay more for a
business that is lodged in the hands of a manager with demonstrated pro-shareholder leanings than for one in the hands of a self-interested manager marching to a different drummer. (To make the point extreme, how much would you pay to be a minority shareholder of a company controlled by Robert Wesco?)

The key word is “demonstrated”. A manager who consistently turns his back on repurchases, when these clearly are in the interests of owners, reveals more than he knows of his motivations. No matter how often or how eloquently he mouths some public relations-inspired phrase such as “maximizing
shareholder wealth” (this season’s favorite), the market correctly discounts assets lodged with him. His heart is not listening to his mouth - and, after a while, neither will the market."

Surprisingly, this 3 paragraphs was written by Buffett in 1984 letters to his Berkshire Shareholders. [ Source: http://berkshirehathaway.com/letters/1984.html ]

Mr. Tan Teng Boo, if you're reading this, i'm sure Warren Buffett don't mean you since he wouldn't know what's going to happen 28 years after writing that article. But don't you agree his words of advice is timeless?