tag:blogger.com,1999:blog-7294165939647321702.post5270821910336037923..comments2020-01-20T10:24:46.094-05:00Comments on <center><a href="http://www.barelkarsan.com">Barel Karsan - Value Investing</a></center>: It Trades For Less Than It OwnsSaj Karsanhttp://www.blogger.com/profile/04493152766022812984noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-7294165939647321702.post-28084545332568640022009-09-09T08:07:45.416-04:002009-09-09T08:07:45.416-04:00Hi
First, I want to say I really like your blog. ...Hi <br />First, I want to say I really like your blog. Your ideas are great! I've talked about a few of your ideas in my blog.<br /><br />However, the RVI and DSW pair trade does have some issues. The problem is the Premium Income Exchangeable Securities (PIES) that RVI sold to raise $128.1M. <br /><br />I've explored at some length the PIES problem on my blog. Just thought you might like to take a look. Your feedback would be much appreciated.<br /><br />Here's the link:<br /><br />http://valueinvestorshaun.blogspot.com/2009/08/pair-trade-retail-ventures-inc-and-dsw.html<br /><br />I can also be reached at shaunhhh@gmail.com.<br /><br />Shaunshaunhhhhttps://www.blogger.com/profile/04936708261469724099noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-22890324647845124372009-08-13T10:35:26.217-04:002009-08-13T10:35:26.217-04:00Anyone know a brokerage that has DSW shares to bor...Anyone know a brokerage that has DSW shares to borrow. Ameritrade was a no-go.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-69326618209736559772009-08-10T16:44:07.319-04:002009-08-10T16:44:07.319-04:00Hi Anon,
I don't own it because I haven't...Hi Anon,<br /><br />I don't own it because I haven't fully investigated the liabilities of this company. On my first read-through, they did not appear simple to comprehend.Saj Karsanhttps://www.blogger.com/profile/04493152766022812984noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-42375309968150330662009-08-10T11:19:36.452-04:002009-08-10T11:19:36.452-04:00Hi,
I assume "Disclosure: None" means t...Hi,<br /><br />I assume "Disclosure: None" means that you are not investing in this yourself, may I ask why?<br /><br />I have not looked at the fundamentals, as I think that the possibility of a short squeeze is non-trivial in this stock. As you said, short interest is currently running at ca 28% of free float. Given the average daily 3m volume of 300k sahres, it would take 15 trading days to cover the short interest. I am not very familiar with short selling, but this looks like you could be forced to cover at some point.<br /><br />What do you think? Thanks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-44265099011567804532009-08-10T02:50:57.190-04:002009-08-10T02:50:57.190-04:00Maybe I did my calculations wrong, but it seems th...Maybe I did my calculations wrong, but it seems that RVI has negative equity if its DSW stake is excluded. If that's the case, the relative value arbitrage idea would fail since it implicitly assumes that the value of RVI ex-DSW is greater than $0.<br /><br />On the other hand, to execute this strategy, buy 1 RVI share for each 0.568 DSW shares short. This is based on the fact that RVI owns 62.9% of DSW and there are 48.69M and 44.02M O/S of RVI and DSW, respectivelyanother value investorhttps://www.blogger.com/profile/07659083327214275843noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-3112641516175679402009-08-07T20:22:50.250-04:002009-08-07T20:22:50.250-04:00Hi CauseWheel,
The calculation is a bit involved ...Hi CauseWheel,<br /><br />The calculation is a bit involved to get into here, but there are some examples on the web. The idea is that your position in DSW should net to zero. Therefore if your shares of RVI indirectly give you ownership of X shares of DSW, you would then short X shares of DSW. The potential return is the price of the X shares of DSW minus the X shares of DSW you purchased at a discount through RVI.<br /><br />Hi Anons 1 and 2,<br /><br />You are correct. In another manner of speaking, you have to subtract out RVI's debts that are not matched by RVI's other assets.Saj Karsanhttps://www.blogger.com/profile/04493152766022812984noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-52761355156517938842009-08-07T15:40:16.778-04:002009-08-07T15:40:16.778-04:00Is there good info in RVI's 10-k about its lia...Is there good info in RVI's 10-k about its liabilities? Is it debt? Litigation claims? If there is uncertainty about them, or they are too large, this could explain what is going on.<br />I will look into it when I have a chance.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-91414829017842931912009-08-07T15:07:29.347-04:002009-08-07T15:07:29.347-04:00Shouldn't you be using RVI's enterprise va...Shouldn't you be using RVI's enterprise value as opposed to equity value??Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-73450261004901612992009-08-07T10:25:09.782-04:002009-08-07T10:25:09.782-04:00I am trying to learn a bit more about how this typ...I am trying to learn a bit more about how this type of arbitrage works and could use some additional information on a situation like this--specifically how would you determine the number of shares to buy of RVI and the number of shares to short for DSW--Then how would you go about calculating the potential return. <br /><br />By the way, thanks for your great work on this website--I find it very useful in learning about investment opportunities/strategies.CauseWheelhttps://www.blogger.com/profile/11093454531709067990noreply@blogger.com