ValuePlays

The pricing of Archer Daniel’s (ADM) stock offering is pretty telling. Yes, I know is is not officially a “take over” fund, but, what else do they really need it for?

Archer Daniels Midland announced that it has priced its offering of up to $2 billion of equity units. ADM will issue 35,000,000 equity units with a stated amount of $50 per unit and has granted the underwriters an option to purchase up to 5,000,000 additional equity units to cover over-allotments. The equity units carry a total distribution rate of 6.25%, and the threshold appreciation price of the equity units is $47.83, which represents a premium of approximately 20% over the closing price of ADM’s common stock of $39.86 on May 28, 2008.

The equity units will initially consist of a contract to purchase ADM common stock and a 5.0% beneficial ownership interest in a $1,000 principal amount 4.70% debenture due June 1, 2041. Under the purchase contract, holders are required to purchase ADM common stock no later than on June 1, 2011.

With all the discounted equity offering we are seeing in the financial sector at Citi (C), Washington Mutual (WM) and USB (USB), it is refreshing to see an offering at a premium (and a pretty substantial one) to the current price.

The pricing reflects the core strength of ADM’s business and its prospects.

The only thing left is to see who they will buy or partner with……..

Disclosure (“none” means no position):

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Interesting stuff……..

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Got an email from Whitney Tilson in which he clarified the apparent long position on his 13-F.

“The reason MBIA and Ambac show up as longs in our 13-F is that it can be hard to get the borrow on the short, so when we can get the borrow, we short more than we want, and then buy the stock long to bring the net short position down to the level we want. Then, every time we want to increase our short position, we don’t have to get the borrow — instead, we simply sell down the long position.”

Simply put, he adjust the positions portfolio weighting with the long side..

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In the filing, T2 has a $176 thousand stake in Ambac and $388 thousand in MBIA.

Both are new holdings since the previous filing.

Tilson’s clarification:

“The reason MBIA and Ambac show up as longs in our 13-F is that it can be hard to get the borrow on the short, so when we can get the borrow, we short more than we want, and then buy the stock long to bring the net short position down to the level we want. Then, every time we want to increase our short position, we don’t have to get the borrow — instead, we simply sell down the long position.”

Disclosure (“none” means no position):None

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I was sent a copy of Pat Dorsey’s “Little Book That Builds Wealth” for a review. Loved it.

Dorsey spend the bulk of the book talking about moats. What are they, how to spot them and what do fake ones look like.

Perhaps the most valuable lesson a potential shareholder can learn is what is a business moat and why does it matter.

Dorsey says: “Durable companies- that is, companies that have strong competitive advantages- are more valuable than companies that are at risk from going from hero to zero in a matter of months because they never had much of an advantage over their competition…… Companies with moats are more valuable than those without.”

He goes on the tell readers how to identify a and more importantly, how to recognize an advantage that is not enduring but temporary giving potential investors a “false sense of a moat”. He give great examples from the dot.com era as evidence of what seemed at the time like an enduring advantage but proved fleeting in the end, leaving shareholders crushed.

Chapters 8 and 9 are the key ones and they talk about “eroding moats” in businesses and how to actually find a business with a moat. In both chapters he gives concrete examples to illustrate what he is talking about.

There are other chapters such as valuation tools, what does management really matter, and when to sell. for me though, all of those chapter are secondary to the identification of a moat in a business. Without that, the other lesson and tools seem to me to be secondary as those calculations, if based on a flawed initial premise mean nothing.

The book is worth reading more than once if for no other reason the lessons in it are so important, it behooves investor to really understand them.

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I was sent a copy of Pat Dorsey’s “Little Book That Builds Wealth” for a review. Loved it.

Dorsey spend the bulk of the book talking about moats. What are they, how to spot them and what do fake ones look like.

Perhaps the most valuable lesson a potential shareholder can learn is what is a business moat and why does it matter.

Dorsey says: “Durable companies- that is, companies that have strong competitive advantages- are more valuable than companies that are at risk from going from hero to zero in a matter of months because they never had much of an advantage over their competition…… Companies with moats are more valuable than those without.”

He goes on the tell readers how to identify a and more importantly, how to recognize an advantage that is not enduring but temporary giving potential investors a “false sense of a moat”. He give great examples from the dot.com era as evidence of what seemed at the time like an enduring advantage but proved fleeting in the end, leaving shareholders crushed.

Chapters 8 and 9 are the key ones and they talk about “eroding moats” in businesses and how to actually find a business with a moat. In both chapters he gives concrete examples to illustrate what he is talking about.

There are other chapters such as valuation tools, what does management really matter, and when to sell. for me though, all of those chapter are secondary to the identification of a moat in a business. Without that, the other lesson and tools seem to me to be secondary as those calculations, if based on a flawed initial premise mean nothing.

The book is worth reading more than once if for no other reason the lessons in it are so important, it behooves investor to really understand them.

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So, Sears (SHLD) released its 10-Q today and there is nothing really that was not disclosed yesterday save 1 item.

On page 7, there is a $23 million “investment in equity securities” classified as “Level 1 inputs—unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occur with sufficient frequency and volume to provide ongoing pricing information. “

Here is the filing:

from the annual report, as of Feb. 2 “We purchased 5.3 million shares of common stock of Restoration Hardware, Inc. (“Restoration”), a specialty retailer of hardware, bathware, furniture, lighting, textiles, accessories and gifts during 2007. Our investment of $30 million represents an ownership interest of 13.67% of Restoration’s total outstanding shares.”

Based on Restoration’s (RSTO) share price on 5/2, the date of the valuation on the 10-Q Sear’s still holds its Restoration stake.

It also appears that Sears may end up being able to take their buyout proposal directly to shareholders and the current buyout is being contested in court

Disclosure (“none” means no position):Long SHLD, None

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