Other Special Situations

This page will serve as a living document for things I learn related to Special Situations (not including Risk Arbitrage).

Book Resources (Same As Risk Arb):

  • Warren Buffett and the Art of Stock Arbitrage by Mary Buffett and David Clark
  • You Can Be a Stock Market Genius by Joel Greenblatt
  • Distressed Debt Analysis by Moyer

Webpage Resources:

Spinoffs in the US typically file a 10-12b form, so searching the SEC filings produces a list of spinoffs

Yahoo M+A newsfeed

Google Alerts for buybacks, tender offer, repurchase, dissolution, royalty trust, master limited partnership, REIT liquidation, spin-off, separation and stubs.

Types:

Securities Buybacks and Self-Tenders

  • Executed either through Dutch auction or offer at fixed price. Fixed price prorates if too many shares tendered. Dutch auction fixed dollar amount securities, shareholders tender between high and low for fixed time. Guess the highest where Dutch closes, ex. Sonosite.

Corporate Restructuring/Recap

  • Companies which have little need for capital accumulation pay 100% of after tax earnings. Can convert to MLP or royalty trust to pay 100% of pretax earnings – increase in payout. Figure out after tax payout, yield of market valuation. Then apply to future full pretax payout. ex, Tenneco and ServiceMaster

Liquidations

  • Only REITs liquidate without paying corporate tax. Takes longer to liquidate. Consider distributions in the meantime. ex., Arcata and MGI.
  • When hedge funds liquidate, check their 13-F SEC filings to figure out what they were holding. If they were holding a significant portion of a company’s market cap, it could create a fire sale in their assets.

Corporate Spin-offs

  • Likes situation where parent spins out exceptional business ex, Moody’s. Management often follows good business. 10-K finds stuff about subsidiary being spun out. Buy conglom at discount.

Stubs

  • Accrued dividend claim, tax or legal claim in liquidation

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