SUNDAY, DECEMBER 21, 2008 - VOL. CCLII NO. 140

Archive for the ‘Carl Icahn’ Category

Blockbuster A Shares (BBI) & Blockbuster B Shares (BBI.B): Relative Value Arbitrage Opportunity

In Arbitrage, Carl Icahn, Long-Term Capital Management on September 23, 2008 at 8:43 pm

U P D A T E

Since September 23 the “A” Share / “B” Share spread has fallen from $0.89 to $0.75. The arbitrage return is technically infinity.

T H E S I S

3:03 AM Cogitator: also blockbuster is attractive
Client-9: who’s buying and how is it being financed?
3:05 AM Cogitator: nobody
it’s just share class arbitrage
buy the b shares and short the a shares
3:09 AM Client-9: my computer is being slow right now… what’s the spread
Cogitator: 60%
3:11 AM Client-9: wow. what’s the difference between the two securities?
3:12 AM Cogitator: b shares have two votes; a shares only have one
Client-9: how are the company’s financials?
3:13 AM Cogitator: it’s blockbuster…
pretty crappy
but if you buy the b and short the a, you will make money
3:14 AM most brokers don’t let people short sell bbi
which explains the large spread
3:15 AM Client-9: how do they historically trade?
3:16 AM Cogitator:

Highlights From Security Analysis Sixth Edition: Seth Klarman & David Abrams

In Arbitrage, Benjamin Graham, Carl Icahn, Ivan Boesky, Net Current Asset Value, Security Analysis, Seth Klarman, Warren Buffett on September 18, 2008 at 10:19 pm

The sixth edition of Security Analysis is a strange amalgamation of Graham’s original work (styled in British English) and new commentary from prominent value-oriented investors (in American English). I find it impossible to read fluidly. Nonetheless the contributors make a strong independent showing, especially Seth Klarman and his protégé, David Abrams. They argue—as I have done in numerous essays—that market inefficiencies are smaller in magnitude and frequency than before.

I am especially pleased that both men acknowledge the hedging opportunities present in derivative securities. This has become my favorite area of study and action—and one that appears unlikely to be outmoded soon. (Elsewhere, I have found much of the “value investing” philosophy to be comparatively inadequate.)

Continue Reading