Seth Klarman - Shareholder Letters

Came accross a link to Seth Klarman's letters to shareholders from 1995-2001. Particularly interesting, is the breakdown of his portfolio allocation and returns. Also, he talks in great detail about the frothy market environment of the late 1990's. It's always interesting to see what strategies these experienced veterans are employing and how they turn out in different types of markets. Sadly there is no letter in this compilation from a year where there was a bear market. Anyways, here is the link:

Klarman Shareholder's letters 1995-2001

Thanks to distressed debt investing for this compilation.

SG

Neose Technologies (NASDAQ:NTEC) Liquidation

I took a position earlier this year in Neose Technologies after they had announced their intention liquidate. They were a development stage biotech company that had not been profitable since inception. I took the position after they announced that they had been able to find buyers for their 2 patents. I essentially thought this situation was a low-risk scenario, ie. heads I win a lot, tails I don't lose much. In their filing for the asset sale they described their intention to distribute proceeds of the sales to shareholders of record. Their was a table showing management's estimates of what the payoff would be. Essentially, the payoffs ranged from $0.36 a share to $0.52 a share. The stock was trading at $0.35.

An analysis of the estimated distribution table showed that the only thing the amount of the final payoff depended on was the company's ability to either renegotiate their office lease, or sublet the lease. I thought either of these situations were highly likely, and therefore the expected payoff could be closer to $0.52 rather then $0.36.

On March 24th NTEC announced their initial distribution of $0.33 a share. Shareholder's on the last date of record will have received this amount plus the remainder when all liability claims are settled. Management's estimate is still between $0.36 and $0.52 a share. Even if the payout comes in at the lower end of the range my position will still be profitable.

UPDATE

I sold my shares after the stock transfer books closed on the OTC market for .12 a share. I received in total .33 + .12 = .45 on a .35 investment. My return was 29%.

These opportunities are great because they have no correlation to market activity and can help lift a portfolio in a bear market.

SG

Forgent Networks (ASUR) - Arbitrage Opportunity

Forgent networks (NASDQ: ASUR) will be undergoing a going-private transaction. All holders of less then 750 shares will be cashed out at $0.34 per share, approx. 126% premium to today's price of $0.14. The transaction is still in it's preliminary stages and a definitive vote date has not yet been set. Probability of success is quite high as the stock will be forced to de-list, due to NASDAQ requirements, if the company is not voluntarily taken private. If the company is forced to de-list it will still have to incur expenses associated with regulatory reporting, whereas if the transaction is approved it will no longer have to file the required regulatory materials. Since the going private transaction is the more favourable of the alternatives, it can be expected to be approved.


SG
Disclosure: I own ASUR