Catching up: Green Mountain, AS Creation and AIRE KGaA Tender offer at 17 EUR

What a week for the portfolio ….

Green Mountain

Green Mountain imploded (again) last week after they lowered their guidance.

Green Mountain had many attributes making it a “perfect short”:

+ shady accounting as revealed early by Sam Antar at WhiteCollarFraud
+ massive insider sales
+ negative free cashflows
+ pumped up growth through expensive acquisitions
+ expiring patents in 2012

David Einhorn, now credited for “revealing” the over-valuation was actually relatively late in the game. However one has to admire his timing capabilities. I was relatively early and hat to swallow a intermediate -40% loss on the position before I got into the money.

The question is now, how low can the stock go ? If GMCR is a “real business”, then the current valuation seems to be fair. If they are a real fraud, the stock could go down much further. Also one should remember that momentum always goes in both directions. Nevertheless, as the easy money on the short seems to have been made, I will exit (cover) the short on Monday.

AS Creation

AS Creation reported surprisingly good Q1 numbers which show that at least with a certain time lag, the company does have some pricing power in its core business. The outlook is mixed as they expect losses when they ramp up the Russian JV.

Nevertheless, I think the first quarter gives credibility to the managment as they always told investors that on an annual basis they are able to pass cost increases onto clients.

AIRE KGaA Tender offer EUR 17 per share

After I was already happy that my special situation investment AIRE KgAA offered to buy back 10% of the shares at 14 EUR, suddenly AIG real estate issues an offer for 17 EUR per share for the whole company.

Luckily, I only sold relatively small amounts of AIRE at around 14 EUR. As someone said before: Sometimes it better to be lucky than smart.

What I find interesting about the offer are two things:

– first, they seem to have already 31.8% of shares under their control, so from their existing 7.85% the have bought 24% through option contracts

– second, based on the official NAV of around 21 EUR, the 17 EUR offer in theory does not leave a lot of upside for AIG. However one has to remember, that AIRE KGaA owns a lot of highly leveraged equity positions in US developements which were pretty aggresively written down to zero over the last few years. So there is lot of positive optionality in the legacy portfolio. If some of those projects are “coming back”, the NAV could be significantly higher. AIG Real estate as the previous manager should know those projects pretty well.

If I remember correctly, they were active in residential, multi tennant developements. Maybe this has to do with AIG’s decission from early April to go back into real estate investments on a larger scale. I had actually read this but didn’t really make the connection.

For the time being, I will wait for the final offering documents to decide what to do, however I will continue to sell down to 5% of portfolio weight.

As Green Mountain was the ideal short, AIRE KGaA was the ideal special situation:

+ unusual vehicle (listed, closed real investment fund, US and Asian real estate, only German listing)
+ difficult to analyse (lot of debt, but non-recourse)
+ bad name / scandal, however no direct exposure (AIG)
+ early entry of “activist” investors (Grevenkamp, Swiss guy)

From a timing perspective, I was very lucky in the portfolio, getting in at a very low point in January 2011. The chart shows that with such investments, one usually has time to analyse and invest. It doesn’t reallypay out to invest driectly after the drop:

After the big drop in 2008/2009, the stock was “sleeping” now for almost 3 years before something happened.

That is something to keep in mind for investing in such situations. I t takes some time until the value will be (hopefully) realised by someone.


  • take over offer:
    increase to 18,25 Euro !!!!!


    Zielgesellschaft: AIRE GmbH & Co. KGaA; Bieter: AIG Century GmbH & Co. KGaA

    WpÜG-Meldung übermittelt durch die DGAP – ein Unternehmen der EquityStory AG.
    Für den Inhalt der Meldung ist der Bieter verantwortlich.

    Ergänzung zur Veröffentlichung der Entscheidung zur Abgabe eines
    freiwilligen öffentlichen Übernahmeangebots gemäß § 10 Abs. 1 und 3 in
    Verbindung mit §§ 29 Abs. 1, 34 des Wertpapiererwerbs- und


    AIG Century GmbH & Co. KGaA
    Taubenstraße 7-9
    60313 Frankfurt am Main

    eingetragen im Handelsregister des Amtsgerichts Frankfurt am Main unter HRB
    92579 (‘Bieterin’)


    AIRE GmbH & Co. KGaA
    Speicherstraße 55 (‘WERFTHAUS’)
    60327 Frankfurt am Main

    eingetragen im Handelsregister des Amtsgerichts Frankfurt am Main unter HRB

    ISIN: DE 000 634 4211
    WKN: 634421

    Börsenplätze der Zielgesellschaft: Frankfurt am Main, Berlin, Düsseldorf,
    München, Stuttgart

    Frankfurt am Main, 18. Mai 2012 -AIG Century GmbH & Co. KGaA (‘AIG
    Century’) hat am 30. April 2012 ihre Entscheidung zur Abgabe eines
    freiwilligen öffentlichen Übernahmeangebots für alle ausstehenden Aktien
    der AIRE GmbH & Co. KGaA (‘AIRE’) bekannt gegeben. AIG Century hat
    entschieden, den Angebotspreis von EUR 17,00 auf EUR 18,25 je AIRE-Aktie
    zur erhöhen. AIG Century konnte Kaufverträge mit weiteren wesentlichen
    AIRE-Aktionären schließen und hat sich dadurch circa 69,5 Prozent der
    ausstehenden AIRE-Aktien gesichert.

    Weitere Informationen:
    Der erhöhte Angebotspreis entspricht einem Aufschlag von circa 35,69
    Prozent auf den Schlusskurs (Xetra) der AIRE-Aktien in Höhe von EUR 13,45
    am 27. April 2012, dem letzten Handelstag vor der Veröffentlichung der
    Angebotsentscheidung. Bezogen auf den volumengewichteten Durchschnittskurs
    (Xetra) der AIRE-Aktien von EUR 9,74 während der vergangenen sechs Monate
    (Stichtag: 27. April 2012) ergibt sich ein Aufschlag von etwa 87,4 Prozent.

    Die endgültigen Bedingungen des Angebots werden in der Angebotsunterlage
    nach deren Genehmigung durch die Bundesanstalt für
    Finanzdienstleistungsaufsicht (BaFin) veröffentlicht.

    Weitere Informationen bezüglich des Angebots werden im Internet unter veröffentlicht.

    Wichtige Information: Diese Bekanntmachung stellt weder ein Angebot zum
    Kauf oder Verkauf noch eine Aufforderung zur Abgabe eines Angebots zum Kauf
    oder Verkauf von Aktien der AIRE GmbH & Co. KGaA oder anderen Wertpapieren
    dar. Die endgültigen Bedingungen und Bestimmungen des Übernahmeangebots
    werden in der noch zu veröffentlichenden Angebotsunterlage mitgeteilt. Die
    Bieterin behält sich eine Änderung der Bedingungen und Bestimmungen des
    Angebots im rechtlich zulässigen Umfang vor. Aktionären der AIRE GmbH & Co.
    KGaA wird dringend empfohlen, die Angebotsunterlage und alle sonstigen
    Dokumente im Zusammenhang mit dem Übernahmeangebot zu lesen, sobald diese
    Dokumente von der Bieterin veröffentlicht worden sind, da sie wichtige
    Informationen enthalten werden.

    Ende der WpÜG-Meldung

    18.05.2012 Die DGAP Distributionsservices umfassen gesetzliche
    Meldepflichten, Corporate News/Finanznachrichten und Pressemitteilungen.
    DGAP-Medienarchive unter und
    Notiert: Regulierter Markt Frankfurt (Prime Standard); Freiverkehr
    Düsseldorf, Hamburg, München, Stuttgart

  • #Welju,

    re AZO: I have been actually looking at AZO for quite some time. However, for the “perfect short”, the “shady accounting” and “fad business model” are missing.

    Actually Groupon scores quite well on those issues…

    • I just sorted out and wasn’t looking for all details.

      Stock buybacks above intrinsic value decrease the book value per share and serve mainly the selling insiders. On the other hand, they add a bunch of new stores and they are also increasing the cash flow. You can compare it with ORLY and AAP or with AN and PBY.

      AZOs CEO said, “the strength of AutoZone’s business has been our culture”, and Glassdoor is saying: “Company Rating (Based on 208 ratings) 2.6 (Employees say it’s “OK”); CEO Rating (Based on 133 ratings) Bill Rhodes III 39% Approve. For comparison: O’Reilly CEO Greg Henslee with 94% Approve.

  • i would be happy to sell you more GMCR as you cover your short but I could not borrow more Friday morning so the Friday expiring 27s were amazing at .22 went out at 1.95,will try to locate tomorrow ( Mon ). Yuo realize no one has publicly focused on the fraud just the miss and loss of momo reasons. This one can go MUCH lower and the easy money was made twice after Nov and the recent earnings reports. Figure every 6 months this keeps printing $$$ for shorts.

  • Congratulations for picking GMCR (short) and AIRE KGaA.

    • thank you. However, almost many of my “high conviction” ideas (including WESTLB and Draeger) have “catalysed. And I am somehow short of new “high conviction” trades….

      • Usually I prefer (undervalued) stocks where above-average profit distribution and growth is likely. Therefore, fewer trades and less “stock turnover”. Sales are mainly necessary when it comes to extreme overvaluation, errors and/or new assessments; but even there, it takes three to ten new “high conviction” ideas per year. Sometimes, it is better to wait.

      • If I were a short seller, I would look for AZO, although they have a nice growth and use their FCF and new loans for share buy-backs. The latter cannot continue forever, as well the increases in the accounts payable. The biggest question would concern the timing.

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