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    Value Investing Summary of lessons from all the Amazon shareholder letters

    October 15, 2019

    Value Investing Summary of lessons from all the Amazon shareholder letters

    Summary of lessons from all the Amazon shareholder letters

    Posted: 15 Oct 2019 01:49 PM PDT

    "Building a company that lasts" https://link.medium.com/DTwFnH7zO0

    submitted by /u/leenasoni_
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    I'm a total amateur and need some second opinions am I looking at a potential fraud?

    Posted: 15 Oct 2019 02:24 PM PDT

    Background:

    A friend of mine knows I'm interested in fundamental research of companies I started doing this on my own a few years ago and he mentioned that one of his good friends had told him about a Canadian mining company called CRUZ COBALT CO. it's a penny stock mining company purportedly with 7 Cobalt projects 5 in Ontario, 1 in Montana and 1 in Idaho. So I wanted to look into it as he bought it on the advice of a friend and it's headquartered in Vancouver, British Columbia, which from what I've heard is the mecca for securities fraud because in Canada, there is no federal securities regulator and the BC provincial regulator is the weakest of them all.

    Management Team

    The management team per the company's website consists of three men James Nelson, Seth Kay and Gregory Thomson. They also list a woman named Cindy Cai as their CFO. Digging around I found out she is the CFO of two other small mining companies and has been the CFO for at least 11 companies since 2010 all of them in the energy or resource exploration business what a busy woman! Here are all three mining companies websites, anything look familiar? Cruz Cobalt Co. l Sienna Resources Inc. l Spearmint Resources Inc..

    From the shields in the top left corner to the page layout they look to be nearly copies of each other. In addition Gregory Thomson is a Director for all three and James Nelson is President, CEO, Secretary and Director for Cruz and Spearmint.

    Company Offices

    If that isn't at all interesting click the contact us tab on each of the websites and notice they all have the exact same head office at Suite 1470, 701 West Georgia Street, Vancouver, British Columbia, V7Y 1C6. They also share a PO. Box 10112 Pacific Centre and in their annual reports it states that both Spearmint and Cruz's registered and records office are at 900 – 885 West Georgia Street, Vancouver, British Columbia, V6C 3H1. Meanwhile Sienna's registered and records office is far away at 800 – 885 West Georgia Street. All three share the same auditor Davidson and Company LLP.

    Auditor's Going Concerns

    In each of the latest annual reports the auditor expresses "material uncertainty related to going concern" essentially saying they are not sure whether each company can stay in business because "(Cruz) had a working capital of $3,063,030, had not yet achieved profitable operations and has an accumulated deficit of $15,875,374 since its inception". Spearmint on the other hand "At January 31, 2019, the Company had not yet achieved profitable operations, incurred a net loss of $768,576 during the year ended January 31, 2019 and has an accumulated deficit of $3,551,251 since its inception". Finally Sienna "had a working capital deficiency of $401,206, had not yet achieved profitable operations and has an accumulated deficit of $22,122,639 since its inception".

    Share Issuance

    In the past 2 years alone Cruz has issued $7,351,159 in shares, Spearmint has issued $1,671,200 and Sienna has issued $2,405,000 in shares. None of these companies seem to be doing anything other than raising more money.

    Another Red Flag

    Looking at the other companies the main players have been involved with I found out Gregory Thomson was a director of a company called Copper Road Inc. which last filed an annual report with the SEC in 2007. One of the directors who was his peer was a man named Kelly Fielder, when looking up Kelly I found this delightful article

    Conclusion

    I see a lot of weird relationships and questionable actions but I'm a complete noobie so I was wondering if y'all who are more experienced and sophisticated could tell me. Did I just stumble onto a potential fraud? Or is this unusual behaviour just how small companies in the mining sector behave? I would love to be wrong about this and tell my friend he did not buy a scam. All criticism or corrections are welcomed. Thanks for reading.

    -dolphinBuns

    Disclaimer: I am not an expert so don't take any of this as investment advice it just smells fishy and I want to know if my nose is working correctly.

    submitted by /u/dolphinBuns
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    Some realities of the distressed debt market to be very aware of

    Posted: 15 Oct 2019 02:15 PM PDT

    Some realities of distressed debt market and how the participants can engage in legal theft from widows. I will speak in general terms. I would also love to hear from people in the distressed business about what goes on.

    I think the reality of investing in distressed debt is that there are many parties who seem to be out there to fleece minority bondholders of their money and do it in bankruptcy court. Let's look at each of the parties and what often happens.

    ​

    1. Distressed debt funds – In my opinion, many are super sleazy parasites (even ones with good public reputations). They will fleece minority bondholders left, right and center often in the following ways:

    ​

    1. The addition of new capital at favorable prices (often discounts to already low valuations) that may only be available to select investors or because of the purposeful murkiness of the disclosures only select investors take it up.
    2. Big fees for backstopping new capital (rights offerings, new share issuances, etc.) again often only available to large creditors in the club.
    3. Other.

    The Distressed debt funds could easily end up extracting 10% or more of a company's value through these tactics above the capital they put in. The valuations should be fair value – not low balled. The backstop fees should be compared to market put prices of other public companies because companies needing capital are essentially buying puts from capital suppliers. And the NUMBER of shares distributed to various claimants should be clearly disclosed (often they are not which is nuts.)

    ​

    1. "Professionals" – Lawyers, Financial advisors, etc. Perhaps thousands of documents filed and millions of fees from the corporation – and for what – to overcomplicate something that when it comes down to it can often be summed up in a very simple manner that take existing claims that are restructured to new claims. Even that is not laid out in a simple manner in 1 page with the essence of the business transaction clearly laid out at the end. The fees are super high and they may not even be hired if they will not structure a transaction to fleece minority bondholders that would benefit the big distressed funds. The big distressed funds are likely hiring the creditor committee lawyers and financial advisors anyway.

    ​

    1. Management: Often takes a big stake in the company in the form of equity in Key Employee Retention Plans. You can imagine how "key" they are if they were the same management team for many years whose decisions led the company to be some variation of badly run, over leveraged and inefficient. They will likely get a big stake worth many millions for essentially getting the company through bankruptcy and not for stellar performance. I think there may be a quid pro quo with the large stakeholders to both take as much as they can and ignore the rights of minority bondholders.

    You can't always count on bankruptcy judges to be fair as they might miss something in the purposely convoluted and overly complex, unclear and murky plans and disclosure statements. I would recommend the judges use the power of equitable subordination much more aggressively when these distressed debt funds are engaged in bad behavior trying to fleece minority shareholders.

    So watch you butt if you invest in distressed debt and expect the big funds to do highly unethical things. If these types of things happened in equities investing there would be an uproar regarding minority shareholders rights but because this area is so murky it is difficult and complex to figure out (intentional is my guess).

    Solutions:

    Perhaps there is room for a disruptive legal firm that could take market share by short cutting and simplify the process and documents filed that is 25% of the cost and significantly less time for everyone to read, etc. The number and size of filings could be reduced significantly while keeping the business and legal substance. This would be a huge savings for everyone.

    And about them taking from widows – very often widows will own some of these bonds either directly or indirectly through a bond fund and the distressed debt funds, "professionals" and management, in my opinion, are engaged in legal theft from them. Imagine many years from now and you are lying on your death bed, as a participant in this sector did you make the world a better place from your actions?

    This article is entirely my own opinion.

    submitted by /u/about842
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    Value Investing in Gold? Caesar Bryan (Gabelli Funds) explains his approach

    Posted: 15 Oct 2019 09:39 AM PDT

    Fall 2019 Graham & Doddsville Investment Newsletter

    Posted: 14 Oct 2019 04:53 PM PDT
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