Case Study: Geoff's Investment in Bancinsurance - Letter to Board of Directors157 views 2010-10-01 07:35 Tags: Investment Letter Study Case Board
A reader sent me this email:
"I came across your Barnes and Noble write up on GuruFocus. I noticed in the comments section you mentioned two letters you sent to the board of directors of an insurance company you owned. Would I be able to get those off of you?"
Sure. Here’s the case study. Read what I did. And think about what you would have done.
Background: Years ago, a microcap specialty insurance company, Bancinsurance (BCIS), was involved in a bail bond reinsurance program that caused a 29% loss of shareholder’s equity.
Bancinsurance’s auditors resigned. A.M. Best cut Bancinsurance’s financial strength rating. NASDAQdelisted the stock. And the SEC sent a Wells Notice telling Bancinsurance that enforcement action was planned against executives.
At this time – 2005 – I began following the stock. On February 3rd, 2010, the SEC told Bancinsurance it was not going to act against the executives. I decided to buy Bancinsurance stock.
I started selling other stocks I owned to round up cash. In March, Bancinsurance’s bid and ask prices were below $5. I started buying at $4.75.
On March 23, 2010, the Bancinsurance board announced the CEO – who owned 74.17% of all Bancinsurance shares – was offering to buy out other shareholders at $6 a share. I bid for all stock at or below $6 a share throughout this period. I probably accounted for the majority of Bancinsurance’s trading volume from this point on.
On April 7th, 2010, I sent a letter to Bancinsurance’s board of directors.