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Canadian Value
Canadian Value
Articles (4624) 

A Rare "Long" Recommendation From Muddy Waters Research

February 17, 2015 | About:

This is the first time in our investment careers that we have come across a situation in which a company’s opacity is a reason to buy the stock. Our investment approach is to tackle complex situations, and attempt to understand the economic reality underlying the information (often misinformation). So it is with Bolloré SA (BOL), which has a horrifically complex corporate structure. However, through this structure, BOL effectively owns a significant portion of itself. Most of the market seems to take at face value BOL’s reported shares outstanding of 2.5 billion. We estimate that the effective shares outstanding are only 1.1 billion (57.2% lower than reported).

Muddy Waters, LLC is long Bolloré SA because its complex corporate structure, with numerous levels of circular ownership, effectively cancels over half of its outstanding shares. Thus, we estimate that the true number of shares outstanding is only 42.8% of what BOL reports. BOL’s shares present a unique corporate structure arbitrage.

  • Muddy Waters, LLC is long Bolloré SA because its complex corporate structure, with numerous levels of circular ownership, effectively cancels over half of its outstanding shares.
  • We estimate that the true number of shares outstanding is only 42.8% of what BOL reports. BOL’s shares present a unique corporate structure arbitrage.
  • Mr. Bolloré is an outstanding capital allocator and has grown the share price and book value of BOL over the past 20 years, respectively, by 1,213% and 1,953%.
  • We value BOL shares at €8.50, which is 94.6% higher than its current price.

continue reading: http://www.muddywatersresearch.com/wp-content/uploads/2015/02/MW_Bollore_02172015.pdf

About the author:

Canadian Value
http://valueinvestorcanada.blogspot.com/

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