Monday, November 3, 2014

A painful to read article on Pinetree Capital

For those of your interested in the recent firehose-vomming of tinycaps that's been coming out of Pinetree, this article from a year ago goes into more detail than I'd ever bother to read:

Divestor blog - Pinetree Capital, possibly the worst closed-end fund ever. The graphics don't work in Internet Exploder, but they do work in Chrome. I'd assume therefore they also work in Firefox.


Divestor blog - Pinetree Capital revisited. From 14 October of this year. Here's a quote of most of it:
How would you like it if you bought an equity interest in 70 cents per share for the market price of 20 cents?

Normally most people would snap up on the opportunity. Every dollar you invested is backed by over 3 dollars of real net financial assets! What could be the catch?

The catch, of course, is that the assets you are purchasing are illiquid, of dubious value beyond a thin market quotation, and is managed by somebody that has an impressive track record of losing money.

Otherwise the market would not be giving such a steep discount to the whole consolidated operation.

What is interesting is that the capital fund continues to be hampered by debentures that have a 33% ceiling on the debt-to-asset ratio. Last year the fund breached this and had to pay handsomely for the privilege of obtaining more time.

Management has a huge incentive to not let the debtholders take over – surely the big players in the debenture space would liquidate the fund piece by piece and would not be hamstrung by pesky management or their insanely huge salaries.

The debentures, by virtue of the debt-to-asset covenant, are functionally secured, first-in-line debt, next in line to the margin loans the fund has been taking to fund its incredibly speculative investment portfolio.

They also mature in 1 year and 7 months time.

Now that the whole world stock market has tanked over the past month, speculative issues get hammered the most. Pinetree has been suffering, and its equity has thus gone down to the huge discount over stated asset value that you see today.
This guy really seems to care far too much about Pinetree!

1 comment: