In the preceding month WAM increased its CYA holding by close to a million shares, in preparation for demanding greenmail, so that it could sell back some of its CYA shares at the ramped price, and keep the rest of its holding valued at this artificial price. The communications between WAM and CYA regarding this scam is material information for their granny investors. When CYA's criminal management lied to its investors about the reason for the buyback, they committed securities fraud.
Listed investment companies are the Drosophila of financial fraud research, as they can be straightforwardly analyzed and valued. CYA holds listed assets with a current value of around $70m, or $0.89 per share. CYA collects interest and dividends of around $3m from these assets yearly, with around $0.8m in costs, or 27%. The fair value of CYA as a going concern is thus 73% of NTA, i.e. $0.65 per share, while its liquidation value is $0.89 per share. CYA promised years ago to liquidate the fund and return the money to investors, but never actually intended to, since that would stop the fee party.
The criminals running these companies know all this very well, but lie and dissemble, claiming that no matter the costs of an LIC, its ongoing fair value is at NTA or above. This is of course ridiculous, since quite obviously an LIC with lower costs would be worth more to an investor than an otherwise identical LIC with higher costs. CYA ridiculously claims costs of 1.1%, dividing expenses by outstanding assets, yielding a deliberately deceptive and useless metric favored by fund fraudsters. The entire business model of the LICs depends on such dissembling, as they could never function if they had to issue shares at fair value.
This sounds up your alley. The market certainly looks as if it will keep rising for the time being. I suspect there'll be more of these.
ReplyDeletehttp://www.businessspectator.com.au/article/2013/11/15/dataroom/freelancer-shares-soar-debut-0
Yeah absolutely ridiculous, what happened today was a farce from start to finish, that in and of itself should discourage anyone from going near FLN, no further questions needed. Yet almost no one thinks like that, and media of course spins it positive.
ReplyDeleteI don't know what my favorite part is. That FLN opened at a 2013 forecast P/E of 2300. That the top twenty shareholders own 96% of the company. That $1.25m of the cash was paid to a director's company for "various domain names". The $2.5m non-recourse loans for directors and employees to buy employee shares. That the company in one day lost 45% of its value peak to trough.
Thanks for commenting, Scrutinizer. I suspect you are right in that there will be more farcical share issues, more blatant ramps, more granny investors funds evaporated, more million dollar payouts to insiders and middlemen, more fraud.
I've been sharing your blog around, not that I'm influential. Keep up the good work.
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