I’ve said it before and I’ll say it again: the best book for modern value investing is Joel Greenblatt’s You Can Be a Stock Market Genius (note there’s nothing unique about that statement; most investors would have the book at towards the top of their list!).
so the spins got punished regardless of whether they admitted to having to pay their own taxes and overhead? surprising, because this kind of seems how the mkt ought to work.
#1. I suspect that the actual goal is to sell Vitesse. If JEF sold it, that would result in double taxation (taxation at the JEF level; and then taxation to investors on any upstream proceeds). If they run the business for some amount of time and then sell the company (Vitesse), then JEF shareholders end up with a single level of taxation. Or they do even better if it's a tax-free deal (but not my assumption).
#2. My recollection is that the JEF comp structure is sensitive to shareholder returns; and they include cash and non-cash distributions. So this is arguably better for Team Handler than distributing the after-tax cash proceeds to shareholders.
#3. Otherwise agreed; makes no sense to burden this division with the costs and inefficiencies of running as a public company.
Great analysis. Thank you. We will be sending our subscribers to this post!
What do you think of the sustainability of their dividend - $66mm / yr or >15% yield at current prices?
Do you think JEF could have sold VTS for the valuation the market is currently assigning it?
so the spins got punished regardless of whether they admitted to having to pay their own taxes and overhead? surprising, because this kind of seems how the mkt ought to work.
Late comment so it may fall on deaf ears.
#1. I suspect that the actual goal is to sell Vitesse. If JEF sold it, that would result in double taxation (taxation at the JEF level; and then taxation to investors on any upstream proceeds). If they run the business for some amount of time and then sell the company (Vitesse), then JEF shareholders end up with a single level of taxation. Or they do even better if it's a tax-free deal (but not my assumption).
#2. My recollection is that the JEF comp structure is sensitive to shareholder returns; and they include cash and non-cash distributions. So this is arguably better for Team Handler than distributing the after-tax cash proceeds to shareholders.
#3. Otherwise agreed; makes no sense to burden this division with the costs and inefficiencies of running as a public company.