|Shares Out. (in M):||5||P/E||0||0|
|Market Cap (in M):||80||P/FCF||0||0|
|Net Debt (in M):||0||EBIT||0||0|
|Borrow Cost:||Available 0-15% cost|
|Annual Loss Assuming Flat NAV|
|Price + Distributions||22.30|
|Pre Raise||Post Raise|
|NAV Per Share||17.74||18.62|
|Price Increase %||5.0%|
Dividend cut in Q4
Natural wax and wane of premium
|Subject||Agree . . . . but|
|Entry||05/15/2015 05:55 PM|
RoboCpp - thanks for the good write-up. I have some history with these closed end funds and while I agree with your rationale completely, I'm resigned to the fact that there is no catalyst for the premium to shrink unless the market collapses. In the meantime, you have to eat the borrow cost (which has been somewhat high at times) and the bullsht dividend. If they were not able to do the rights offerings to replenish the asset base, I would agree this is a great short, but until that stops, this Ponzi scheme will keep going.
I also think the people involved are much more sinister than you discussed. I wrote a long letter to the SEC because this is (by definition) a publicly traded Ponzi scheme taking advantage of unsophisticated people, but the SEC didn't care. Even after I had a 2 hour conference call with them, they didn't do anything because technically CRF is not breaking any laws since they disclose everything in the fine print of a prospectus that no one reads. Here is the letter I sent to the SEC in case you care:
Good luck on the idea, I hope it works and these crooks get screwed . . . but I've grown too cynical.
|Subject||Re: Agree . . . . but|
|Entry||05/17/2015 07:44 PM|
Thanks ElmSt you raise good points and I agree with what you wrote in your letter. Thanks for providing that link. The weakness of this idea is certainly the lack of catalyst. While the premium would definitely collapse in a market downturn, I think it may be good to keep this idea on your radar and short in September or so. If they don't complete a rights offering before then the distribution will get cut materially and that should send the fund and the premium lower.