DC.PR.E : Huffing and Puffing Begins

Tim Kiladze wrote a piece in the Globe today titled Dundee Corp. faces investor spat over preferred share repayment:

On Tuesday, Maryland-based Roumell Asset Management, which says it holds 3.6 million shares, or 6.4 per cent of Dundee, released a public letter to the company’s board of directors asking for Dundee’s preferred shares that come due in 2019 to be extended and given a new, discounted price.

Dundee declined to comment Tuesday, but on an August conference call, executive chairman Jonathan Goodman addressed the complexity of the matter. “We’re in the very unique position that the preferred shareholders don’t want us to give them stock and neither do a lot of the common shareholders. But I think we have to be pragmatic,” he said, alluding to the company’s cash levels.

Assiduous Readers will remember that I wrote about DC.PR.E in August – that post contains links to posts from all the huffing and puffing in 2016 about the previous arrangement that gave rise to the existence of the issue.

The Roumell letter advocates:

We believe the company should offer the current Series 5 preferred shareholders appropriately discounted (from par value), and extended, preferred shares. Dundee’s financial position has deteriorated significantly since January 2016 and the discount offered to the Series 5 preferred shareholders must reflect this new reality. In the absence of the Series 5 preferred shareholders accepting a newly discounted, and extended, security, Roumell Asset Management would support honoring the obligation by issuing common stock. While we speak only for ourselves, we believe other large shareholders view the situation similarly.

So who’s Roumell? They run a fund:

The Roumell Opportunistic Value Fund (Institutional share/RAMSX) follows the same deep-value, Opportunistic Capital Allocation (OCA) strategy that we have adhered to since 1998. The Roumell Opportunistic Value Fund seeks to achieve its objective by holding a combination of equity, debt and cash reflecting a broad mandate to pursue value where we find it. In the absence of sufficient investment opportunities, the Fund will hold cash. The Fund is managed by Jim Roumell.

The appropriate benchmark for this kind of fund is difficult to determine, but they mention the Russell 2000 Value Index in their quarterly fact sheet, so let’s go with that until we’re told differently. The fund has achieved an “Average Annual Total Return as of Quarter Ending 6/30/2018” of 0.77% over the past five years compared to 11.72% for the Vanguard Russell 2000 Value Index Fund Institutional Shares VRTVX in the five years to 2018-8-31. Sorry about the period mismatch, but it seems we’re not talking about fractions of a basis point here! Let’s just say I’m not busy mortgaging my house so I can place money with Roumell! They do give returns for other strategies in the 18Q2 Investors’ Letter … you can decide for yourselves whether you want to mortgage your houses.

DC.PR.E closed at 18.47 today … a good bounce off the lows, but hardly a vote of confidence in the company’s ability to redeem at par next year.

One Response to “DC.PR.E : Huffing and Puffing Begins”

  1. BarleyandHops says:

    “But I think we have to be pragmatic”


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