Singer / IECA investment in TAO I’m interested in the board’s take on Paul Singer’s dumping of shares by himself personally and through his Elliott Intl. Capital Advisors (EICA) at the end of October / start of November. Here’s my recap of what I know, and speculation as to what is going on:
My first note of Singer’s involvement in TAO was from Insider Trading reports from August 19, 2011 indicating that he had bought 47,640 shares for himself and 71,460 shares for EICA, at average prices of $6.613. These purchases brought his total share ownership up to 1,896,240 personally and 2,844,360 for EICA, for a combined total of 4,740,600...meaning he had already accumulated a total of 4,621,500 shares prior to August 19th, 2011. Given that TAO’s share price was still in the mid-$2s as late as Sept. 2010, and depending upon how long Singer had been accumulating shares, in August of 2011 his average cost could’ve been considerably lower than that $6.613 purchase price...or, roughly the same if the accumulation had occurred between mid-December 2010 and the reported August 2011 purchase, which I feel is more likely.
By the time Singer took down 350,000 shares personally and 650,000 shares for EICA (i.e. a total of 1 million shares) of the May 2012 bought deal financing at $10.45, his respective ownership of TAO shares had climbed to 2,264,115 personally and 4,204,785 on behalf of EICA...for total ownership of 6,468,900 shares.
In other words, since his initial insider trading report of the August 19, 2011 purchase, Singer / EICA had added another 1,728,300 shares.
Through that time period of August 2011 to May 2012, Singer traded around his position...both buying and selling shares...but his lowest buy price was in December 2011 when he picked up 50,000 shares at $5.131 personally and another 164,996 shares for EICA at prices between $5.643-5.727.
This all leads me to question whether Singer’s and EICA’s average cost for shares was much lower than the prices he sold at on October 24th 2012 (i.e. $7.00-7.06) and November 7th 2012 (i.e. $7.00). Certainly, since then, if Singer / EICA has continued to dump his position in TAO (which, because he ceased being an insider as of the November 7th sale, we have no official notice of), it has probably been at prices lower still. In other words, he may be dumping shares at lower prices than he paid for them.
Why?
Possible reasons:
1. Faced with redemption calls from his investors, Singer dumped shares to raise cash; and/or...
2. With the ‘fiscal cliff’ uncertainty, and the possibility that the tax rates on capital gains in the US may change adversely as a result of the negotiations to avert the ‘fiscal cliff’, Singer was locking in gains at current taxation rates; and/or...
3. Singer decided to take a tax loss on TAO shares while he was pretty certain that the share price wouldn’t appreciate much before he could begin be-buying his position in TAO...i.e. while TAO was still completing its infrastructure upgrades and, therefore, constrained in its production...something that should be eventually confirmed by Singer’s regulatory filings (Question: does anyone know what rules govern US investors in buying back into a position they’ve realized a tax loss on...is it anything like the 30-day rule in Canada?); and/or...
4. Despite the upside that most of us board members believe TAO has over the next few months-year, Singer has lost faith in the TAO story; and/or...
5. Singer is moving on to other investments he feels have more upside, and needed the cash. This possibility is bolstered by the Bloomberg report from Monday of this week that Singer is offering to acquire the software company Compuware Corp. (CPWR) for $2.3 billion. The article reports that Singer has made a number of recent activist investments in software / technology companies...so, maybe, Singer is moving away from resource companies and more into tech companies.
Any info, comments or opinions from the board on this?