RE:Rock solid dividend?Hi Greybeard1,
Some very thoughtful and well reasoned analysis. A few comments:
1) Taking the dividend to zero has serious implications if it continued for the Voting Trust as in a set period of time ( I don't recall the period, but it may be two years) the "A" shares would be automatically converted into "B" shares and their tenous hold on the company would be lost.
2) Honderich would lose whatever leverage he has over the Voting Trust if their income is reduced to zero. This might start the palace revolt we have all been waiting for, so forcing the dividend to zero might also be good in the short-term for shareholders.
3) The shares acquired by Fairfax in November came from Power Corp. They are very astute investors and most assuredly have an arragement with Fairfax that compensates them either directly or indirectly when Fairfax takes Torstar private. Originally I thought Canso was involved, but have changed my perspective as the amount acquired corresponds almost perfectly to the shares owned by Power Corp.
4) Boynton and his new crew will spin their wheels trying to pull Torstar out of the mud as long as the Voting Trust and more specifically Honderich is directing activities. The task isn't quite hopeless, but keeping the same CFO who presided over this financial mess is a signal they aren't really serious about unlocking shareholder value. Any improvement in results will be inspite of themselves.
5) I don't understand how the bank analysts can overlook Fairfax owning 41% of the "B" shares and his recent purchase of more than 9 million shares. There was speculation they had made an offer about this time last year and it was rejected. They must have got a signal that all was not lost or they wouldn't have acquired more shares a year later. There is absolutely no take-over premium built into the current share price ignoring the fact the share price is well below book value at liquidation. I understand why you don't respect bank analysts.
6) The short positions have been covering themselves except for the exceedingly greedy ones. Torstar shares are not going to zero and so the upside in not covering is very low and the downside should Fairfax launch a bid at say $5.50 is substantial.
7) I continue to acquire shares for all of the reasons you have outlined in your positive news summary. I believe there is an upside of $3 - $4/ share on an investment of less than $2/share. The market may wake up to this reality as Torstar starts to show some positive financial performance momentum and this could be goosed if the feds throw some money at them. I don't know who is buying all the shares at Postmedia, but they must know something about the industry to justify that kind of investment. Torstar is unburdened by debt and in my opinion is a much better bet.