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F.K. Soft's picture
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Without really thinking, when I opened my account I purchased for my virtual portfolio the two stocks that I'm thinking of investing in.

After about 5 seconds I realized that there's no capital gains taxes or transaction costs involved.  I'm probably going to be involved in a lot more special situations than I would in real life.


CENF is trading for $1.90 and as I understand it is going to be bought for $2.25

Read about it here:
http://mikesnewsletterinvesting.blogspot.com/2006/06/potential-arbitrage.html

-FKS
By F.K. Soft at 2006-06-23 12:38 | Stocks | F.K. Soft's blog


RE: CENF

Hi FKS,

Thanks for the posting, an interesting opportunity indeed.  I am having problems understanding why the stock wasn't bid up to $2.25?  Especially right after that announcement in November 2005, you would think every arbitrageur on Wall Street would be in on this situation by now.  Is there a risk here that is not obvious?


-theo
By Theo at Fri, 2006-06-23 12:58 | login or register to post comments

CENF is a pretty typical

CENF is a pretty typical going private transaction.  These small companies don't attract the attention of the Big Guys on Wall Street and often provide good profit potential for moderately low risk.  It's up to small investors like us to act as arbitrageurs in order to bring efficiency to these markets. 

Theo, I'm surprised you didn't spot this deal in Fat Pitch Financials Contributor's Corner.  I believe Mike found out about this deal through my site.  I bought this stock several weeks ago and I have been enjoying the recent climb in price.   If you are interested in these opportunities, don't forget your free access to Contributor's Corner.  I still owe you for your programming help.
By George at Fri, 2006-06-23 18:26 | login or register to post comments

RE: CENF is a pretty typical

Hi George,

Correct me if I'm wrong, but CENF is different from other going private transactions because there is no limit to the amount of shares you tender for cash.  For example, most of the smaller going private transactions have a maximum of, say, 100 shares that will be exchanged for cash.  These small transactions - with a max profit usually up to $1,000 - are not enough for the big arbitrageurs on Wall Street to get involved.  But in CENF's case, an arbitrageur could buy a few million $ in shares and make a tidy profit.  That is why I was perplexed.

Congratulations on buying CENF when it was much lower.  I will need to keep an eye on your site for future opportunities.  Thanks again for the free access!


-theo


By Theo at Sun, 2006-06-25 13:27 | login or register to post comments

Theo,There's no risk that I

Theo,

There's no risk that I know of, although surely some risk exists somewhere.

Since I can't see any, I've assumed it's small.

-FKS
By F.K. Soft at Sat, 2006-06-24 19:41 | login or register to post comments

There is always risk.  I

There is always risk.  I always assume that there is about a 10 percent chance that the deal will not happen with these going private transactions.  That is roughly the historical rate of failure from my experience with these transactions.
By George at Sun, 2006-06-25 11:21 | login or register to post comments

RE: Risk

10% is not that small.  CENF last closed at $1.94 and so the current profit potential is 16% not including transaction costs.  At this price, I don't think the margin of safety is that good considering if the deal does not go through, you could lose a lot more than 16%.

I had a look through CENF's financial statements and they weren't so pretty.  CENF does not earn any money nor are they cashflow positive.  My only guess is that the company has hidden assets or Mr. Moyes thinks he can turn the company around.  But in the event the deal does not go through, you are left holding stock in a not-so-great company.  Those are the risks you need to consider.

-theo

By Theo at Sun, 2006-06-25 16:07 | login or register to post comments

Goodbye CENF

I sold all my CENF recently.  This investment was a mistake.  I got an annualized return of 24% out of it, but the risk involved would be unacceptable to me now (less than 3 months later).  Just because I was sucessful doesn't mean it had anything to do with skill.  I'm trying to develop a sucessful PROCESS.  Any deviation from that is a failure.  CENF was one of those.  I just didn't know then, and don't know now, all the sides of the deal.  It's amazing how positive I was when I bought versus how I feel about it now.  Scary.  Future arbitrage is going to have a meet a high hurdle for me to buy.

Another interesting quirk is that since I loaded up on CENF when I opened my account, my portfolio turnover is already 100% after about 2 months.  This is something that will not be repeated again.  There just aren't that many good ideas that I can understand.  Also, good ideas take longer than that to come to fruition.

-FKS
By F.K. Soft at Sat, 2006-09-23 12:38 | login or register to post comments