Charts don't lie. People do.
I was completely flabbergasted to see Alpha Natural Resources (ANR) trading BELOW the stock price of Cleveland Cliffs (CLF) today. And yesterday after the initial spike in ANR which represented the underlying spread (or most of it) in the agreement, the stock began tailing off. Which was a head scratcher. For those not in the know.
My guess is by that time yesterday AM.... Harbinger Capital - a hedge fund which owns 18%+ of Cleveland Cliffs - informed the co. they were going to be fighting it. Just my speculation but as always, the big boys find things out before us and can act on it. Then all their hedge fund buddies could short ANR yesterday and today in glee and make some dinero, while we scratch our heads and why the heck the stocks were not acting correctly in relation to each other.
Harbinger, turned from a passive to active investor...
- In a 13D filing on Cleveland-Cliffs Inc. (NYSE: CLF), 18.4% holder Harbinger Capital changed their filing status from 13G 'passive' to 13D 'active', saying the proposed acquisition of Alpha Natural Resources Inc. (NYSE: ANR) by Cleveland-Cliffs is not in the best interest of shareholders.
- Harbinger said it may take a position with respect to potential changes in the operations, management, Board composition, ownership, capital structure, strategy and future plans of the company.
- If Alpha terminates the Merger Agreement because Cleveland-Cliffs's Board of Directors withdraws its recommendation of the deal, or if the Merger Agreement is terminated in certain circumstances and Cleveland-Cliffs enters into or consummates another transaction within one year of such termination, then Cleveland-Cliffs will owe Alpha a $350 million termination fee.
- If Cleveland-Cliffs's shareholders do not approve the Merger, the Company will owe Alpha a $100 million termination fee.
On the negative side this will bog down both stocks most likely until this is resolved. Which could be a while. If this is going to be a long drawn out affair we have to reconsider our large weightings since making zilch while this is fought over is a waste of time and money. We'll see what the next few days bring as obviously the board of both companies agreed to it; this is a (now) activist outsider throwing their weight around. But they have a ton of weight at almost 20% of shares.
On the positive side we got some high drama coming to the CLF Corral. I'd rather make money
than deal with drama but this is the situation as it stands.Long both names in fund and personal account
9 comments:
I am also surprised that someone (Harbinger Capital in this case) would oppose CLF's proposal since it is considered bad for CLF. I believe, like you, TraderMark, that ANR will be much more valuable and costly by this time next year (or even year's end). I would have expected someone on ANR's side to object due to low valuation or some other company (MTL or anyone) to actually enter into a bidding war for ANR. If I had enough money... but I think that this allows me (and others) to get back into ANR at a decent price...
ah-ha there we have it.
will be interesting to watch it play out. by the way i just saw some #s on a few hedge funds middle of the yr #s and harbinger is up 42.8% ytd as of june. sooo maybe they do know what they're doing after all.
maybe harbinger makes their money shorting ANR on this inside news they know
or perhaps they only own CLF??
Mark, thanks for digging this up. I was also very curious what was going on and scratching my head. Thanks again for the great research.
j.,
do you know their top holdings as of last filing? You seem to be the man who squirrels out all that stuff.
yea, keep in mind these are holdings as of march 31st so its a very lagging indicator here since the new filings will come out in the next month.
but it looks like Calpine was their top holding followed by FCX, AKS, CLF, Leap wireless, NYT, and SKF ultrashort financials. they've got a few more but just from scanning those are the largest positions. big on metals
wow
interesting to see they used an ETF instead of shorting individual financials
do you have a link please? thanks (you can post with tinyurl)
CLF out with a response this morning say we want ANR :)
i would guess they used SKF only because its ULTRAshort, 2x inverse. tinyurl is soooo last week haha
even shorter:
http://is.gd/Xao
damn you lazy Generation Y kids. Can't even type 6 characters anymore. It has to be condensed to 4
Actually SKF returned >100% in this last selloff whereas the best you could do shorting a stock is 100%. So I guess it makes sense. I just thought these sophisticated machines would have straddles, strangles, and whatever else sophisticated traders such as yourself do. I was surprised that they are using simple things like me ;)
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