Member Info for alex1621

80 is the new 30 ... hang on for the telegram from King Charles.

There was a rumour circulating around the end of 2016 and the SP shot up to that level fairy quickly ... I suspect that it would sell beyond that price, and closer to 250-270 should there be any competition. I'm also of the view that if the UK can successfully navigate this Brexit fiasco then it could be at that level within a couple of years off it's own steam, particularly if the big ad revenue buyers return.

LOL ... he's running a "short" I'd bet?

The DUP are the biggest hypocrites in all of this ... they won't budge from having a different rule from the rest of the UK, unless of course that rule is gay marriage and the right to have an abortion ... a hateful bunch. The irony is that their approach is likely to lead to a hard border ... followed swiftly by a united Ireland.

Where is the source of this information? That ITV ends interest in Endemol Shine. I'm happy if it is true.

A recent quote from McCall:

“Whatever we looked at from now onwards would have to be very financially disciplined because we’re not just growing for growth, we’re growing to profitably grow and to give returns to shareholders,” McCall said. “We have to be incredibly disciplined about any acquisition we make, whether that’s small or large.”

The Daily Telegraph reported that Endeavor, a Hollywood outfit are also looking at Endemol Shine. The quote from McCall above suggests that any offer would be conservative and suggests that they are not getting into an expensive bidding war.

I watched the presentation ... the assessment given below is beyond ludicrous. Ad revenue is cyclical, ebbs and flows with the UK economy, an economy that has been under a cloud of uncertainty for the last few years. The large FMCG companies have been holding back until that uncertainty lifts ... the same pattern no doubt would be observed if you undertook an analysis of ITV over the last three decades. This too shall pass. What they explained is that they are implementing new monetisation strategies across a range of programming and platforms. The Studios business is particularly impressive, with a range of programming across many countries. It is developing and generating a decent return, in a sector where the demand for content worldwide is growing. They specifically avoided talking about Endemol Shine, but reiterated the mantra that they would be very disciplined with acquisitions and can still grow and develop Studios as they have done historically.

I suspect they have made a bid, but I don't get the impression that they were desperate to buy it, which suggests a conservative offer. We'll find out soon enough.

Look at the SP movement with Entertainment One in the last few years ... when it was down at 134 no one was predicting the 388 it is today? If both ITV engines ... studio and free-to-air start firing on all cylinders it is more than possible that the SP could reach Liberum's target.

It sounds like McColl has bid for Endemol Shine ... let's hope it was a seriously low-ball offer.

The main criticism of ITV is an over reliance on advertising revenue, despite the fact that programme production is growing at a pace. The strategy is to build up the content business to the point where advertising is less important to sales and profitability. As the entertainment industry is increasingly content hungry this looks like a sensible way forward. As for Endemol Shine, the key would be price paid and whether the acquirer knew what it was doing ... the ITV chairman knows the company well, so less chance of a due diligence failure ... then it is simply whether the price is right.

Yes, and the Devil, Goldman Sachs, is in the detail.

So, just to recap:

The counterparty to Liberty Global's ITV Collar arrangement has the right to re-use the shares held in the custody account.

The "slingshot effect" theory therefore still holds as a possibility, and is most certainly legal. ITV's 12 month graph looks like a rollercoaster. Presuming that Goldman Sachs is the counterparty, my next question is would a company with a reputation for integrity in the pursuit of "God's work" do such a thing?

Just a theory of course ... alternative explanations are most welcome. Thank you newbie99 for referring me to LG's last 10K annual report.

Simple and obvious? Mmm?

Liberty Global describe their arrangement as a Collar, ITV Collar to be precise. It is a protective strategy on a long stock position, created by purchasing an out-of-the-money put option while simultaneously writing an out-of-the-money call option. The put protects from a SP drop, the call produces income to offset the cost of the put, and allows Liberty Global to profit on the stock up to the strike price of the call.

So far so simple. However, the investment in ITV was financed through borrowings under a secured loan agreement, the ITV Collar Loan. The shares are pledged as collateral under the ITV Collar Loan.

The important point: "the counterparty has the right to re-use all of the pledged ITV shares". This includes all 398.5 m shares, which have been placed into a custody account. "Under the terms of the ITV Collar, the counterparty has the right to re-use the pledged ITV shares held in the custody account, but we (Liberty) have the right to recall the shares that are reused by the counterparty subject to certain costs".

It's all very straightforward until you get to the "right to re-use the ITV shares held in the custody account". What could that mean? Would they be allowed to sell the shares? Would they be allowed to loan the shares to another party, who then sells them?

All perfectly legal and above board. A bank agrees a loan to a company to fund a share purchase, the shares act as collateral together with a Collar to minimise a fall in their market value. This virtually guarantees repayment of the loan. But why the need for a re-use clause with the ITV Collar?

Also, it wasn't clear if the counterparty of the ITV Collar Loan and ITV Collar is Goldman Sachs. I didn't see anything definitive to confirm that.

The question on my mind is why would Liberty Global enter into an arrangement with Goldman Sachs? As I don't understand the nature of it (it was described by ITV as akin to a loan arrangement, I've also seen it described as a "hedge" of some sort) I can only ask myself what is the possible motive? Liberty Global at all times retain ownership of the stock. The RNS's issued from Goldman show lists of OTC Options and CFD contracts ... again, I haven't read any article offering an explanation ... and no journalist has looked into it that I'm aware of. No one is suggesting that Liberty is engaged in shorting themselves, anymore than an institutional holder who loans out stock for a fee is doing so.

I'm looking for an innocent explanation but haven't found it ... so I've just made do with Occam's Razor.

The original 2009 article by Jason Schwarz in The Street is detailed below. It appears to be legal, but only really available to big players ...

https://www.thestreet.com/story/10649048/1/apple-seven-reasons-shorts-love-it.html

Extract from an article, cited below. It appears to be legal?

"Large institutional investors, because of their huge purchasing power, have the ability to drive prices down and then buy back into the stock at a low price. These large investors ride that price up as others join the rally, and then pocket a hefty profit as a result".

"This is called the slingshot effect and it was well described in a much-quoted article by Jason Schwarz back in 2009. In the article, he referred specifically to Apple stock. Is this strategy legal? Yes, it is. Can you ride the wave, too? Maybe, but more importantly, you can learn a valuable lesson from it".

https://www.thebalance.com/how-to-legally-manipulate-stock-prices-3140856

It is not illegal to loan out shares that you own, institutions do that on a daily basis, so it would be very difficult for a regulator to do anything about that. The Guinness affair was a share support operation, an attempt to keep the Guinness share price high in order for it to merge more favourably with Distillers. The shady characters involved bought Guinness shares and where given guarantees of compensation should the Guinness share price fall below the buying price. If Liberty are loaning to Goldman who are shorting to keep the SP below, say, 180p, I'm not sure there is any illegality at work.

It is of course a theory, but when you refer to something as a conspiracy theory you are suggesting that it is far fetched and probably bogus. The fact that Liberty/Goldman control over 20% of the stock and have an arrangement in place makes me think otherwise. Given your vast experience in the financial markets perhaps you could explain to us all what the innocent nature of this arrangement is?

And why bother?

If you are shorting at around 180 you are maintaiining a cap on how high the SP can get. Any company engaged in M&A has to pay a premium for control, normally around 30%, which would take the offer to around 230 ... after some Board pushback it gets to around 240-250. If you let the SP drift above 180 you enter overpaying territory. Given the depressed post-Brexit vote economy you can safely keep a lid on the SP as there’s is unlikely to be great results in the short-term. The only spanner in the works would be another bidder ... but if you know the industry you’ll have some idea about that possibility. If you are not ready to make your move a loan and suppress operation might make some sense. Why would any company put their stock in the hands of Goldman? If you have 20% of the stock that is a lot of ammunition, and if there’s an agreement for first call on Goldman’s stake then you might just put off an alternative bidder.

But none of this is possible, right?

How about:

Loan out the stock
Borrower shorts the stock
Borrower buys back stock at lower price
Liberty receive loan payment and/or % of the short profit
Allow SP to drift back up
Repeat the process

It cannot be done? Please explain.

The new CEO needs to focus on the business, because that's what she can control, she can't control the selling price, which is determined buy the actions of human beings (and algorithms designed by them) ... Michael O'Leary laughed at her when she took over at Easyjet, he's not laughing now.

Given that the production arm is growing at a pace into a growing world demand for content did anyone ever consider that ITV might well prosper in the future irrespective of the fate of free to air TV? Which incidentally may well recover strongly as it is currently in a cyclical downturn. Netflix were sending DVD’s in the post a few years back, if anyone on a bulletin board would have predicted their 2018 valuation they’d have been laughed at. Personally I wish Liberty Global would sell down their stake and move on ... along with Goldman Sachs.