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    Saturday, December 06, 2008


    AHUG - A good value investment

    I've likely lost between 10% and 25% on my AHUG investment which I've written about here and here.

    In my last analysis I outlined the risks but left out the one that occured. Allco went into administration. There was an offer in excess of $45 on the table before that. The administrators have now negotiated away most of the money that was going to AHUG, to Allco's banks. AHUG holders will now get about $11.53 plus a share in the liquidation of the HIT trust.

    The HIT trust had That would net out to $8.2 in assets or $8.47 per unit of AHUG. They would probably not realize that much but it seems unlikely that there would be less than $2 a unit.

    AHUG holders are being asked to vote to accept $11.53 plus the residual in the HIT trust. For AHUG to be worth more lots of legal maneouvers would need to go well. They are:

    If the trust could not get the monies quarantined then a succeful case would leave AHUG holders as unsecured creditors of Allco which is probably worth nothing.

    I'd estimate the likelyhood of success here would value AHUG higher than $11.53 and i'm sure the receivers recognize this. Instead they are using the current fear to bully holders into a worse position. (This reminds me of deal or no deal where the banker offers an amount worse than your expected value but the fear of loss causes the player to take it).

    I, for one, accept the bullying and will vote to accept the $11.53 plus the residual from the winding up of the HIT trust.

    I'm left thinking that this was the perfect value investment. A good chance of making multiple times my investment (heads I win) and a small chance of losing a little (tails I don't loose - much). The actual chain of events was almost unforseeable back in August, yet the inherent margin of safety in buying 60c worth of assets for 17c resulted in a managable loss. This position has far outperformed the market since August!
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    Disclaimer and Disclosure Analyses are prepared from sources and data believed to be reliable, but no representation is made as to their accuracy or completeness. I am not paid by covered companies. Strategies or ideas are presented for informational purposes and should not be used as a basis for any financial decisions.
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