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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:82202 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

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28-03-2017 Hits:56248 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

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28-03-2017 Hits:84473 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

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27-03-2017 Hits:84185 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

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The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

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 I'm sure most of you who follow GGP have heard about this by now, but I am here to give you a different perspective. First, let's look at what just happend... From the WSJ:

A steep decline in the stock price of General Growth Properties Inc. prompted a top executive of the company to sell half of his common shares this week to cover a margin call.

Bob Michaels, General Growth's president and chief operating officer, sold 700,000 shares Tuesday at an average price of $27.13, according to a filing with the Securities and Exchange Commission.

The sale left Mr. Michaels with 690,507 common shares in General Growth, which develops and owns shopping malls.

Now, those of you who have been following my GGP series should have saw this coming. Start at GGP Shenanigans: How much value do you place on the credibility of management? and be sure to follow all links contained therein. The members of the Bucksbaum family are probably more highly leveraged than the president, so if he is getting margin calls one can only imagine what the others are about to recieve. Let's use our imagination. This is a from a contribution by one of our esteemed BoomBustBlog members, thus it is not my work or research but it is definitely worth drilling down a bit further. In case you haven't noticed, there is a lot of intellectual firepower hanging out at the BoomBust!

This is a short note which implies Bernie is either facing a margin call now, or will face a margin call with only a very small amount of incremental stock price decline. Note from the author: Just a small caveat to the prior stuff I wrote - I goofed on the "unsubscribed debt" term.  GGP isn't on the hook for "all" the unsubscribed debt - they are liable for most (83.3%, to be exact) of what the arrangers borrowed but didn't sell off to other investors.  The general point is the same, but I just thought I'd clarify that.


Bernie Freibaum's underwater equity position

Since December 2001, Bernie appears to have bought $82 million worth of stock at an average cost of 47.3, 42% below the present stock price of 27.48.  It is extremely unlikely that BF has generated more than $32 million in post-tax, post-consumption income [see detailed analysis below].  This implies very, very heavy use of margin debt to purchase this stock. It is highly likely that the dividend payments are being used to pay off the margin debt interest payments, which is why GGP must continue paying very high dividends.  This also explains why Bernie has not bought any material additional amount of stock (more than 1.4k shares), even though the price has fallen so hard.  Presumably if he is optimistic, this would be an extremely cheap price.

If he put all of his post-tax, post-consumption income into the Form 4 GGP stock purchases and borrowed the remainder, this would imply $50M of borrowings on $82M of purchases.  With the stock down 42% off of his average cost, the market value of his collateral equity position is now $47.6M, which is less than the $50M he had borrowed.  This would imply that right now he either is facing margin calls, or will face margin calls if the stock drops any further. 


Historical Insider Buying

BF's historical purchases can be found in the Form 4's that he has filed with the SEC.

Filer Name

Title

Trans Type

Dollar Value

Shares Traded

Trans Date

Trans Price

Total Holdings

Owned

FREIBAUM, BERNARD

CFO

B

$72,620

2,000

2/14/2008

$36.31

47,000

I

FREIBAUM, BERNARD

CFO

B

$1,019,430

28,200

2/14/2008

$36.15

7,541,015

D

FREIBAUM, BERNARD

CFO

B

$206,500

5,000

12/19/2007

$41.30

45,000

I

FREIBAUM, BERNARD

CFO

B

$412,300

10,000

12/19/2007

$41.23

7,512,815

D

FREIBAUM, BERNARD

CFO

B

$34,965

700

11/7/2007

$49.95

7,502,815

D

FREIBAUM, BERNARD

CFO

B

$2,236,780

45,500

9/17/2007

$49.16

7,502,115

D

FREIBAUM, BERNARD

CFO

B

$636,350

13,000

9/14/2007

$48.95

7,456,615

D

FREIBAUM, BERNARD

CFO

B

$1,355,750

29,000

8/6/2007

$46.75

7,443,615

D

FREIBAUM, BERNARD

CFO

B

$5,255,630

113,000

8/3/2007

$46.51

7,414,615

D

FREIBAUM, BERNARD

CFO

B

$1,092,985

23,500

8/3/2007

$46.51

40,000

I

FREIBAUM, BERNARD

CFO

B

$544,500

10,000

6/8/2007

$54.45

7,301,137

D

FREIBAUM, BERNARD

CFO

B

$1,368,750

25,000

6/7/2007

$54.75

7,291,137

D

FREIBAUM, BERNARD

CFO

B

$681,600

12,000

5/18/2007

$56.80

7,266,137

D

FREIBAUM, BERNARD

CFO

B

$579,500

10,000

5/17/2007

$57.95

7,254,137

D

FREIBAUM, BERNARD

CFO

B

$1,357,000

23,000

5/16/2007

$59.00

7,244,137

D

FREIBAUM, BERNARD

CFO

B

$3,274,752

53,300

5/11/2007

$61.44

7,221,137

D

FREIBAUM, BERNARD

CFO

B

$1,330,427

21,700

5/10/2007

$61.31

7,167,837

D

FREIBAUM, BERNARD

CFO

B

$15,476,406

249,700

5/4/2007

$61.98

7,146,137

D

FREIBAUM, BERNARD

CFO

B

$10,986,051

175,300

5/3/2007

$62.67

6,896,437

D

FREIBAUM, BERNARD

CFO

B

$1,603,500

25,000

3/16/2007

$64.14

6,721,137

D

FREIBAUM, BERNARD

CFO

B

$3,294,500

50,000

2/22/2007

$65.89

6,336,137

D

FREIBAUM, BERNARD

CFO

B

$1,090,000

25,000

8/11/2006

$43.60

5,948,951

D

FREIBAUM, BERNARD

CFO

B

$56,030

1,300

5/19/2006

$43.10

5,903,434

D

FREIBAUM, BERNARD

CFO

B

$417,145

9,500

5/18/2006

$43.91

5,902,134

D

FREIBAUM, BERNARD

CFO

B

$461,055

10,500

5/17/2006

$43.91

5,892,634

D

FREIBAUM, BERNARD

CFO

B

$1,898,000

40,000

3/8/2006

$47.45

5,882,134

D

FREIBAUM, BERNARD

DIR

B

$340,217

8,300

11/7/2005

$40.99

5,582,134

D

FREIBAUM, BERNARD

DIR

B

$888,181

21,700

11/4/2005

$40.93

5,582,134

D

FREIBAUM, BERNARD

CFO

B

$835,000

20,000

8/8/2005

$41.75

5,448,708

D

FREIBAUM, BERNARD

CFO

B

$806,520

28,200

6/14/2004

$28.60

4,444,455

D

FREIBAUM, BERNARD

CFO

B

$1,302,488

45,100

5/28/2004

$28.88

4,416,255

D

FREIBAUM, BERNARD

CFO

B

$1,752,750

61,500

5/27/2004

$28.50

4,416,255

D

FREIBAUM, BERNARD

CFO

B

$267,100

10,000

5/5/2004

$26.71

4,309,655

D

FREIBAUM, BERNARD

CFO

B

$268,500

10,000

5/3/2004

$26.85

4,299,655

D

FREIBAUM, BERNARD

CFO

B

$993,000

30,000

3/16/2004

$33.10

4,229,655

D

FREIBAUM, BERNARD

CFO

B

$3,862,500

150,000

12/16/2003

$25.75

4,001,655

D

FREIBAUM, BERNARD

CFO

B

$468,175

6,100

11/21/2003

$76.75

1,283,885

D

FREIBAUM, BERNARD

CFO

PB

$2,018,250

30,000

8/29/2003

$67.28

1,244,602

D

FREIBAUM, BERNARD

CFO

B

$197,850

3,000

8/4/2003

$65.95

1,214,602

D

FREIBAUM, BERNARD

EX VP

B

$11,574,750

305,000

12/18/2001

$37.95

932,294

D

FREIBAUM, BERNARD

EX VP

B

$21,229

695

6/29/2001

$30.55

547,294

D

FREIBAUM, BERNARD

EX VP

B

$21,229

894

6/30/2000

$23.75

451,599

D

Historical Income Streams

We can get a fairly reasonable view of BF's earnings by looking at his past jobs and his compensation history at GGP.

Compensation at GGP

All compensation back to 1995 is publicly available in GGP's proxy statements. It is reproduced below:

Year

Base

Bonus

Other Cash

Total

2007

1,100,000

1,000,000

559,895

2,659,895

2006

1,000,000

1,000,000

551,696

2,551,696

2005

1,000,000

0

536,001

1,536,001

2004

900,000

0

464,672

1,364,672

2003

850,000

0

350,814

1,200,814

2002

800,000

0

352,860

1,152,860

2001

750,000

0

361,494

1,111,494

2000

500,000

0

328,968

828,968

1999

450,000

0

361,363

811,363

1998

450,000

0

315,256

765,256

1997

400,000

0

200,000

600,000

1996

300,000

0

200,000

500,000

1995

225,000

0

200,000

425,000

Dividends at GGP

Based on BF's stock ownership records, we can also approximate the dividend payments he has received over the past 8 years. These figures are presented below:

 

2000

2001

2002

2003

2004

2005

2006

2007

GGP Dividends/share

0.69

0.8

0.92

0.78

1.26

1.49

1.68

1.85

BF Shares owned (k)

452

499

932

1,778

4,391

4,980

5,921

7,259

Dividend Inflow ($k)

312

400

858

1,387

5,532

7,420

9,947

13,430

Prior Jobs

We also know BF's prior jobs, dating back to when he was at the beginning of his career.

- From age 40 to the present, BF has been at GGP as the CFO.

- From age 39 to age 40, BF was at Ernst and Young as a consultant.

- From age 32 to age 39, BF was the CFO and General Counsel of Stein and Company, a real estate development and service company.

- From BF's early 20's to age 32, BF was in various positions at Ernst and Young, American Invsco Corporation and Cooperes and Lybrand LLP.

While serving as the CFO and General Counsel of Stein and Company, BF received an equity stake in the company. This, plus his cash compensation at each of these jobs, can be conservatively estimated. I conservatively assume that his equity stake in Stein and Company was sold for $5 million after-tax.