|
 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
|
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