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Larry Loiello: “After reading the recent Borealis news, I was left with the impression that BOREF shares may be redeemed for $10 any time for the next 10 years. I am surprised to see it trading lower than that. It seems to me that if one could purchase shares at under $10, there is a guaranteed profit to be made. What am I missing?”
→ You are missing that the $10 is payable after 10 years, plus 2% a year interest (for a total of $12.19). My guess is that by 2029 things will either have worked out — in which case you’d have gotten a lot more than $12.19 — or not, in which case they might not have the $12.19 to pay you.
For those who’ve asked whether they should exchange their semi-liquid BOREF shares for shares of the new holding company: I see zero reason to do this any time soon.
For those — like me — who were hoping the stock would just keep rising $1 a day . . . or at least not fall back as it has . . . all I can tell you is that patience is hard.
But as also noted last month, it sometimes pay off.
Another example just came smiling into view: an investment I made in 2006.
Bush was president; there were no iPhones; and a startup called Delta Energy claimed to have an economical process for turning discarded tires into carbon black and oil.
As a souvenir, when the financing was completed, we each got a small Lucite block with three tubes embedded in it: one labeled “tire shred,” one “oil,” one “carbon black.” It sits on a filing cabinet in my office.
For some reason, though it’s small, it attracts a lot of attention. “What’s this?” visitors ask.
“A reminder of how dumb I am,” I say.
But guess what? After many years thinking I’d never see that money again, Bridgestone has opened a plant in Mississippi to “depolymerize” 3 million tires a year. (About 1% of the annual U.S. discards.) Here’s a presentation they made at a recent industry conference.
It might work out after all.
With luck, that will be true for long-suffering investors in Borealis as well. Or not.
I’m sure not selling at $10 or $20, let alone last night’s close of $7.70. Now that funding has been secured, FAA approval and entry into service might follow in a couple of years (or not) . . . at which point a technology that could save airlines billions of dollars a year might be worth $500 million or $1 billion or more. At last night’s close, the grandparent company, Borealis, with 5 million shares outstanding, was selling for $38.5 million.
Have a great weekend.
Quote of the Day
Be greedy when others are fearful and fearful when others are greedy.~Warren Buffett
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