DISQUS

Inger · 5 months ago

I wander what did they find in MHGC? Too much leverage, too tough a segment to operate theese days (luxury hotels are struggling) and the recovery of that segment is also too far from now...

The only possibility for smart money here - that MHGC will be acquired by someone. I don't see any other reason to invest in this company now. Or may be I have a very narrow point of view?

marketfolly · 5 months ago

In a way, the play makes perfect sense as Falcone is well versed in the ways of distressed or troubled situations. Luxury hotels in a massive recession certainly fall into that category. Not to mention, he likes concentrated and activist positions. While he is not activist on this name yet, he very well could be in the future.

Acquisition is always a possibility as well, but that's just speculation and as you mentioned, smart money would know about that.

Inger · 5 months ago

Do you think that Falcone, possibly, can take part in managing the company?
Otherwise I don't see how he can influence the situation at MHGC, and influencing at management level here is the only way to make money on their stock theese days (I don't think Falcone is going to hunt for penny profit from MHGC shares, taking into account the 8% stake in it... If I was him, I would accumulate that amount of stock only to take control on management, bring in some proved management team, make the company private or rise its market cap.) So if it is not acquisition from a third company, it should be take over of some sort directly by Falcone, otherwise it is waste of money...
What do you think?

marketfolly · 5 months ago

Has Falcone actively managed a company in the past? I didn't think he had, but I could be wrong there. That would be an interesting situation and one I don't think he would get involved in, as he has so many other concentrated positions that need attention. He might take the usual route and try to get a slate on the board and go activist though... but we'll have to wait and see.

As far as I can tell though (on the surface) it just looks like his typical distressed play where he bets on something when no one else really wants to. While I don't think he's out for penny profits either, you have to realize that penny profits multiplied times that 8% stake turns into a lot of money.

I don't want to say too much more because honestly it would be pure speculation on my part. While we cover Falcone on the blog, I'm not in the distressed area of the markets and as such am not as familiar with the metrics he uses to assess/select the companies he does.