Investment liquidating trust

05-Sep-2020 01:10

Once the intended spinoff of Home Insurance was announced, many investors purchased City Investing shares as a way of establishing an investment in Home Insurance before it began trading on its own, buying in at what they perceived to be a bargain price.Most of these investors were not interested in the liquidating trust, and sold their units upon receipt of the Home Insurance spinoff.City Investing Liquidating Trust In 1984 shareholders of City Investing Company voted to liquidate.The assets of this conglomerate were diverse, and the most valuable subsidiary, Home Insurance Company, was particularly difficult for investors to appraise.GDV shares surged in price and were distributed directly to unitholders.Wood Brothers Homes was sold, various receivables were collected, and most lucrative of all, City Investing received large cash distributions when Pace Industries sold its Rheem and Uarco subsidiaries at a substantial gain.Today we complete our series on Seth Klarman, the founder of The Baupost Group, a deep value-oriented private investment partnership that has generated an annual compound return of 20% over the past 25 years, and the author of an iconic book on value investing, Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor Following on from our earlier posts, Seth Klarman on Liquidation Value, and Seth Klarman on Catalysts, we present Seth Klarman’s application of liquidation value investment principles to a specific case: the City Investment Liquidating Trust (from Chapter 10Investing in Corporate Liquidations Some troubled companies, lacking viable alternatives, voluntarily liquidate in order to preempt a total wipeout of shareholders’ investments.Other, more interesting corporate liquidations are motivated by tax considerations, persistent stock market undervaluation, or the desire to escape the grasp of a corporate raider.

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Trading initially only in the over-the-counter pink-sheet market, the units had no ticker symbol.

Efforts to sell Home Insurance failed, and it was instead spun off to City Investing shareholders.