Urbana Corporation issued a press release yesterday announcing that they have bought a 15.6% stake in Caldwell Financial Ltd. Urbana is managed by Thomas S. Caldwell who also owns 45.14 percent of Caldwell Financial. So this transaction looks in my opinion pretty bad: it could be a nice way for insiders to cash out of Caldwell Financial at the expense of the Urbana shareholders. I don’t know if this is indeed what happened. The press release is short on details and while insiders own a total of 69.3% of Caldwell Financial they could have bought the 15.6% stake from a third party.
While my initial thought was that as an Urbana shareholder I was getting screwed pretty bad the potential loss of value seems minimal. In the weekly NAV update the company already disclosed earlier this week that they own 700,000 shares of Caldwell Financial with a cost price of just 1.5M (just a bit more than 1.3% of NAV) and based on Urbana’s latest Annual Information Form this position is indeed the 15.6% stake. It discloses that TSC owns 45% or 2.2M shares of Caldwell Financial. Based on this the 700,000 shares would translate to a 14.4% position: close enough to the announced 15.6% number.
So while I still think the transaction is very questionable there is no big loss of value, and I’m not yet selling my position. But Urbana is certainly moving up in the list of things I could sell if I find another good idea.
Sadly, though the discount in URB is pretty clear, it doesn’t seem like Caldwell is going to do much to shrink it.
Lots of other investments like this one, in my opinion, where the odds are probably a bit more in your favor.
What do you think are better alternatives?
bit riskier and different play but i like aberdeen (AABVF) more