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Author: tomjoad Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 6881  
Subject: Re: Extreme Undervaluation??? Date: 4/11/1997 1:23 PM
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On Wed, 09 Apr 97 23:45:00 -0600, metro wrote:
<<On Wed, 09 Apr 97 17:48:29 -0600, tomjoad wrote:


On Wed, 09 Apr 97 02:46:59 -0600, metro wrote:

<<On Tue, 08 Apr 97 18:59:04 -0600, tomjoad wrote:


There is a classic arbitrage situation that exists in the stock market at this time. A company that came public last week, The Enstar Group (ESGR) on the Nasdaq Bulletin Board, is being offered at $9.88/share. The company, which is essentially a 'shell' company, owns 853,423 sharesof First Union Corp. (FTU) stock. FTU, for the uninitiated, is the 6th largest bank in the U.S. FTU is currently quoted at $84.25/share on the NYSE. There are 4,750,534 shares of Enstar Group stock outstanding. If you multipl

y Enstar's FTU holdings by the current market price, and divide that figure by the number of Enstar shares outstanding, you

arrive at a value of $15.09/share. Therefore, you can purchase Enstar shares at $5.21/share less than they are actually worth just based on their assets. This is a discount of 34.5%. I bought 500 shares last Friday. The recent selloff in this market has produced

opportunities. Do your homework.


This seems a bit odd to me, and seeing that it is spammed in almost every folder, I'm seriously questioning the validity of it. If this is remotely accurate/true would someone explain it to me? I'd really appreciate it.



I take exception to your characterizing my posts as 'spams'. I posted to about half a dozen groups that I thought were appropriate, and BTW, it is valid.


I apologize for calling them 'spams', I'm just used to disregarding anything that I see posted more than once, It's from reading too many newsgroups.

I don't understand the concept of the 'shell' company. Do they do anything? Or are they just a company that holds stock in another company? It just seemed odd to me that you could buy one at a discount and get the other. To me it's kinda like buying a pepsi when you want a coke, only to find that the pepsi is on sale, and is really filled with coke. I guess I didn't word my question very well the first time.


My understanding is that Enstar is what emerged from a bankruptcy reorganization. They plan to buy a business at some point, but in the mean time, it is purely an asset play. BTW, the current management is not the one that was involved with the company's prior difficulties. I know it seems strange that you're getting more than a dollar's worth of value for a dollar, but virtually no one knows about this company. It's too small for institutional ownership and it's traded on the OTC Bulletin Board (they've applied for NASDAQ listing), so it's obscure, to say the least.

It doesn't seem to make sense that some closed-end funds trade at discounts to net asset value, but this happens regularly. Go figure.
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