Case Study: Geoff’s Investment in Bancinsurance – Both His Letters to the Board of Directors
In an earlier post about Bancinsurance (BCIS), I answered a reader’s email that asked:
I came across your Barnes and Noble write up on GuruFocus. I noticed in the comments section you mentioned two letters you sent to the board of directors of an insurance company you owned. Would I be able to get those off of you?
I’m not showing you these letters because they influenced the board. They didn’t. The CEO first offered $6 a share. The board finally agreed to $8.50. I had nothing to do with that.
I’m showing you these letters, because readers ask about my own investments. What kind of stocks do I pick? And how do I value them? These 2 letters give you an idea.
Obviously: they were written for a specific audience.
So – yes – I went out of my way to use conservative estimates of Bancinsurance’s value in these letters. I asked the board to reject any offer less than book value. Does that mean I thought Bancinsurance was worth book value?
I thought Bancinsurance was worth more than book value. Still do. And – in private – I would’ve told you that. I talked about book value in the letters, because I was asking for something. I wasn’t being rational. I was being reasonable.
I only owned 0.5% of Bancinsurance. As I said in an earlier post: I would’ve liked to own a lot more. I didn’t have the time and volume I needed to get the shares I wanted. That’s life.
I wasn’t a big shareholder. The board didn’t care what I wrote.
They eventually settled on an arbitrary number: $8.50. Book value had risen to $9.50. There’s no logical reason for the $8.50 a share number. They outline reasons in the going private transaction report. None of them are logical.
Here are my letters to the Bancinsurance board of directors. The first letter was sent in April and argues against the CEO’s original $6 a share offer. The second letter was sent in July and argues against the CEO’s raised $7.25 a share offer. The board later agreed to the CEO’s re-raised $8.50 offer.