@observatory, In their books even owning the shares for more than 10 years may not qualify you as a long term investor.

From the historical price/NAV discount chart, it can be clearly shown that the transition from premium to discount started from the Great Financial Crisis well before the buying by COL. It is the discount that attracted value investors like COL, and not the latter's entry causing the discount as alleged by management.

Like they say, a picture is worth a thousand words, so attached is a historical graph and figures tracking the 10-year iCap price changes from listing date on 19/10/2005 to now. This represents what the average shareholder would have gained from the share price change and dividends over any 10-year period, like what John Dough described, going to bed sleeping soundly every night. There are altogether 92 such 10-year holding periods using monthly data, and the average price change is 37.4%. On a CAGR basis, this works out to an average of 3.2% p.a.. I have added a trend line to the graph and this may partly explains the widening price discount – a long term dropping of returns. You can draw your own conclusions. Until the day when the NAV becomes a bankable number, share price and dividends are all an investor can get in terms of cash returns.
https://www.dropbox.com/s/kptv2ol22r2ebf2/iCapital%20share%20price%20performance.xls?dl=0

@ValueInvestor888 Any 'shareowner' who has kept the shares for the past 10 years would have to think very hard his options, continue to keep the shares for another 10 years (in order to qualify as a serious long term investor), sell them at a big discount and walk away, or maybe take a more active interest in his investment instead of just sleeping soundly over it every night.

@observatory Based on the latest voting results, the gap between the two sides is about 10 million shares. This may look like a big number, but only requires 5 million shares switching side, from -5 to +5 = 10 million. Nothing is impossible in this world, who could have imagined that sworn enemies like UMNO and DAP are in bed together now?

@observatory Why must COL be expected to do all the heavy lifting, including incurring legal costs to fight iCap management in court, when the rest of the shareholders do very little to support it? This can be seen from the attached voting numbers from recent AGM, where there were negligible opposing votes from other shareholders besides COL? If people want change, must also do their part
https://www.dropbox.com/s/lckvee0ifv9dhxk/iCap%20voting%20trends.pdf?dl=0

So in COL's case, they have bought the shares and held them for more than 10 years with nothing to show for it after adjusting the costs for dividends received. Local funds dare not enter with no assurance of a profitable exit later on.

@speakup Funds need to mark their quoted investments to market, not NAV, so what is important to them is share price performance, not NAV figures that cannot be cashed in unless the fund is liquidated or reduce the price discount.

For every share traded in the market, there must be a buyer and a seller. So why blame the price drop only on the buyers and not the sellers? The more valid argument should be: the more shares being sold, the lower is the price.

@RealValueInvestor Trying to defend the indefensible is like digging yourself a bigger hole. Like saying the more shares being bought, the lower is the price, when it is just a simple case of having more sellers than buyers. Don't need any fancy conspiracy theories about COL.

@Patient Investor The argument presented can be summarised like this: Existing portfolio > cash > rest of the market (including iCap, which is made up of cash + existing portfolio.) How logical can this be?

You don't need a margin of safety if you just buy back your own stock at 40% discount and cancel it.

@Patient Investor I have laid out in detail the various options and scenarios of COL vs the fund here over the last 2 years, just have to refer back.

@stockraider Berkshire's buyback threshold is not at a discount to book value, but at a premium, and was raised from 1.1 times in 2012 to 1.2 times in 2018. WB uses the intrinsic value of the shares rather than the accounting book value, because lots of investments are carried at historic book value and hence not fully reflected in the books.

TTB himself, putting his money where his mouth is.

@speakup Now we know why the price went up a few sens , guess who was buying, haha.

If holding cash as a free option is such a great idea, then being able to buy cash at a 42% discount (the same discount that the cash portion of iCap's portfolio is valued at) will be an even greater idea? With the same logic that there are no better values in the current market than holding cash, then by implication, the current portfolio is considered better than holding cash, otherwise, they should also be converted into cash. So all the more reason to buy more of the same shares at a great discount? John Dough should have realised by now that the crowd here is quite different from the average Investor Day attendee.

@Nepo Very simple question, is continuing to hold Parkson a better investment than switching to iCap? Why tout iCap is such a great buy at a discount and yet maintains that there is nothing worth buying in the market at the moment, hence the cash pile? At least try to be consistent and not insult the intelligence of the readers here by implying that Parkson is a better buy than iCap.

One more subtle and specific reason for iCap to oppose a share buy back is the threat posed by COL's big shareholding. A buyback reduces the number of voting shares and if COL's holding remains the same, a 10% share buyback increases the effective percentage of COL's block by 10% (not 10 percentage points), which may be critical in the coming proxy war.

A WB Wannabe may need to deviate from the true teachings of WB in desperate times, as when under attack by foreign funds.

Instead of John Dough paraphrasing iCapital, I have also been paraphrasing what ChatGPT said about share buy backs:
Is there a conflict of interest for a closed end fund's manager to reject suggestions for a share buy back at a deep discount on the grounds that it reduces the size of the fund (and hence its fees based on AUM)?
ChatGPT
There is a potential conflict of interest for a closed-end fund's manager when considering suggestions for a share buyback at a deep discount. The conflict arises from the fact that the fund manager's compensation is often tied to the fund's assets under management (AUM), which is influenced by the fund's size.

When a closed-end fund repurchases its own shares through a buyback program, it reduces the number of outstanding shares, effectively decreasing the fund's AUM. As a result, the fund manager's fees, which are typically based on a percentage of AUM, would also be reduced.

In this situation, the fund manager may have conflicting motivations. On one hand, the buyback program could be seen as a way to enhance shareholder value by narrowing the discount between the fund's market price and its net asset value (NAV). On the other hand, the manager may be hesitant to pursue a buyback that reduces the fund's AUM and, subsequently, their compensation.

It's important to note that the fund manager has a fiduciary duty to act in the best interests of the fund's shareholders. If a share buyback is genuinely believed to be in the best interest of the fund and its shareholders, the manager should carefully consider the proposal, taking into account the potential benefits and drawbacks.

Ultimately, the decision should prioritize the long-term performance and value creation for shareholders, rather than solely focusing on the manager's short-term compensation. Shareholders may play a role in holding the fund manager accountable for their decisions and advocating for actions that align with the best interests of the fund's investors.

COL has stopped buying for more than a year now and the discount has continued to widen. So now blame the shareholders for not knowing how good the shares is.

The company has to maintain this absurd narrative that the more COL buys, the further the price will fall, in order to appeal its case, as the other allegation that COL has exceeded the individual share holding limit has been dismissed with costs by both the high court and court of appeal, as well as by the SC initially. Clutching at straw!

One of the arguments used by management against doing a share buyback is that it will reduce the fund size (and the management fee correspondingly) and funds available for future investments. This is only true if the bought back shares are cancelled immediately. But there is the option to just hold them as treasury shares and resell them later back to the market at more favorable prices. This then is no different from holding other shares in the portfolio and if it is such a bargain as touted by management, where is the downside if they truly believe in its merits? At least, the price discount will then also becomes the company's problem and not just the shareholders', an alignment of interests.

Instead of touting the 42% discount, it should be pointed out that buying the shares get more compelling when looked at from the potential upside, turning the current 58 cents to the dollar valuation to par is a potential 72% ROI. Keep this up and the sharks may smell blood in the water. Then it will be just a matter of making up the numbers to make it happen. It is shark bait now.

At the end of the day, the Board of Directors must be prepared to justify to shareholders the legal costs of the injunction action against COL when presenting the bill to the shareholders, or are they going to just bury it in a footnote like what they did to the dual listing multi-million expenses? So if the company wins the suit and stop COL from further buying, the price discount will turn into a premium? This is the impression I have so far.

The only legal obligation for a shareholder who has exceeded the declarable interest threshold, which is 5% substantial shareholder here in Malaysia is to declare all his share transactions henceforth. There has never been a requirement or precedent of having to explain or justify his position or voting, unless in support of resolutions proposed by him to the shareholders.

One of the company's director is chairman of the MSWG. Does he agree that COL has breached the shareholding limit in spite of the court judgments? If so, yes, go ahead and shoot them a show cause letter as suggested above.

"In fact, keen-eyed investors, including the MSWG, should query City of London as to why they buy millions of ICAP shares (even going so far as to breach the regulatory 20% single shareholding limit) and consequently widen ICAP's NAV discount."
Having lost its case against COL with the Securities Commission, High Court and Court of Appeal that it has breached the 20% individual shareholding limit, why is the Company still insisting that there is a breach? Until it can overturn the previous verdicts with appeal to the Federal Court, the legal rulings stand, there is no breach, and any statement to the contrary is non-factual and against the court rulings. A minority ruling in its favor does not alter the verdict. Sure, spending more money on legal fees and appeal by all means, if the board of directors is convinced that it is in the shareholders' best interest to fight against the largest shareholder. It only delays the inevitable.

Having taken COL's buying or the lack of it out of the equation, the discount is an indication of the trust deficit that has been widening along with John Dough's farcical posts.

" Without all this interference, ICAP's share price would have been trading at a nice premium to its NAV by now, just like it did before City of London's persistent purchases." COL has been injuncted from further buying for more than a year now and yet the price discount has continued to widen. Why? Must thank the writer for the comic relief, my toes are laughing!

In the letter to shareholders by UOB giving the rationale for the members' voluntary liquidation of the CEF United International Securities, this is what it said under section 2.2 Benefits of Proposed Members' Voluntary Liquidation:
"Under the proposed members voluntary liquidation, all shareholders will be able to realise their entire investments in the shares.
As at 30 September 2013, the consolidated net assets of the Company stood at aproximately S$297.7million and the Company's consolidated net asset value ("NAV") per share was approximately S$1.49. The shares have been trading on the Singapore Exchange Securities Trading Limited at between S$1.08 to S$1.21 for the 12 months prior to 30 September 2013.
The actual amount available for distribution to shareholders pursuant to the proposed members' voluntary liquidation will vary depending upon the actual realised value of the Company's underlying portfolio of assets, and will be subject to provisions and deductions to be made for all the Company's existing liabilities (including tax liabilities), and costs and expenses to be incurred in connection with the proposed members' voluntary liquidation. The proposed members' voluntary liquidation offers an opportunity to all shareholders to realise their investments in UIS at a price which is closer to the NAV per share"
UIS shares were trading in a price discount range of 18.8% to 27.5% prior to liquidation, no where near where iCap is now, and yet, management felt enough is enough, better to close it down than to confront unhappy shareholders at every AGM and EGM. Management had more than 80% support at the previous AGM, so their position was never threatened, and yet they did the honorable thing for all members.

ChatGPT can write much better than this, instead of sounding like a broken record. Statistics wise, I can count 3 Singapore big bank managed CEFs and one Malaysian one that were self liquidated instead of waiting for the day when they could be trading at a premium again. That's a 4:1 historical odds.

We all know what equities risk premium is. If it is indeed possible to have low risk and high returns, it should then be called risk discount instead, similar to negative good will in accounting. Another of John Dough's myth.

Holding cash is indeed a low risk high returns investment for the fund manager, but there is practically little returns left for the shareholders after management fees and taxes, as shown by the latest quarterly results.

It has been argued by the company that cash is a free call option, which can be used to buy shares at the opportune time. With the same logic, any liquid share in the portfolio also has a free put option, as it can be sold and converted to cash any time as well. There is no rule or law to say that one is better than the other, For those who are not familiar with options, at the money, there is call/put price parity, i.e. the values of both options are the same because there is a 50:50 chance of the share price moving in either direction with the next move, so one bet is as good as the other. In corporate finance, the investment decision is separate from the financing decision. So one only buys a share because it is deemed to be a better investment than what one is presently holding, be it cash or other shares. So if it is going to be better than the shares on hand, just sell some and buy it, what's the problem? If it is worse than the existing portfolio, why want to buy it in the first place?

i3Investor should charge John Dough for blatant advertising. If iCapital feels so strongly about iCapital.biz, put your money where your mouth is and do a share buyback. Otherwise, money talks and bullshit walks.

I am not saying it is an impossible task. Just look at PH, can move from being in the opposition to now in government with 2/3 majority in one election. Just requires present management to continue doing nothing about the discount except blaming the shareholders, until there is no alternative (TINA) but to vote for change. Also, for John Dough to continue posting to hasten the process of self-revelations.
The minority judgment in the Court of Appeal hearing is on the basis of lifting the corporate veil in the case of the same shareholders accumulating more than the permitted shares using different nominees. Here, it was never alleged that the various funds managed by COL belong to the same owners, so it is not relevant.

@stockraider These are the options: 1. Wait for the company to call a vote on the continuation of the fund, which is scheduled for the 2025 AGM. If this is passed (simple majority), the fund will continue for another 5 years. If rejected, the company will propose a special resolution (75% majority required) to wind up the fund. As I have mentioned before, there will be a no man's land situation if this winding up resolution fails. The company is supposed to be discontinued, but cannot be liquidated. Option 2 - without waiting for the 2025 AGM, any party or parties holding more than 10% votes can call for an EGM to vote on the special resolution to wind up the company, again 75% vote is required. So think carefully whether you can achieve the 75% threshold (of those present and voting, not of the total capital) to achieve your objective. I think this is what is holding back the vulture funds, in spite of the deep discount. They don't want to end up like COL, trapped with a big position and unable to exit one way or another.

Given that Berkshire shares has a 1.6% weighting in the S&P500 index, and is No. 7 in market cap, it is impossible for it not to be owned by all the index funds tracking the US markets. Bearing in mind that Index funds have now overtaken active funds in US, it is impossible for funds not to be major holders of the shares. The latest filings are here https://fintel.io/so/us/brk.a

When an INED cum chairman of the BOD resigns citing differences in opinions (whether with other members of the board or management), he is duty bound by the listing rules to bring such matters to the attention of the shareholders, if these are important enough for him to resign. This is what fiduciary duty is all about. Nowadays, when it comes to reprimanding or fining listed companies for breaching listing rules, Bursa makes no distinction between executive and non-executive directors, making the latter equally liable. Ignorance is no excuse.

@speakup Local funds have no stomach to get into a messy drawn out court case with someone who will fight tooth and nail over such a move, which is an existential threat.

@tantengbear This is the same kind of logic with low risk and high returns investment, against conventional wisdom. If there is such a thing and there is no barrier to entry, arbitrageurs can sell their high risk and low returns investment and switch to this low risk high return one, bringing things back to equilibrium on the risk/returns CAPM line.

The equivalent of a run on a bank is the rush for redemptions in an investment fund, if it is open ended. But for a CEF, there is no redemption as such, so the only exit is to dump shares through the market at whatever price available, which is what is happening to iCap's price discount. Stopping the only big buyer there is is going to make it worse. Directors buying a few lots here and there are not going to restore confidence. Quoting WB is one thing, doing the same as him is another. WB is paying himself only $100K a year, so he is on the same page as his investors.

Anecdotal evidence would suggest that the injunction is the cause for the widening of the discount, ceteris paribus.

ICap obtained an interim injunction against COL buying further shares on 21/12/21 with share price at 2.24 and NAV at 3.46 at end of December 2021, for a price/NAV of 0.65. At end of February this year, share price dropped to 1.98, with NAV slightly down at 3.43, for a price/NAV of 0.58. So without COL doing any thing, price discount widened another 7 percentage points. Got to find another bogey man then, don't you think?

What WB said on share buybacks this year https://www.ft.com/content/97b87555-3b1a-408d-90c4-21cb45afecb9

Looks like management fees are higher than investors' returns! Any statistics on AUM over the years? This is not a CEF, so investors can come in or leave any time, at the buy/sell spread.

Using your same logic, if COL can continue to buy after disposal of the court case, the price discount is going to get worse, you are then frightening the shareholders to sell their shares before price drop further. Who to blame then?

@Integrity how many shareholders can be lucky enough to have generous uncles like you? How many can afford to bail out and leave around $1.40 on the table through no fault of their own, but blame it on other shareholders who continue to sell at such deep discounts? The latter are the root cause. There is no short selling allowed on this stock, so all the sellers are genuine, not trying to depress the share price to make money.