Post # of 280933
GOD BLESS NATE THOMA!
Walrath's using his objection as a device to find the true valuation of the reoganized company ... and not merely to investigate the existence of insider trading.
I have been guilty of placing too much 'hope' on SG uncovering proof of insider trading. And even if some plausible case for it could be made I really didn't believe that Walrath would do too much more than impose FJR, and that would only get us $0.07B.
But on this very slow day I decided to crawl back through the Feb. 8th transcript to see if I could discern any information that my earlier two ‘quick-reads’ didn’t uncover. I think I may have hit pay-dirt.
After the lawyers for the hedge funds realized that Walrath was going to, in fact, grant EC discovery of Thoma’s allegations, they sought to limit the scope of that discovery to matters pertaining to insider trading (which seems, on its face, reasonable; afterall, that’s what Thoma’s objection was all about) -- however, at the bottom of Page 61 of the transcript something VERY interesting took place. Something that CLEARLY lets us know where the judge is going on May 2nd, and something that sent the hedge fund lawyer into a blithering tail-spin.
Walthrath immediately rejects the limitation that the discovery should be confined to trading) and says the following:
”No. But that [i.e. discovery that relates to issues involving what the hedge funds valuations of WMI and its affiliates were] may bear on the issue of whether or not – what the true valuation of the reorganized debtor is. That’s a relevant issue still open.”In other words, she doesn’t think that there’s yet been a “true valuation of the reorganized company, and she suspects that the hedge funds possess that desired information.
The lawyer to whom she had been speaking then appears to be stunned by her words:
23 MR. HARRIS: I -- Your Honor, I understand that but I
24 beg to differ on whether an investor's particular view of that
25 actually bears on -- what we think it's worth bears on [this should read “or]
1 necessarily what the Court determines it's worth or what
2 bankers say it's worth of other things. We may have a very
3 different view as we have throughout this case, Your Honor, of
4 what the securities and -- the existing securities and the
5 post-reorganization securities this company may be worth.
6 Sometimes we were right; sometimes we were wrong. We're not
7 always right as the Court well knows.
8 THE COURT: Yes.
A couple of weeks ago, I thought it strange when, in SG’s objection, it noted that they had received, through discovery, multiple indications of buyer interest in the reorganized company. Clearly, they obtained that information from the hedge funds, who, in discussions with those interested buyers, have no doubt tossed around numbers … all of which would move us closer to what Walrath was concerned with seeing … “a true valuation”. Walrath's going to use those numbers, obtained from the hedge funds, AGAINST the hedgefunds to arrive at a base number, then use the $17.8B in NOLs to extrapolate into a true value.
And it was Nate's objection that permitted this investigation OF TRUE VALUE to commence.