Here’s my updated take on Dimez. I’m just an amateur enthusiast so take it for what it is worth . These are all based on my guesses and interpretation. I’ve had Dimez on my radar for more than a year but never got in because I thought it was too speculative at then price levels. Lucky for me the price dropped recently and based on my dd to the level I think the risk is worth the possible HUGE return. This is unlike a penny stock in terms of investment strategy. First, there is no dilution risk and since the final price is definitive, whether $0 or I guess max at around $3.5 pps fluctuation doesn’t really matter if you plan to hold onto it to the end. PPS does matter on entry so I felt good when I got in on recent dips between .11 and .15. It doesn’t matter to me now if it drops to .01, aside from the lost opportunity to get in at lower, if holding onto the end for a zero or greater pps. I’m awaiting on additional buying opportunity for my last block after which I’ll sit and watch. I did notice the ruling on other concluded winstar cases came about a year after the trial so it should be anytime now.
Thanks “Rollin” for the link to the court and this thread. I looked for cases with similarities and found three: Fifth Third, Cal Fed, and Commercial. The courts have repeatedly warned using expectancy theory, ie lost profit as in the case of Anchor, is pointless, a waste of time, because of its speculative nature on how you estimate lost profits. On the other hand, Fifth Third and Commercial prevailed on their expectancy damages because they demonstrated lost profits with solid evidence. Cal Fed, in my opinion, had similar concrete methodology except they lost; but not because of the lack of validity but they couldn’t establish causation; in other words, they couldn’t prove their damage was related to the breach rather than some other reasons. However, their approach in calculating the damage was sound and acceptable. The point to this is Anchor’s claims in my opinion have the characteristics that appear to be acceptable to the court based on all of my readings of other cases. For example, their profit losses are based on tracking actual performances and market comps rather than some speculative growth formula which others have used unsuccessfully (except Commercial won theirs because they demonstrated their formula made sense given their past income performances). Courts have indicated the need for specific data by which to determine damages and I think Anchor is using this hard data approach which makes their case more compelling. I have to admit initially I wondered why they would continue with the expectancy theory when courts have repeatedly ruled against this approach as well as to opined over and over for plantiffs to not use it. Solid data approach won it for Fifth and Commerical on their lost profit claims.
Anchor’s $970M damage consists of the following components of lost profits: sale of RFC, sale of branches, stock offering, and gross up(to mitigate the effect of income taxes on the damages if awarded). It has to meet the three tests of causation, foreseeabilty, and non-speculative way of estimating the damages. What is really interesting is the recently concluded Fifth Third case is very similar in that they were forced to sell assets due to the breach and then sought and won lost profits. (they did lose one component of their lost damage because of its speculative nature in calculating the damage). Gross up damages follow the type of damages won. Here is a coincidence - the government in the Commercial (or was it Fifth?) case used the exact same argument as in Anchor with respect to the sale of branches related to causation – I mean exactly the same. The rebuttal was fairly simple and I’m sure Anchor will use the same (basically the government claimed the bank sold assets not due to the breach but because they exceeded the regulatory limit on the type of business conducted by these assets).
Based on limited information that can be gleaned from the summary judgment, it seems the branch sales damage has a good chance and if awarded the net will be $120M. The other three are all connected to the outcome of the RFC claim so it’ll be a boom or a bust. I think causation will be proven; foreseeabilty is similar to that of the other three banks so a good chance of prevailing on it. And calculating lost profit will be the key. The government also argued Anchor did not take steps to mitigate their loss of RFC when they regained their capital requirement three years later. So if Anchor concedes on this point and the court awards damages in proportion to these three years and we assume damage is cut in half it would be $150M. These two alone equal $270M and if they get $270M we have a 8x bagger. Add to this NAMCO, and stock offering plus the gross up which would all be gravy. On the other hand, if they get zero which is still a real possibility then this would be a bummer and we can use the warrants as wall paper. The one thing I am wondering about, however, is when the trial concluded a year ago and leaks do happen but there have been no movement good or bad. Everyone involved must be really tight lipped about this. The float is so low on any positive outcome the pps will jump instanteously to its intrinsic value. It’ll be hard to get in. Alternatively, if the outcome is unfavorably it’ll be virtually impossible to bail before it hits zero. I suspect when the verdict is announced, positive or negative, they’ll probably halt trading or instantaneously price it appropriately. This is all my opinion. Do your own DD before investing. Post any thoughts, arguments or corrections to my account above.
