If Gild/Kite/CAR-T goes after PPHM, we'll get a touch of volume. As in 20-30 million volume. The market will go berserk.
I can't believe Ronin's (very accurate) nasty-grams to the old BOD and their bloody threat of a knock-down drag-out proxy fight at the ASM were all for a 2,000 liter stainless steel bio-tank at Avid.
What gives? Something's not adding up here.
Best,
Joe Six Pack
Joe, That would be true - just as Tappan is most certainly not here just for Avid - see their most recent reported holdings below courtesy of CJ - and then take a look at a few paragraphs from an article written in 2013 about the two principals and their investment philosophy.
I particularly like their statement: "We run a concentrated portfolio with a goal of 10-20 long positions, so it is very important that we love everything in the portfolio."
11-13-17/13G: Tappan St. Partners adds 1,616,927sh, now 3,915,611 (8.5% of 45,096,081). Now 3rd largest, behind Ronin and E.Capital(K.Dart). Their +1,616,927 pickup is since 8-14-17; since 6-30-17, they've added +2,259,359.
Emerging Manager Interview Series: Tappan Street Partners - 4/29/13
Over the past few years, I have interviewed a number of emerging hedge fund managers (sub $250 million in assets) across a variety on investing strategies. I meet some of these managers through friends or colleagues and am always fascinated by the investment thought processes each of these capital allocators bring to the table.
About a year ago I was introduced to Prasad Phatak and Chris Koranda of Tappan Street Partners while working through the valuation of an off the run distressed situation. I was immediately impressed by the depth and intelligence they brought to the conversation. After getting to know them, I thought they would be a great subject for our next emerging manager series. Enjoy the fantastic commentary below!
Talk about the background of Tappan Street. How did you guys connect?
[Chris] We’ve known each other now for about 13 years. We were in the same section—actually the same group in many cases—at the Undergraduate Business School at the University of Michigan. Incidentally it’s also the origin of the name Tappan Street Partners: 701 Tappan Street is the address for Michigan’s business school. Basically, for the first few years Prasad and I look the same on paper. We both were undergrads at UofM. Then we both went on to Blackstone, with Prasad in the Restructuring and Reorganization group and me in the M&A group. After that Prasad spent about 6 years at Eton Park in the US Fundamental Long/Short team and I spent a couple years at Perry Capital in the Healthcare group before going on to get my MBA at Stanford. During the course of looking at potential employment opportunities post MBA and finding ideas to pitch during interviews, I was finding so many attractive investment opportunities that might not make sense if you’re running many billions, like our former employers, but are great risk/reward opportunities for smaller amounts of capital and for things that don’t fit into the more rigid silos of other firms. For this reason the competition is just a lot lower in some of the special situations and small and mid-cap companies that we have focused on.
[Prasad] We had always kicked around the idea of starting something together since our time at Blackstone, and discussing some of the investments Chris was finding sparked those discussions again. In my case, I couldn’t act on these opportunities for the fund and my personal investment options were limited given my ongoing employment at a hedge fund. Ultimately, as we thought about launching a fund, we concluded that we could compound our personal savings at very high rates of return and we would also get the benefit of developing an intangible asset in our track record and brand name in the process. 100% of our liquid net worth is in the fund alongside our investors. We view this as a compounding vehicle for our savings over time and are looking to attract like-minded investors that understand our approach. Over the long haul, we view the quality of our LPs as our greatest asset.
Can you talk about your investment process? How does an idea go from being a potential investment to become a portfolio holding?
[Chris] In terms of sourcing ideas we have a pretty heavy focus on special situations and, as a result, we try to take a systematic approach to certain investment opportunities. A few of the things we emphasize: evaluate all spin-offs, all bankruptcies, all post-reorg equities, and all non-traditional securities issued in mergers. These are all categories that frequently experience forced selling and, wherever possible, we’d prefer to buy from a seller that is acting for non-economic reasons. In addition we like to look at asset sales, division shutdowns, and management changes. These sorts of actions are sometimes an indicator that the earnings power of a business is about to change, sometimes substantially. Overall, we think securities in these verticals are more likely to be mispriced due to some combination of non-economic selling and complexity, and thus our return on time / hit rate is likely to be higher as well. While we emphasize special situations, we also have a number of investments that we would deem to be fundamentally sound businesses that don’t fall into the categories above and this was our focus at our past employers. Ultimately, we are doing deep fundamental analysis on special situations, largely because we think our hit rate will be much higher over time.
[Prasad] On the process side, we start every potential investment by first focusing on the downside. In markets that seem to go up every day, we tend to think people become much more relaxed on the risks they are taking. Eventually, having a focus on the downside and not losing money goes a long way if the goal is to compound capital over long periods of time. During the process, we will obviously do the traditional blocking and tackling of reading every piece of public information we can find (Ks, Qs, transcripts, proxies, press, etc.), reading up on competitors and talking to various industry participants. We will come up with base and downside valuations on everything we look at, and both Chris and I will take independent looks at the investments we’re evaluating if it has the potential to be a position greater than 5% of AUM. We think having a second set of eyes on the analysis is valuable and results in better decisions over the long-run. Once we get comfortable that the investment is an attractive return potential for the risk we are taking, we will start to buy (or sell in the case of shorts). After that, we are constantly monitoring our positions and we think every day we should be evaluating new ideas against things that are already in the portfolio. We run a concentrated portfolio with a goal of 10-20 long positions, so it is very important that we love everything in the portfolio. We are looking for “great” ideas and not just “good”. In the absence of great ideas, we’d rather hold cash and wait for the fat pitch.
Tappan emphasizes investments with a clear catalyst in the next 12 to 24 months. . . . . where our thesis will be either proven correct or incorrect.
Joe, Their "love," but more importantly, their confidence, seems to have grown quite dramatically over the past months {since 6-30-17, they've added +2,259,359 shares} as they learned more and more about their investment. I like that.
