Tobias Carlisle: Good line.
Jake Taylor: That’s correct.
Bill Brewster: I mean it really is. And I think shorts got on him for that response because he did take a quick shot at short sellers, but he wasn’t on conference calls going at him. I should have not listened to the part of me that roots for entertainment, and I should have listened to the investing part of me. I mean, thankfully I’m out of the chairs already, but I don’t know.
Tobias Carlisle: Some CEOs are just great sport. Like Musk is great sport. I like Musk personally. I love watching his Twitter fit, and I love watching him go back and forth. I’m not a huge fan of Tesla, but I do like the shenanigans.
Bill Brewster: It’s entertaining. And for a while with Goncalves, I’m sorry if I keep pronouncing it incorrectly, but he was backing up the talk, and I like that a lot, but I don’t know the more that I pay attention-
Tobias Carlisle: But how about the thing where he’s on one hand, he’s issuing shares to buy US steel run.
Bill Brewster: I’m pretty sure it’s US steel.
Tobias Carlisle: And he’s saying on the other hand, they’re too cheap. Someone needs to sit in that book on capital allocation by Jake Taylor.
Bill Brewster: That’s exactly my point. I mean, Jake, you need to call this guy.
Jake Taylor: I think that was the outsiders. That was the one that you were thinking of?
Bill Brewster: No, it was, it was clearly yours.
Tobias Carlisle: Some people need that narrative voice.
Jake Taylor: That’s true. Well, I do wonder… I don’t know. I haven’t looked at the specific financials of either of the companies in quite a while, but what did he get for his giving away part of the company?
Bill Brewster: Yeah. I think that what… It looks like it’s AK steel. But regardless, if you pull up the stock price of AK steel, it is apparently going to be a decent deal for cliffs. He would argue on buying a more undervalued asset than I’m giving up. But if you pull up a longterm chart of any of the US steel makers, which I mean a chart can only tell you so much, but over a long duration, I do think it tells you something. They’re not good businesses.
Tobias Carlisle: Well, this is already beaten up at the moment. I think they ate cheap.
Bill Brewster: well, if you look over a long time, they never really get expense.
Tobias Carlisle: It’s a commodity, product is the problem.
Bill Brewster: That’s right. You’re dealing with all types of stuff. You got China, you’ve got a lot of dumping. I don’t know, it seems to me that he’s muddying the water and it’s a more complicated story and he’s issuing what he deems cheap currency. It doesn’t make a lot of sense to me.
Tobias Carlisle: Could you do with debt?
Bill Brewster: Well, so the problem, and this goes back to the bad business giving difficult decisions. He is building out a huge facility, it’s an HBI facility, and I think that’s going to be roughly a billion dollars. And that’s where a lot of the debt is pledged to that project. If he wants to execute this transaction today, the debt capacity really isn’t in the entity, so you’ve got an issue equity. But maybe that’s the trade off for starting a big project. That is you don’t get to buy another company.
Tobias Carlisle: Right.
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