• The TUGBBS forums are completely free and open to the public and exist as the absolute best place for owners to get help and advice about their timeshares for more than 30 years!

    Join Tens of Thousands of other Owners just like you here to get any and all Timeshare questions answered 24 hours a day!
  • TUG started 30 years ago in October 1993 as a group of regular Timeshare owners just like you!

    Read about our 30th anniversary: Happy 30th Birthday TUG!
  • TUG has a YouTube Channel to produce weekly short informative videos on popular Timeshare topics!

    Free memberships for every 50 subscribers!

    Visit TUG on Youtube!
  • TUG has now saved timeshare owners more than $21,000,000 dollars just by finding us in time to rescind a new Timeshare purchase! A truly incredible milestone!

    Read more here: TUG saves owners more than $21 Million dollars
  • Sign up to get the TUG Newsletter for free!

    60,000+ subscribing owners! A weekly recap of the best Timeshare resort reviews and the most popular topics discussed by owners!
  • Our official "end my sales presentation early" T-shirts are available again! Also come with the option for a free membership extension with purchase to offset the cost!

    All T-shirt options here!
  • A few of the most common links here on the forums for newbies and guests!

Hedge Funds unhappy with DRI, Inc.

nuwermj

TUG Member
Joined
Aug 28, 2013
Messages
616
Reaction score
302
Points
273
Location
Potsdam, NY
GREENWICH, Conn., Oct. 21, 2015 /PRNewswire/ -- FrontFour Capital Group LLC and ADW Capital Partners L.P., significant shareholders of Diamond Resorts International, Inc. (NYSE: DRII), announced today that they have delivered a letter to the President and CEO of Diamond Resorts International to express their frustrations with the Company's underperformance, despite commendable execution by the management team, and to request that the Board of Directors explore available strategic alternatives, including a sale of the Company, in order to unlock shareholder value.

Here is the letter.
http://www.prnewswire.com/news-rele...-diamond-resorts-international-300163626.html

Are there any financial experts here that can interpret this for us?
 

nightnurse613

TUG Review Crew: Expert
TUG Member
Joined
Jun 6, 2005
Messages
2,088
Reaction score
55
Points
408
Location
Phoenix, AZ
The only interest to me is the proposed $50M repurchase of inventory!!:clap:
 

Ty1on

TUG Review Crew: Veteran
TUG Member
Joined
Jun 10, 2015
Messages
5,127
Reaction score
1,958
Points
348
nuwermj said:
Are there any financial experts here that can interpret this for us?

I wouldn't classify myself as a financial expert, but I read the letter, and here is what I get.

DRI's key indicators are very strong and indicative of a stock valuation that is higher than it currently is. The reason for this undervaluation, in the investors' minds, is other investors that are shorting the value of the stock because of fears of the direction in which the industry as a whole is going. They specifically list inventory buyback, the asset-light model, and perceptions of industry lending practices as catalysts of the short-selling.

What they are saying is, "Hey, you guys have done a great job, and we recognize that the value of our corporation is greater than the market realizes. Let's take this company private while the stock price is low, giving us and other investors the opportunity to roll our public stock ownership, at current market value, into private equity, before others figure out the value and start bidding up the stock price."

A consequence of simply writing and publishing this letter, whether or not is was the intent, is that you may see stock price increases as other investors either take a closer look at the company's financials, or simply take their word for it and jump in while they can. Corporations and investors sometimes promulgate news releases for the sole purpose of manipulating the market.
 
Last edited:

nuwermj

TUG Member
Joined
Aug 28, 2013
Messages
616
Reaction score
302
Points
273
Location
Potsdam, NY
They specifically list inventory buyback, the asset-light model, ... as catalysts of the short-selling.

I wonder why these short sellers don't like the capital-light model. In another thread Steve Nelson (T_R_Oglodyte) asks "why more companies aren't doing the same thing"; "Why pay good money to buy/build inventory when you can get it for nothing."
[*] And I agree him. Bluegreen has also adopted a capital-light strategy (similar too, but exactly the same as DRI's). DRI's capital-light model seems like a good strategy to me. So I wonder why the short sellers have reservations?

[*] http://tugbbs.com/forums/showpost.php?p=1807710&postcount=11
 
Last edited:

Ty1on

TUG Review Crew: Veteran
TUG Member
Joined
Jun 10, 2015
Messages
5,127
Reaction score
1,958
Points
348
I wonder why these short sellers don't like the capital-light model. In another thread Steve Nelson (T_R_Oglodyte) asks "why more companies aren't doing the same thing"; "Why pay good money to buy/build inventory when you can get it for nothing."
[*] And I agree him. Bluegreen has also adopted a capital-light strategy (similar too, but exactly the same as DRI's). DRI's capital-light model seems like a good strategy to me. So I wonder why the short sellers have reservations?

[*] http://tugbbs.com/forums/showpost.php?p=1807710&postcount=11

Capital Light isn't the same thing as deedback acceptance. In the Capital Light model, the company "buys" a condo project from a separate developer. But instead of paying them for the project lump sum, they buy units in phases as they sell. This way, the timeshare company doesn't have to carry the inventory it isn't ready to actively sell, and is able to narrow the gap between paying the capital cost of the development and realization of sales proceeds (through deposits and securitization). I think the downside of this is that the company has no control over the design and "visual branding" of the resort, and that there is slightly less long run profit (The project developer, after all, has to see enough of the profit to carry the capital itself).
 

nuwermj

TUG Member
Joined
Aug 28, 2013
Messages
616
Reaction score
302
Points
273
Location
Potsdam, NY
Yes, Bluegreen is doing this (buying units in phases as they sell) but I am not aware of any resort at which DRI operated this way. They will buy units in phases from a separate developer at the newly announced Kona property, but that hasn't even broken ground yet. Do you know what other location DRI has purchased in phases from a separate developer?

Regardless. DRI does call the voluntary surrender program and the defaulted-owner recovery program "Capital Efficient." Attached is a slide shown to share holders that illustrates the usage. Maybe capital efficient and capital light are not the same thing. I confess that I have used the terms interchangeably.

Thanks for your feedback.

open


https://drive.google.com/open?id=0BzHfVJaaWOsmMHJvUEl1Y1FzX0k
 

Ty1on

TUG Review Crew: Veteran
TUG Member
Joined
Jun 10, 2015
Messages
5,127
Reaction score
1,958
Points
348
Yes, Bluegreen is doing this (buying units in phases as they sell) but I am not aware of any resort at which DRI operated this way. They will buy units in phases from a separate developer at the newly announced Kona property, but that hasn't even broken ground yet. Do you know what other location DRI has purchased in phases from a separate developer?

Regardless. DRI does call the voluntary surrender program and the defaulted-owner recovery program "Capital Efficient." Attached is a slide shown to share holders that illustrates the usage. Maybe capital efficient and capital light are not the same thing. I confess that I have used the terms interchangeably.

Thanks for your feedback.

open


https://drive.google.com/open?id=0BzHfVJaaWOsmMHJvUEl1Y1FzX0k

Yep, capital efficient, but capital-light is a specific financial term.
 

raygo123

TUG Member
Joined
May 15, 2011
Messages
2,068
Reaction score
259
Points
293
Location
twinsburg ohio
Yep, capital efficient, but capital-light is a specific financial term.
I understand cap light, it seems somewhat contrary to repurchase inventory. Is this their buyback program pennies on the dollar? And is this their cost, or realized profit potential?

Sent from my Nexus 7 using Tapatalk
 

Ty1on

TUG Review Crew: Veteran
TUG Member
Joined
Jun 10, 2015
Messages
5,127
Reaction score
1,958
Points
348
I understand cap light, it seems somewhat contrary to repurchase inventory. Is this their buyback program pennies on the dollar? And is this their cost, or realized profit potential?

Sent from my Nexus 7 using Tapatalk

Repurchase works perfectly with Cap Light. The idea is minimizing product cost to maximize margin. Also, with Cap Light, remember that you can schedule to forego paying for units until you need them. Thus, a glut of repurchases, the company isn't stuck with the cost of newly built inventory at the same time.
 

nuwermj

TUG Member
Joined
Aug 28, 2013
Messages
616
Reaction score
302
Points
273
Location
Potsdam, NY
Yep, capital efficient, but capital-light is a specific financial term.

In that case DRI does not employ a "capital-light" strategy. Again, other then the new Kona location, there is no resort in the DRI network that fits the definition.
 

raygo123

TUG Member
Joined
May 15, 2011
Messages
2,068
Reaction score
259
Points
293
Location
twinsburg ohio
So, as part of the inventory repurchase $50 million, is the kona property part of that, or just buy backs?

Sent from my Nexus 7 using Tapatalk
 

Ty1on

TUG Review Crew: Veteran
TUG Member
Joined
Jun 10, 2015
Messages
5,127
Reaction score
1,958
Points
348
So, as part of the inventory repurchase $50 million, is the kona property part of that, or just buy backs?

Sent from my Nexus 7 using Tapatalk

No, the repurchase budget they suggested would presumably be for buybacks only. An Asset Light new project would be new purchases.

$50M is a lot of buyback money when you are charging owners to give deeds back to you LOL
 

raygo123

TUG Member
Joined
May 15, 2011
Messages
2,068
Reaction score
259
Points
293
Location
twinsburg ohio
That's my point, but was not sure, that has to be a projected revenue gain. Smoke and mirrors huh?

Sent from my Nexus 7 using Tapatalk
 

Ty1on

TUG Review Crew: Veteran
TUG Member
Joined
Jun 10, 2015
Messages
5,127
Reaction score
1,958
Points
348
That's my point, but was not sure, that has to be a projected revenue gain. Smoke and mirrors huh?

Sent from my Nexus 7 using Tapatalk

It could be the expense of administrating the buyback program (over and above the fee they charge) and sales commissions on reselling them. I'd love to see the details of their plan. Also, assuming not every DRI deed is worthless, they could also be shill buying them via EBay and other resources.
 

raygo123

TUG Member
Joined
May 15, 2011
Messages
2,068
Reaction score
259
Points
293
Location
twinsburg ohio
Zack has a #1 buy rating on DRII. So must have some credibility. That's amazing considering the sector. Buy in hopes of short squeeze. 44% of float is short

Sent from my Nexus 7 using Tapatalk
 
Last edited:

nuwermj

TUG Member
Joined
Aug 28, 2013
Messages
616
Reaction score
302
Points
273
Location
Potsdam, NY
$50M is a lot of buyback money when you are charging owners to give deeds back to you LOL


Diamond will be paying maintenance fees on those intervals/points until they are sold. This, according to Diamond, is the biggest cost of the voluntary surrendering of points.
 

Ty1on

TUG Review Crew: Veteran
TUG Member
Joined
Jun 10, 2015
Messages
5,127
Reaction score
1,958
Points
348
Diamond will be paying maintenance fees on those intervals/points until they are sold. This, according to Diamond, is the biggest cost of the voluntary surrendering of points.

Very good information...
 

T-Dot-Traveller

TUG Member
Joined
Jun 10, 2015
Messages
4,682
Reaction score
3,642
Points
348
Location
Canada
Resorts Owned
Mayan Palace Regency
Taranova
DRI - stock price & hedge fund owners

I love reading info like this - bet you my wife won't care .

Thank you all for the analysis & tea leaf reading .
 

nuwermj

TUG Member
Joined
Aug 28, 2013
Messages
616
Reaction score
302
Points
273
Location
Potsdam, NY
Capital Light isn't the same thing as deedback acceptance.

For what It's worth (I'm primarily trying to learn how timeshare systems work) ...

Bluegreen seems to consider inventory recovery programs part of their "Capital Light" strategy. This is from Bluegreen's parent, BFC Financial Corp.'s 10-K for 2014 (p. 95).

"Bluegreen’s capital-light business strategy also includes Secondary Market Sales pursuant to which Bluegreen enters into secondary market arrangements with certain resort POAs [Property Owner Association] and others on a non-committed basis, which allows Bluegreen to acquire VOIs [Vacation Ownership Interests] generally at a significant discount as such VOIs are typically obtained by the POAs through foreclosure in connection with maintenance fee defaults."
 

raygo123

TUG Member
Joined
May 15, 2011
Messages
2,068
Reaction score
259
Points
293
Location
twinsburg ohio
For what It's worth (I'm primarily trying to learn how timeshare systems work) ...

Bluegreen seems to consider inventory recovery programs part of their "Capital Light" strategy. This is from Bluegreen's parent, BFC Financial Corp.'s 10-K for 2014 (p. 95).

"Bluegreen’s capital-light business strategy also includes Secondary Market Sales pursuant to which Bluegreen enters into secondary market arrangements with certain resort POAs [Property Owner Association] and others on a non-committed basis, which allows Bluegreen to acquire VOIs [Vacation Ownership Interests] generally at a significant discount as such VOIs are typically obtained by the POAs through foreclosure in connection with maintenance fee defaults."
I believe Wyndham also is going at it with OVATION.
Buy low sell high, simple. I know the capital light, but this is a first, I ever heard it applied.

Sent from my Nexus 7 using Tapatalk
 

Ty1on

TUG Review Crew: Veteran
TUG Member
Joined
Jun 10, 2015
Messages
5,127
Reaction score
1,958
Points
348
For what It's worth (I'm primarily trying to learn how timeshare systems work) ...

Bluegreen seems to consider inventory recovery programs part of their "Capital Light" strategy. This is from Bluegreen's parent, BFC Financial Corp.'s 10-K for 2014 (p. 95).

"Bluegreen’s capital-light business strategy also includes Secondary Market Sales pursuant to which Bluegreen enters into secondary market arrangements with certain resort POAs [Property Owner Association] and others on a non-committed basis, which allows Bluegreen to acquire VOIs [Vacation Ownership Interests] generally at a significant discount as such VOIs are typically obtained by the POAs through foreclosure in connection with maintenance fee defaults."

They probably do consider recovery as part of their cap-light program, but your excerpt pertains to their buying intervals in non-Bluegreen resorts and including them in Bluegreen inventory.
 

raygo123

TUG Member
Joined
May 15, 2011
Messages
2,068
Reaction score
259
Points
293
Location
twinsburg ohio
More consolidating, Wyndham is more of a management provider, also finish out development. More a Kazan approach.

Sent from my Nexus 7 using Tapatalk
 

nuwermj

TUG Member
Joined
Aug 28, 2013
Messages
616
Reaction score
302
Points
273
Location
Potsdam, NY
They probably do consider recovery as part of their cap-light program, but your excerpt pertains to their buying intervals in non-Bluegreen resorts and including them in Bluegreen inventory.

What makes you think this? If they were non-bluegreen resorts then the intervals would be added to Bluegreen's Vacation Club. That hasn't happened. Where are the deeds going when Bluegreen sells them?
 

raygo123

TUG Member
Joined
May 15, 2011
Messages
2,068
Reaction score
259
Points
293
Location
twinsburg ohio
What makes you think this? If they were non-bluegreen resorts then the intervals would be added to Bluegreen's Vacation Club. That hasn't happened. Where are the deeds going when Bluegreen sells them?
I thought the same thing. They would not have to negotiate with themselves.

Sent from my Nexus 7 using Tapatalk
 

raygo123

TUG Member
Joined
May 15, 2011
Messages
2,068
Reaction score
259
Points
293
Location
twinsburg ohio
What makes you think this? If they were non-bluegreen resorts then the intervals would be added to Bluegreen's Vacation Club. That hasn't happened. Where are the deeds going when Bluegreen sells them?
I thought the same thing. They would not have to negotiate with themselves.

Sent from my Nexus 7 using Tapatalk
 
Top