Hedge Fund Scout Capital Acquires Total Return Swaps on Domino's Pizza ~ market folly

Friday, October 21, 2011

Hedge Fund Scout Capital Acquires Total Return Swaps on Domino's Pizza

James Crichton and Adam Weiss' hedge fund Scout Capital just filed a Form 3 and Form 4 with the SEC regarding their position in Domino's Pizza (DPZ).

On October 18th, Scout acquired various total return swaps with expiration dates of September 6th, 2012 and November 16th, 2012. The conversion/exercise price of these derivatives range from $23.38 to $28.94 and in all these swaps seem to represent over 750,000 shares. DPZ currently trades around $31.40.

The footnotes of the filings also indicate that Scout has now become a 10% owner of Domino's Pizza (DPZ) as a result of the company's buyback program.

For more from this hedge fund, head to Scout's presentation on Williams (WMB) and Sensata Technologies (ST) from the Value Investing Congress.

Per Google Finance, Domino's Pizza is "is a pizza delivery company in the United States. The Company operates its business in three segments: domestic stores, domestic supply chain and international. Its brands include the Domino’s Pizza, Domino’s HeatWave hot bag, Domino’s American Legends pizzas and Domino’s BreadBowl Pasta and Cinna Stix. Domino’s earns its revenue by retail sales at its franchise stores, which generate royalty payments and supply chain revenues to the Company. DPI’s also generates earnings through retail sales at its Company-owned stores."

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