What We're Reading ~ 4/27/16

Second level thinking: what smart people use to outperform [Farnam Street]

Consumption in China is resilient, despite troubled economy [Economist]

What if China already had a hard landing? [FT Alphaville]

Baidu - a hidden gem [Variant Views]

A look at Expeditors International [Rational Walk]

The curious case of Hercules Offshore [Oozing Alpha]

A subprime boom, insane interest rates, predatory lending: sound familiar? [Motherjones]

Luck meets perseverance: the creation of IBM's competitive advantage [Farnam Street]

A look at India's e-commerce market through Flipkart [Founding Fuel]

The extinction invention [MIT Technology Review]

Learning Larry Page's Alphabet [Fast Company]

The case for investing in Latin America [Bloomberg]

The affordability crisis: what happens when millennials can't afford homes? [Apartment List]

More than 40% of student borrowers aren't making payments [WSJ]

47% of Americans can't come up with $400 in an emergency [The Atlantic]

Will driverless cars mean the end of auto insurance? [CSMonitor]

Inside the fall of SunEdison [WSJ]

Lessons from SunEdison's collapse [BaseHitInvesting]

Facebook wants to be the layer between you and the future [Buzzfeed]

Inside Apple's secretive iPhone factory [Bloomberg]

Ken Griffin's Citadel Boosts Cypress Semiconductor & Hercules Offshore Stakes

Ken Griffin's investment firm Citadel has filed two 13G's with the SEC regarding its positions in Cypress Semiconductor (CY) and Hercules Offshore (HERO).

Cypress Semi

Their 13G filing indicates that Citadel owns a 5.21% stake in the company with 7,941,732 shares.  This marks a 42% increase in their position size since the end of March.  The filing was made due to activity on June 12th.  At the end of March, Citadel also owned various puts and calls on the name as well.

Per Google Finance, Cypress Semiconductor is "delivers high-performance, mixed-signal and programmable solutions. The Company operates in four segments: Consumer and Computation Division, Data Communications Division, Memory Products Division, and Emerging Technologies and Other.

The Company’s offerings include the flagship Programmable System-on-Chip (PSoC) families and derivatives, such as CapSense touch sensing and TrueTouch solutions for touchscreens. The Company is engaged in universal serial bus (USB) controllers, including the West Bridge solution that enhances connectivity and performance in multimedia handsets. In addition the Company operates in static random access memories (SRAMs) memory market and programmable timing devices. It serves markets, including consumer, mobile handsets, computation, data communications, automotive, industrial and military."


Hercules Offshore

Per the filing, Citadel has revealed a 5.08% ownership stake in the company with just over 8 million shares.  This marks around a 15% increase in their position size since the end of March.

It's also worth noting that in Citadel's most recent 13F (detailing positions as of March 31st), they disclosed ownership of various puts and calls on HERO as well.  Citadel's most recent disclosure was made due to portfolio activity on June 12th.

Per Google Finance, Hercules Offshore is "provides shallow-water drilling and marine services to the oil and natural gas exploration and production industry globally. It provides these services to national oil and gas companies, integrated energy companies and independent oil and natural gas operators."


You can view additional recent portfolio activity from Citadel here.

Mark Rachesky's MHR Fund Management Goes Activist on Seahawk Drilling (HAWK)

Mark Rachesky's MHR Fund Management has filed an activist 13D with the SEC regarding shares of Seahawk Drilling (HAWKQ). The filing, reflecting portfolio activity on February 16th, indicates MHR has disclosed a 9.8% ownership stake in HAWKQ with 1,173,513 shares. This is not a new position as MHR held the same amount of shares at 2010 year-end.

HAWKQ Selling Assets to Hercules Offshore (HERO)

Rachesky's firm seems to take issue with the debtors of HAWKQ who have fast-tracked a proposed sale transaction with Hercules Offshore (HERO). The proposed sale would result in the debtors receiving $25 million in cash and 22.3 million shares of Hercules common stock in exchange for the sale of substantially all of its assets.

Going Activist: Formation of Equity Committee

MHR has filed in conjunction with Andalusian Capital Partners, FISBC Global Asset Management, and Mercer Park. We'd also point out that Kyle Bass' Hayman Capital disclosed a 8.4% stake in HAWK in a separate and unrelated filing.

Per various exhibits filed with MHR's 13D, we see that they've been granted appointment of an equity committee to secure independent representation for public shareholders "at this crucial stage of these Chapter 11 proceedings, while the Debtors are attempting to fast-track a DIP motion and prearranged sale that equity has not had adequate time to review."

Fund Manager Background

So, we'll have to see what Rachesky has up his sleeve in this regard since his committee formation was granted. Rachesky, prior to founding MHR was a senior investment officer and managing director for Carl Icahn. Needless to say, he's got plenty of experience in the activist realm.

Rachesky earned his B.S. in molecular aspects of cancer from the University of Pennsylvania and an M.D. from Stanford University School of Medicine. Additionally, he earned an MBA from the Stanford Graduate School of Business; the man is a degree-earning machine.

Per Google Finance, Seahawk Drilling was spun-off from Pride International and "operates a jackup rig business that provides contract drilling services to the oil and natural gas exploration and production industry in the Gulf of Mexico."

Be sure to stay up to date with the latest hedge fund filings with our free daily site updates via email or also via RSS reader.

Kyle Bass Buys Seahawk Drilling (HAWK)

Kyle Bass' hedge fund firm Hayman Capital has disclosed an 8.4% ownership stake in Seahawk Drilling (HAWK) with 1,000,000 shares. Hayman filed this information via a 13G with the SEC per portfolio activity on February 15th, 2011. This is a new equity position as they did not own equity as of December 31st, 2010.

We've covered Bass on the site before, but if you're unfamiliar with him, he has gained notoriety over the years due to his prediction of not one, but two 'bubbles.' First, he predicted and profited from the subprime crisis. Second, he was one of the first to call for sovereign defaults and that thesis has gained steam over the past year. For our prior coverage on this hedge fund manager, check out Bass' presentation at the Value Investing Congress.

His position in HAWK is intriguing because the company just agreed to an asset purchase with Hercules Offshore (HERO). HERO is buying 20 jackup rigs and related assets from HAWK for $25 million and 22.3 million shares of HERO. This cash infusion will be used to pay HAWK's debtor-in-possession (DIP) loan which the company secured in connection with its bankruptcy. You can head to the Special Situations Monitor for an analytical look at the situation here.

Also, Hercules Offshore is up big today after receiving an upgrade from Credit Suisse. They highlight that HERO is just around the corner from covenant relief.

Per Google Finance, Seahawk Drilling "operates a jackup rig business that provides contract drilling services to the oil and natural gas exploration and production industry in the Gulf of Mexico."