Professionally, I’ve had worse days than yesterday…. but it’s hard to remember many! I am, of course, referring to yesterday’s block of the Jetblue-Spirit merger. I was very, very public in my opinion of the deal: I thought the Jetblue case was substantially better than the government’s (and better argued!), and the deal could / should / would be approved. That public stance included no fewer than four podcasts (
Thank you Andrew for doing your post-mortem so quickly. Your honesty is refreshing and trust-building. For me, this trade hurt. I put a lot of time into reading the papers, and became personally invested not only in making money but in seeing the system reach the "right" result. Putting SAVE in the rear view mirror is taking some time. Reading your thoughts has been helpful.
1) anyone still in SAVE needs to revisit the balance sheet, I traded in and out of their 8% IP bonds profitably and their present quote should trouble anyone long the equity; and
2) the judge’s trite little quote may not be judged kindly in hindsight if SAVE goes BK.
Andrew, reflecting back on the process, I do have two observations, based on my impressions from your work and the X-scope: eyes and ears in the courtroom in general came away with a 50/50 sense of the outcome, and reports from the final day suggested the majority in attendance were leaning toward DOJ. Even Lionel, attending the summary hearing, came away less certain of the outcome. Some of Judge Young's comments, as relayed second hand, even suggested he was getting on board with the DOJ perspective, expressing interest in the welfare of LES families who might be stranded by loss of access to their ULCC. While this was explained as "kicking the tires," it might have been more clear to those present that he was "drinking the Kool Aid."
Second, perhaps apply Bayes theorem...I imaging you already do. Pre-test probability of a DOJ favorable outcome in Federal court, if I recall correctly, is historically 80% (home team advantage); adjusted by sense from the courtroom (call it 50/50), then further adjusted by document review (which seemed extremely compelling in this case, although sadly not to Judge Young).
"when you have a big loser is step back and ask, “did I do something wrong? Was this bad process, or bad outcome?”"
This is exactly the way to do it. If investing was easy, everybody would do it successfully. There are always big losses over time, I've had plenty of those, but it's part of the game. All you can do is learn and keep you eye on process and the long-term.
I don't know the details. As someone who was appalled reading some of the cases throughout law school, my $0.02 is: Sometimes the Court knows what result it wants, and will twist and contort however it needs to get to that conclusion. When I combine this with taking Matt Stoller at his word when he says the worm has turned re: anti-trust litigation, I would foresee the Court making its contortions to make the agenda happen.
As a practicing attorney, I believe you are entirely correct accept I would substitute the word "oftentimes" for "Sometimes". Having practiced before Judge Young before, I had thought him predisposed to see the heavy handed regulator as overstepping its mandate by picking winning businesses as opposed to simply preventing monopoly power. I read the man wrong.
I believe that the break-up fee has already been paid to Spirit shareholders via a $2.22 dividend in October of 2022 and in 12 separate $0.10 dividends paid monthly since January of 2023. I wouldn't count any additional payments into a current investment thesis.
Hard to say. The nature of the trade has changed. Now we have to value spirit as a stand-alone entity, with a break up fee, potential engine issue, debt maturity. The merger is now an optionality in the share price.
Phenomenal post-mort. I wrote a small Twitter thread today tagging you in which I used the term "echo chamber" in analyzing the contributing factors to violating my own risk tolerances. I hope that didn't come across as derogatory to your work, certainly wasn't the intent of my musings. Probably a poor choice of words, wrong connotation vs what my post was meant to convey. I was simply exploring the multitude of concepts on this merger arb that enticed me to oversize relative to my own expertise (or lack therof) etc. vs what I have historically been willing to do.
I recognized your work as high quality, thorough, and earnest. Still do. Made my own choices, was long before I devoured yours and others content, and drew many extremely similar conclusions as you after reading filings myself. I'm certain I would've had virtually identical view of trial odds even if I didn't listen to your and guests coverage.
Pay no heed to the grave dancers. If you get 10 of these in your lifetime, put in the same work, etc. the good side of karma will find you more often than not. Paper champions be damned friend.
Fwiw I am far from convinced you assigned improper odds despite ultimate outcome. We are baffled about similar of judges takeaways.
At any rate, best of luck in future. Strikes me as extremely likely you'll do well in one form or another given willingness to do some intellectually and emotionally challenging introspection after a tough loss. Not a common trait in life.
The whole thing smells. If this was a Republican administration, this would have never made it to court in the first place given all the mega airline mergers of the past. Also, the way this judge ruled makes me think a few things. One, something outside of the court influen$ed him or JetBlue played chess and did this on purpose to sink a direct competitor. If Hayes got Spirit, it was a win but if he bankrupted them and see them liquidated, even a bigger win.
The whole thing smells. If this was a Republican administration, this would have never made it to court in the first place given all the mega airline mergers of the past. Also, the way this judge ruled makes me think a few things. One, something outside of the court influen$ed him or JetBlue played chess and did this on purpose to sink a direct competitor. If Hayes got Spirit, it was a win but if he bankrupted them and see them liquidated, even a bigger win.
Brilliant write up. You’re right. The decision to go long $SAVE cannot be judged by the outcome but by the process. It is what it is.
Thank you Andrew for doing your post-mortem so quickly. Your honesty is refreshing and trust-building. For me, this trade hurt. I put a lot of time into reading the papers, and became personally invested not only in making money but in seeing the system reach the "right" result. Putting SAVE in the rear view mirror is taking some time. Reading your thoughts has been helpful.
You did great work on this and putting it all out publicly for free is much appreciated regardless of the outcome.
Two thoughts:
1) anyone still in SAVE needs to revisit the balance sheet, I traded in and out of their 8% IP bonds profitably and their present quote should trouble anyone long the equity; and
2) the judge’s trite little quote may not be judged kindly in hindsight if SAVE goes BK.
Playing in the the judicial sandbox is not in your circle of competence . This belonged in what Charlie Munger would wastebasket in the “Too hard Box”
Your thesis was fine. The only thing it ignored was the Government and courts don’t operate with common sense.
Probably there were other forces at play that were more powerful than just good arguments from JBLU side.
Nobody could predict the judge imagining he was giving a gift. Does he plan to serve as the bankruptcy judge too?
Trevor Noah is hilarious.
Andrew, reflecting back on the process, I do have two observations, based on my impressions from your work and the X-scope: eyes and ears in the courtroom in general came away with a 50/50 sense of the outcome, and reports from the final day suggested the majority in attendance were leaning toward DOJ. Even Lionel, attending the summary hearing, came away less certain of the outcome. Some of Judge Young's comments, as relayed second hand, even suggested he was getting on board with the DOJ perspective, expressing interest in the welfare of LES families who might be stranded by loss of access to their ULCC. While this was explained as "kicking the tires," it might have been more clear to those present that he was "drinking the Kool Aid."
Second, perhaps apply Bayes theorem...I imaging you already do. Pre-test probability of a DOJ favorable outcome in Federal court, if I recall correctly, is historically 80% (home team advantage); adjusted by sense from the courtroom (call it 50/50), then further adjusted by document review (which seemed extremely compelling in this case, although sadly not to Judge Young).
"when you have a big loser is step back and ask, “did I do something wrong? Was this bad process, or bad outcome?”"
This is exactly the way to do it. If investing was easy, everybody would do it successfully. There are always big losses over time, I've had plenty of those, but it's part of the game. All you can do is learn and keep you eye on process and the long-term.
I don't know the details. As someone who was appalled reading some of the cases throughout law school, my $0.02 is: Sometimes the Court knows what result it wants, and will twist and contort however it needs to get to that conclusion. When I combine this with taking Matt Stoller at his word when he says the worm has turned re: anti-trust litigation, I would foresee the Court making its contortions to make the agenda happen.
As a practicing attorney, I believe you are entirely correct accept I would substitute the word "oftentimes" for "Sometimes". Having practiced before Judge Young before, I had thought him predisposed to see the heavy handed regulator as overstepping its mandate by picking winning businesses as opposed to simply preventing monopoly power. I read the man wrong.
Process > Outcome.
I fully agree with you.
What happens to the pending ticket fee?
And is there a break-up fee paynent to the Spirit shareholders still to cone (400m +70m for Spirit were agreed)?
I believe that the break-up fee has already been paid to Spirit shareholders via a $2.22 dividend in October of 2022 and in 12 separate $0.10 dividends paid monthly since January of 2023. I wouldn't count any additional payments into a current investment thesis.
Hard to say. The nature of the trade has changed. Now we have to value spirit as a stand-alone entity, with a break up fee, potential engine issue, debt maturity. The merger is now an optionality in the share price.
In the previous article Andrew wrote we should read his VIC ideas.
Does anyone know how I can search for Andrew's ideas on VIC?
Many thanks!
Phenomenal post-mort. I wrote a small Twitter thread today tagging you in which I used the term "echo chamber" in analyzing the contributing factors to violating my own risk tolerances. I hope that didn't come across as derogatory to your work, certainly wasn't the intent of my musings. Probably a poor choice of words, wrong connotation vs what my post was meant to convey. I was simply exploring the multitude of concepts on this merger arb that enticed me to oversize relative to my own expertise (or lack therof) etc. vs what I have historically been willing to do.
I recognized your work as high quality, thorough, and earnest. Still do. Made my own choices, was long before I devoured yours and others content, and drew many extremely similar conclusions as you after reading filings myself. I'm certain I would've had virtually identical view of trial odds even if I didn't listen to your and guests coverage.
Pay no heed to the grave dancers. If you get 10 of these in your lifetime, put in the same work, etc. the good side of karma will find you more often than not. Paper champions be damned friend.
Fwiw I am far from convinced you assigned improper odds despite ultimate outcome. We are baffled about similar of judges takeaways.
At any rate, best of luck in future. Strikes me as extremely likely you'll do well in one form or another given willingness to do some intellectually and emotionally challenging introspection after a tough loss. Not a common trait in life.
The whole thing smells. If this was a Republican administration, this would have never made it to court in the first place given all the mega airline mergers of the past. Also, the way this judge ruled makes me think a few things. One, something outside of the court influen$ed him or JetBlue played chess and did this on purpose to sink a direct competitor. If Hayes got Spirit, it was a win but if he bankrupted them and see them liquidated, even a bigger win.
The whole thing smells. If this was a Republican administration, this would have never made it to court in the first place given all the mega airline mergers of the past. Also, the way this judge ruled makes me think a few things. One, something outside of the court influen$ed him or JetBlue played chess and did this on purpose to sink a direct competitor. If Hayes got Spirit, it was a win but if he bankrupted them and see them liquidated, even a bigger win.