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How is this company worth $12B? Is it hard to short? The $12B equity valuation would imply slim odds of Max-Hervé George being fully paid out. If not, what inf

How is this company worth $12B? Is it hard to short? The $12B equity valuation would imply slim odds of Max-Hervé George being fully paid out. If not, what information are we missing?

polarix 10y ago
One thing we're missing is whether the company is "too big to fail".
ryankupyn 10y ago
I expect that it's the long time horizon until Max-Hervé (or rather his estate) is actually paid off. Up until that point, barring any regulations which require the insurer to steadily accumulate reserves in response to the rising value of his policy, the insurer will keep operating - and profiting normally. It's entirely possible that this distant future cost isn't that much of an issue for most investors! And of course Aviva has 50 years to engage in legal wrangling as well. It would only take one amenable government in that period to turn the tables. For Max-Hervé and his banks there is actually some rather significant risk. Their insurer could collapse due to some other cause, and policies might not be paid out. By keeping the policy and not settling, their taking out a position on Aviva's continued survival for 50 years.
- vasilipupkin 10y ago
  If he is not paid out in the life insurance portion, it doesn't matter. If aviva collapses, he simply has a portfolio he can no longer rotate out of. So, his risk is really no different than risk of holding a portfolio of stocks in the worst case
chillydawg 10y ago
One reasonable settlement would be to take 50% equity in the firm in exchange for his contract. Then he extracts half of all dividends for as long as he likes. Taking 100% probably would not be wise, as he'd be in charge of it and he probably has no idea how to run it.
- peteretep 10y ago
  There are estimated 30 people with the same contracts, and as there's not 1500% equity to go around, that won't work.

How is this company worth $12B? Is it hard to short? The $12B equity valuation would imply slim odds of Max-Hervé George being fully paid out. If not, what information are we missing?

polarix 10y ago

One thing we're missing is whether the company is "too big to fail".

ryankupyn 10y ago

I expect that it's the long time horizon until Max-Hervé (or rather his estate) is actually paid off. Up until that point, barring any regulations which require the insurer to steadily accumulate reserves in response to the rising value of his policy, the insurer will keep operating - and profiting normally. It's entirely possible that this distant future cost isn't that much of an issue for most investors! And of course Aviva has 50 years to engage in legal wrangling as well. It would only take one amenable government in that period to turn the tables. For Max-Hervé and his banks there is actually some rather significant risk. Their insurer could collapse due to some other cause, and policies might not be paid out. By keeping the policy and not settling, their taking out a position on Aviva's continued survival for 50 years.

vasilipupkin 10y ago
If he is not paid out in the life insurance portion, it doesn't matter. If aviva collapses, he simply has a portfolio he can no longer rotate out of. So, his risk is really no different than risk of holding a portfolio of stocks in the worst case

chillydawg 10y ago

One reasonable settlement would be to take 50% equity in the firm in exchange for his contract. Then he extracts half of all dividends for as long as he likes. Taking 100% probably would not be wise, as he'd be in charge of it and he probably has no idea how to run it.

peteretep 10y ago
There are estimated 30 people with the same contracts, and as there's not 1500% equity to go around, that won't work.