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The best unknown activist investment of 2009

93 points by jakarta 17y ago

gstar 17y ago
Now -THAT- is a hack. Bravo. As for this quote: He’s just ruined his corporate life forever. I'd say he's just cemented himself as an incredible strategist that will be fairly in demand!
- gaius 17y ago
  Yeah, you couldn't ask for a more glowing reference.
- tspiteri 17y ago
  He made millions, but he didn't generate any wealth, he just worked the system. I won't say Bravo.
  - gstar 17y ago
    That's why I called it a hack. Fundamentally, it's not much different to gambling with an advantage - there were certainly a lot of opportunities for him to lose. I don't think this called for a suspension of ethics, rather more of a disregard for the establishment. Look, legally exploiting a flawed system to produce a net benefit for oneself isn't fundamentally evil. In fact, in this situation it seems (fortunately) that his actions eventually bailed out a whole lot of small-time investors.
    - idiopathic 17y ago
      What about using the other investors to blackmail management and then selling out these investors when management paid him off? When someone is this smart, the responsibility to be good is even more pressing and the condemnation for being bad should be more loud. And yes, I am judging.
  - DTrejo 17y ago
    In a way he did make wealth by increasing the market's efficiency no?
  - cabalamat 17y ago
    You're right, he didn't generate any overall utility. But on the other hand, he didn't create overall disutility (i.e. harm people). So he's in a better moral position that Nathan Myrvold or other patent trolls.
- cabalamat 17y ago
  Indeed. What the guy who said that quote really meant was "Boo hoo, he's made us look stupid". Bolton will probably be a billionaire by the time he's 50.
hernan7 17y ago
When I was 27 I would have found offensive to be called "a 27-year-old". Which age range do you need to belong to to be taken seriously? Because if he had been 67, he would also be referred to with a dismissive "a 67-year-old".
- gloob 17y ago
  Do you find it offensive when someone points out that you have hair as well? There isn't anything dismissive about the headline, by my reading, but I've never really understood why people find things like this insulting. [Edit: I mean, if you read the article, he clearly was being taken quite seriously. He nearly took over the bloody thing. Interpreting the mention of his age as "dismissive" is silly - it's just context, in much the same way that his nationality, sex, and name are just context.] Unless you happen to be referring to the media quotes in the article itself (e.g. "meddling kid", "ultimate poster boy for the much-maligned Generation Y", etc.), in which case you have a point. [2nd edit: Although, that still isn't really "not taking him seriously". It's just insulting him, though I will concede the possibility that part of the cause of the insults is his relative youth.] On another note, the man the article is about is clearly either a genius or insane. Either way, it's an excellent story.
- lsb 17y ago
  He had, what, 10 man-years of experience at this sort of thing, at most? His opposition had what sounds like a man-millenium of experience, and he made A$5M off of them.
  - jey 17y ago
    The "skill is proportional to experience" idea always puzzles me, especially in fields like finance and software where differences in productivity are measured in orders of magnitude. The most effective investors and programmers easily have 100x greater maximum productivity than the median.
    - ryanwaggoner 17y ago
      The most effective investors and programmers easily have 100x greater productivity than the median. I have a hard time believing that for programmers. 10x maybe, not 100x. If this were true, they should be making tremendously more than median programmers. When was the last time you heard about a software engineer employee making over $1m, let alone $10m?
boredguy8 17y ago
Can someone clarify? He bought 19.9% of the voting shares, called for a meeting to dissolve the trust (what is the trust? Is the trust the same thing as BrisConnections?), then sold his shares to someone who wanted to ensure that BrisConnections continued to exist? Tricky and smart, but what is the value that BrisConnections holds and to which other people want access? Is it just the two upcoming installments that investors owe?
- jakarta 17y ago
  BrisConnections was developing a toll road, but the actual tollroad development assets were held in the trust for tax reasons. If the trust were to be dissolved as the development was in process, it would have killed the project. That's why his particular stake had so much value because it would help stave off the dissolution. Investors would owe the 2 upcoming installments. So he was going to owe $48M and another $48M for the next two installments. That's one of the incentives they too would have had for dissolving the project since the ones who picked up shares at $0.001 would also owe that money.
  - boredguy8 17y ago
    Much thanks, that really clarifies the situation, but it also inspires further questions. So people purchasing shares were theoretically providing the investment funds to complete the toll road, and as a result of that risk, would have access to the profits of the toll road in proportion to their investment, correct? So BrisConnections doesn't want to see the fund dissolved because it loses all the capital represented by the $.001 investors by virtue of still owing $2, and Thiess John Holland wanted to maintain the entity that owed them a contract for building part of the road?
- UpFromTheGut 17y ago
  Feel free to correct me, but I believe the trust was funding for the ~$5B project that BrisConnections was beginning. If the trust was dissolved, BrisConnetions would be unable to complete their project. In order to protect their project, they purchased Bolton's voting rights.
shimi 17y ago
That bloke showed those toll thieves how to do business. These guys are doing a lot of monkey business and some times it blows in your face, get over it!!!!
ericwaller 17y ago
What about the liability?...He contained the liability to his investment vehicle, Australian Style Investments. The A$4.5M was paid to an another entity of Bolton’s, Australian Style Holdings, to quarantine it from the $120M liability in Australian Style Investments. I thought it was a great story until here. This just seems totally unethical. Am I missing something? Certainly I can't just evade the liability of a risky short sale (for example) by making the trade through a shell corporation?
- jakarta 17y ago
  Technically you could. Most hedge funds are LLCs, if the trades spectacularly fail they're not on the hook for the potential unlimited losses of the short trade. Just the amount that is in the investment vehicle.
- pmorici 17y ago
  In this case it says the bank offered to take all the shares off the investors hands for free to free them from the liability.
  - hristov 17y ago
    This however does not absolve Mr. Bolton from his conduct.
    - ericwaller 17y ago
      Also it seems like this was just luck. I don't think he expected to have the liabilities waived (by being bought back by the bank).
- netsp 17y ago
  You're right. Something is off here. That seems like moving all the cash from one company to another and letting the first go bankrupt without the latter assuming liability. What stops this happening more often?
  - 17y ago
cromulent 17y ago
He's not so good with keeping my credit card details though: http://www.theage.com.au/business/bolton-loses-his-bottle-over-hacked-client-details-20090415-a736.html http://www.theage.com.au/business/bolton-loses-his-bottle-ov...
Ras_ 17y ago
Gordon Gekko approves.
jakarta 17y ago
A good background article on him: http://thebigchair.com.au/news/insight/nick-bolton http://thebigchair.com.au/news/insight/nick-bolton "Bolton studied economics and mechanical engineering at Melbourne University. "I don't think I completed one unit in engineering, but I did well at economics," he says. At the same time, Bolton made money from an investment in Melbourne IT, which had a monopoly on internet and website domain names in Australia. With deregulation of that market looming, Bolton saw an opportunity. "I started Bottle Domains at the age of 19 and became a competitor to Melbourne IT." He timed his investment well. By the following year, Bottle was an established player, and Bolton dropped out of uni to run his new business from his St Kilda flat. He claims to have made his first million before his 21st birthday, but "it's never been about the money," says Bolton. "I live reasonably conservatively; even my clothes are not overtly expensive. I might be wearing a $1000 jacket, but with a $20 pair of shoes. I'm not driven by price in terms of what I acquire." "
pyre 17y ago
I don't get the 'ultimate posterboy for the much-maligned Generation Y' comment... A financial sharks a new thing? Or are these people just sheltered by rose-colored glasses that they use to read their history books? If he was a Baby Boomer, would we see comments like "ultimate posterboy for the much-maligned Baby Boomer generation?" I really wish people with their 'get off my lawn' comments would crawl back under their rocks.
tici_88 17y ago
And the Australian securities authorities need to do some serious soul searching as to why a guy with a mere $47,000 in his pocket was allowed to purchase securities that leave him with a A$94mln liability - without even having the money at hand. >"The reasons for creating such a security are beyond the scope of this post, but suffice it to say that stapled securities offer certain tax benefits." And are those "stapled units" another byzantine financial product designed to work around an even more byzantine tax system? I am curious if such financial products would even make sense in a fair, flat tax system.
- netsp 17y ago
  I suspect it's not just tax systems these 'Byzantine' products are designed around. It's also getting around the various regulations around who can invest in what, accredited investors, investment grades, etc.
- danprager 17y ago
  I put it down to a limitation of the Aussie (and other) stock exchanges. The shares had dropped to $0.01, when their true value was negative, given the stapled obligations that they carried. Bolton should have been paid to take on the debt in the first place. A whole lot of other people apparently made the same transaction unwittingly, without reading the fine print, as it were. The sellers of the $0.01 shares were paid a peppercorn and washed their hands of the debt. I reckon this is a problem for the regulators. Once the shares dropped below the value of the remaining obligations (give or take) a fairer price would be negative. Alternatively, trading should be suspended because there's a fair argument that the company is insolvent at that point. Instead, this fact was hidden behind a little "complexity" and inadequate rules. Bolton just took advantage of a broken situation.
  - greendestiny 17y ago
    The stock exchange can take plenty of actions against a stock and from a lay perspective it sounds like they should have.
mkramlich 17y ago
He sounds to me like a predatory, sociopathic parasite. Perfect for Wall Street! :)
sireat 17y ago
He doesn't sound like a likeable guy, but that is besides the point. His actions did demonstrate the pitfalls of "stapled units" to Australia. Shame should be on the people who created this instrument. Any time you have a security created to manipulate tax code, it is ripe for abuse.
terrence123 17y ago
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93 points by jakarta 17y ago

gstar 17y ago

Now -THAT- is a hack. Bravo. As for this quote: He’s just ruined his corporate life forever. I'd say he's just cemented himself as an incredible strategist that will be fairly in demand!

gaius 17y ago
Yeah, you couldn't ask for a more glowing reference.
tspiteri 17y ago
He made millions, but he didn't generate any wealth, he just worked the system. I won't say Bravo.
- gstar 17y ago
  That's why I called it a hack. Fundamentally, it's not much different to gambling with an advantage - there were certainly a lot of opportunities for him to lose. I don't think this called for a suspension of ethics, rather more of a disregard for the establishment. Look, legally exploiting a flawed system to produce a net benefit for oneself isn't fundamentally evil. In fact, in this situation it seems (fortunately) that his actions eventually bailed out a whole lot of small-time investors.
  - idiopathic 17y ago
    What about using the other investors to blackmail management and then selling out these investors when management paid him off? When someone is this smart, the responsibility to be good is even more pressing and the condemnation for being bad should be more loud. And yes, I am judging.
- DTrejo 17y ago
  In a way he did make wealth by increasing the market's efficiency no?
- cabalamat 17y ago
  You're right, he didn't generate any overall utility. But on the other hand, he didn't create overall disutility (i.e. harm people). So he's in a better moral position that Nathan Myrvold or other patent trolls.
cabalamat 17y ago
Indeed. What the guy who said that quote really meant was "Boo hoo, he's made us look stupid". Bolton will probably be a billionaire by the time he's 50.

hernan7 17y ago

When I was 27 I would have found offensive to be called "a 27-year-old". Which age range do you need to belong to to be taken seriously? Because if he had been 67, he would also be referred to with a dismissive "a 67-year-old".

gloob 17y ago
Do you find it offensive when someone points out that you have hair as well? There isn't anything dismissive about the headline, by my reading, but I've never really understood why people find things like this insulting. [Edit: I mean, if you read the article, he clearly was being taken quite seriously. He nearly took over the bloody thing. Interpreting the mention of his age as "dismissive" is silly - it's just context, in much the same way that his nationality, sex, and name are just context.] Unless you happen to be referring to the media quotes in the article itself (e.g. "meddling kid", "ultimate poster boy for the much-maligned Generation Y", etc.), in which case you have a point. [2nd edit: Although, that still isn't really "not taking him seriously". It's just insulting him, though I will concede the possibility that part of the cause of the insults is his relative youth.] On another note, the man the article is about is clearly either a genius or insane. Either way, it's an excellent story.
lsb 17y ago
He had, what, 10 man-years of experience at this sort of thing, at most? His opposition had what sounds like a man-millenium of experience, and he made A$5M off of them.
- jey 17y ago
  The "skill is proportional to experience" idea always puzzles me, especially in fields like finance and software where differences in productivity are measured in orders of magnitude. The most effective investors and programmers easily have 100x greater maximum productivity than the median.
  - ryanwaggoner 17y ago
    The most effective investors and programmers easily have 100x greater productivity than the median. I have a hard time believing that for programmers. 10x maybe, not 100x. If this were true, they should be making tremendously more than median programmers. When was the last time you heard about a software engineer employee making over $1m, let alone $10m?

boredguy8 17y ago

Can someone clarify? He bought 19.9% of the voting shares, called for a meeting to dissolve the trust (what is the trust? Is the trust the same thing as BrisConnections?), then sold his shares to someone who wanted to ensure that BrisConnections continued to exist? Tricky and smart, but what is the value that BrisConnections holds and to which other people want access? Is it just the two upcoming installments that investors owe?

jakarta 17y ago
BrisConnections was developing a toll road, but the actual tollroad development assets were held in the trust for tax reasons. If the trust were to be dissolved as the development was in process, it would have killed the project. That's why his particular stake had so much value because it would help stave off the dissolution. Investors would owe the 2 upcoming installments. So he was going to owe $48M and another $48M for the next two installments. That's one of the incentives they too would have had for dissolving the project since the ones who picked up shares at $0.001 would also owe that money.
- boredguy8 17y ago
  Much thanks, that really clarifies the situation, but it also inspires further questions. So people purchasing shares were theoretically providing the investment funds to complete the toll road, and as a result of that risk, would have access to the profits of the toll road in proportion to their investment, correct? So BrisConnections doesn't want to see the fund dissolved because it loses all the capital represented by the $.001 investors by virtue of still owing $2, and Thiess John Holland wanted to maintain the entity that owed them a contract for building part of the road?
UpFromTheGut 17y ago
Feel free to correct me, but I believe the trust was funding for the ~$5B project that BrisConnections was beginning. If the trust was dissolved, BrisConnetions would be unable to complete their project. In order to protect their project, they purchased Bolton's voting rights.

shimi 17y ago

That bloke showed those toll thieves how to do business. These guys are doing a lot of monkey business and some times it blows in your face, get over it!!!!

ericwaller 17y ago

What about the liability?...He contained the liability to his investment vehicle, Australian Style Investments. The A$4.5M was paid to an another entity of Bolton’s, Australian Style Holdings, to quarantine it from the $120M liability in Australian Style Investments. I thought it was a great story until here. This just seems totally unethical. Am I missing something? Certainly I can't just evade the liability of a risky short sale (for example) by making the trade through a shell corporation?

jakarta 17y ago
Technically you could. Most hedge funds are LLCs, if the trades spectacularly fail they're not on the hook for the potential unlimited losses of the short trade. Just the amount that is in the investment vehicle.
pmorici 17y ago
In this case it says the bank offered to take all the shares off the investors hands for free to free them from the liability.
- hristov 17y ago
  This however does not absolve Mr. Bolton from his conduct.
  - ericwaller 17y ago
    Also it seems like this was just luck. I don't think he expected to have the liabilities waived (by being bought back by the bank).
netsp 17y ago
You're right. Something is off here. That seems like moving all the cash from one company to another and letting the first go bankrupt without the latter assuming liability. What stops this happening more often?
- 17y ago

cromulent 17y ago

He's not so good with keeping my credit card details though: http://www.theage.com.au/business/bolton-loses-his-bottle-over-hacked-client-details-20090415-a736.html http://www.theage.com.au/business/bolton-loses-his-bottle-ov...

Ras_ 17y ago

Gordon Gekko approves.

jakarta 17y ago

A good background article on him: http://thebigchair.com.au/news/insight/nick-bolton http://thebigchair.com.au/news/insight/nick-bolton "Bolton studied economics and mechanical engineering at Melbourne University. "I don't think I completed one unit in engineering, but I did well at economics," he says. At the same time, Bolton made money from an investment in Melbourne IT, which had a monopoly on internet and website domain names in Australia. With deregulation of that market looming, Bolton saw an opportunity. "I started Bottle Domains at the age of 19 and became a competitor to Melbourne IT." He timed his investment well. By the following year, Bottle was an established player, and Bolton dropped out of uni to run his new business from his St Kilda flat. He claims to have made his first million before his 21st birthday, but "it's never been about the money," says Bolton. "I live reasonably conservatively; even my clothes are not overtly expensive. I might be wearing a $1000 jacket, but with a $20 pair of shoes. I'm not driven by price in terms of what I acquire." "

pyre 17y ago

I don't get the 'ultimate posterboy for the much-maligned Generation Y' comment... A financial sharks a new thing? Or are these people just sheltered by rose-colored glasses that they use to read their history books? If he was a Baby Boomer, would we see comments like "ultimate posterboy for the much-maligned Baby Boomer generation?" I really wish people with their 'get off my lawn' comments would crawl back under their rocks.

tici_88 17y ago

And the Australian securities authorities need to do some serious soul searching as to why a guy with a mere $47,000 in his pocket was allowed to purchase securities that leave him with a A$94mln liability - without even having the money at hand. >"The reasons for creating such a security are beyond the scope of this post, but suffice it to say that stapled securities offer certain tax benefits." And are those "stapled units" another byzantine financial product designed to work around an even more byzantine tax system? I am curious if such financial products would even make sense in a fair, flat tax system.

netsp 17y ago
I suspect it's not just tax systems these 'Byzantine' products are designed around. It's also getting around the various regulations around who can invest in what, accredited investors, investment grades, etc.
danprager 17y ago
I put it down to a limitation of the Aussie (and other) stock exchanges. The shares had dropped to $0.01, when their true value was negative, given the stapled obligations that they carried. Bolton should have been paid to take on the debt in the first place. A whole lot of other people apparently made the same transaction unwittingly, without reading the fine print, as it were. The sellers of the $0.01 shares were paid a peppercorn and washed their hands of the debt. I reckon this is a problem for the regulators. Once the shares dropped below the value of the remaining obligations (give or take) a fairer price would be negative. Alternatively, trading should be suspended because there's a fair argument that the company is insolvent at that point. Instead, this fact was hidden behind a little "complexity" and inadequate rules. Bolton just took advantage of a broken situation.
- greendestiny 17y ago
  The stock exchange can take plenty of actions against a stock and from a lay perspective it sounds like they should have.

mkramlich 17y ago

He sounds to me like a predatory, sociopathic parasite. Perfect for Wall Street! :)

sireat 17y ago

He doesn't sound like a likeable guy, but that is besides the point. His actions did demonstrate the pitfalls of "stapled units" to Australia. Shame should be on the people who created this instrument. Any time you have a security created to manipulate tax code, it is ripe for abuse.

terrence123 17y ago

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