On Getting Stolen From…
[This post was originally published January 15, 2021. The AT transaction closed in 2021. The author’s positions and the market situation described here are historical.]
Last night, a buddy texted me. (I’m going to paraphrase a bit as this is a family site)
FRIEND: Kuppy, you won’t believe what those a**holes did!!
ME: Wait!! What?? Who??
FRIEND: They undercut us!!
ME: Who??
FRIEND: Read that press release from AT…
ME: Holy Sh*t!! Who else do we know that owns this??
FRIEND: Dunno…Are you going to tender??
ME (channeling Chruchill): We shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets… We shall never surrender…
If I know that Churchill quote well, it’s because I’m a value investor who’s used to getting screwed by boards, management teams and Private Equity). Sometimes, it’s worth fighting back. Sometimes it isn’t. Maybe the board is right to sell the company here and maybe they’re leaving a few dollars a share on the table. However, this article isn’t about the Board’s [terrible] decision over at Atlantic Power (AT – USA). I bought my AT shares very recently at roughly $2.00. I’m pissed to get $3.03 when I think it is worth a whole lot more, but I’m also up 50% in a hurry(gross on cost*).
* 50% on cost. Not all positions result in acquisition premiums. AT was one of several positions in the Fund during Q1 2021; the Fund’s total gross and net performance for the period are available at https://pracap.com/investor-letters/q1-2021
Instead, this article is about something different. For the last few years, I’ve been hearing about how “value is dead” because “value companies” keep getting sold down out of ETFs and value managers keep getting redeemed, leading to more selling. On one side of the debate, are people looking at fund flows, telling me it’s hopeless to invest in companies trading at under 2x TTM FCF as they’ll only get cheaper. On the other side of the debate is my portfolio, where cheap companies keep getting stolen from me at healthy premiums to market, but dramatic discounts to private market values. While it doesn’t always work like this, I remain steadfast in my view that if something stays cheap for long enough, eventually someone will do something about it and as an investor, you’ll get paid.
Sure, it’s hard to time this. The charts tell you little before a deal is announced and you rarely get as lucky as I just did on the timing. I just know that as value names have continued to get cheaper, this seems to happen more often to me. In a world where everyone is focused on fund flows, grouping companies into tradable factor baskets, people forget that these are also real businesses, with real people, with real incentives. Value will get unlocked. The pace of this unlocking is often random, making it hard to fit into models. Quants will remind me that this is a “one-off situation.” I’d counter that after a dozen or so of these, it stops being such a “one-off.” Instead, it’s a pattern. While not every value stock gets bought out, if you buy cheap companies and the market won’t reward you, someone else will. Ironically, as AT gets acquired, it leaves the data-sets. Yes, there are a lot of value companies still struggling at multi-year lows, but if you ignore all those that got acquired at big premiums, you’re missing the other half of the story.
I don’t think I’ve ever seen a take-under where management quotes Buffett and brags about how cheap the shares are…
As for AT, I haven’t decided what I’m going to do with my shares. Looking at the Page 1 list this morning, I mostly see ETFs, not the sort of partners I’d want in my foxhole. At the same time, I wouldn’t be surprised if someone comes in with a topper bid here. I mean, it’s getting acquired at like ~3x times TTM FCF. In my opinion, that’s cheap—even if there are plenty of forward PPA renewal risks over at AT.
Disclosure: Praetorian Capital Fund LLC, a fund managed by Harris Kupperman through Praetorian PR LLC (SEC-registered RIA), was long AT at the time of original publication (January 2021). This post has been re-published on May 28, 2026 and as of May 28, 2026, Praetorian Capital Fund LLC does not hold a position in AT or its successor.
