New Speculative Position: Mongolian Blank Check

By Travis Johnson, Stock Gumshoe, July 27, 2011

I opened up a small initial position in a recently IPO’d blank check/SPAC stock today — this is a roughly $90 million investment fund that’s been raised by a group of Connecticut investment bankers to buy something that relates to Mongolia.

The risks are obvious: you’re paying someone to go to a country where there are already hordes of lusty investment bankers on the streets already, eager to buy into the world’s most talked-up resource boomtown, so if they do find something to buy it’s probably, unless they’re unusually brilliant or crafty, going to be pretty expensive. But since it’s a blank check company we get a nice backstop: if they can’t find something good to buy in two years, you get almost all your money back (the price is around $10.50 now, the “trust fund” that they’re holding for future investment or, failing that, for return to shareholders, is roughly $10 per share).

More on this one as I think it through more carefully and read up some more on them, but I often like to put on a small position while I’m completing my research — it motivates, somehow. The shares I bought are of Blue Wolf Mongolia Holdings, and what’s actually available now are the “units” — a share and a $12 5-year warrant bundled together, they’ll probably split for separate trading in about two months. Ticker is MNGLU if you’re interested in looking into it, and the S-1 filing for the IPO is available here.

They certainly don’t yet have the assets that Mongolia Growth Group has on the ground in Mongolia right now, but with Blue Wolf you also don’t have to dramatically overpay for the cash on the books like you do for Mongolia Growth Group (I mentioned that investment fund, and their ridiculous premium to asset value, in this commentary a while back — they have since changed the numbers with another offering and more real estate purchases, but the premium to book value remains very steep). As I dig further into the company and see if the managers issue any commentary about their search for an investment I’ll share if I find anything interesting — but so far, I just like that I get professional investors looking on the ground for Mongolia opportunities, and I get a guarantee of most of my cash back if I don’t like it or ...

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