May 13, 2004
What is Richard Rainwater up to?
One of the more interesting Texas billionaires is Ft. Worth's Richard Rainwater. He cut his teeth in the big-time financial world by overseeing the tremendous increase in value of the Bass Brothers' from 1970 through the mid-1980's, including what turned out to be a very lucrative bet on the Disney Co. during that period. Rainwater then struck out on his own investing heavily in energy, real estate investment trusts, and health care and, as he put it several years ago, "I'm just a retired guy who made a couple billion by being in the right place at the right time."
Maybe so, but Rainwater's contrarian investment strategy has always been interesting to follow. Today, this Wall Street Journal ($) article reports on Rainwater's latest investment -- buying a 7.5% stake in battered telecommunications giant Global Crossing Ltd. in recent weeks as its share price plunged in response to new accounting troubles and possible delisting from Nasdaq.
News of Mr. Rainwater's investment in Global Crossing along sent the company's shares up $1.30 to $10.70 yesterday afternoon. The stock had lost almost 40% of its value in less than the past month after management announced that it might need to restate financial results for the past two years and that Nasdaq may delist the company.
Global Crossing was one the biggest stars of the telecom boom and its founders were big contributors to President Clinton's second campaign. But the company slid into chapter 11 in 2002 amid the market downturn and questions about its accounting. It emerged from Chapter 11 in December 2003 with a cleaned up balance sheet, only to announce in late April that poor internal controls had led management to underestimate access costs by between $50 to &80 million for gaining access to other telecom networks. That led the company's auditor -- Grant Thornton LLP -- to withdraw its audits and left the company in violation of the conditions for listing on Nasdaq. Inasmuch as such errors (particularly just after getting out of bankruptcy) do not exactly generate confidence in management, Global Crossing's ability to obtain new financing is subject to serious question in the investor marketplace.
Nevertheless, that's when Rainwater went to work, according to the WSJ article:
As some investors fled the stock, Mr. Rainwater turned a relatively modest investment into a large stake, according to filings with the Securities and Exchange Commission. Mexican magnate Carlos Slim Helu, already a major shareholder, added to his stake and now owns 9.9% of the company. Mr. Rainwater declined to comment on his purchases. The company's other major stakeholder, Singapore Technologies Telemedia Pte. Ltd., has a 61.5% stake.
Mr. Rainwater owns three million shares, according to the filings. His holdings represent 13.6% of the company's publicly traded shares. Between March 17 and May 11, Mr. Rainwater spent $24.4 million on Global Crossing stock, with the purchases accelerating in the past two weeks as the share price fell into the single digits.
The telecommunications industry has been one of the most perilous investments over the past decade. For a variety of reasons, the huge run up in value in most telecommunications companies during the late 1990's has been followed by a plunge in value that appeared to have no bottom. Rainwater's bet is the first positive sign for a battered industry in a very long time.
Posted by Tom at May 13, 2004 12:03 PM |
What I know of Richard Rainwater tells me that he will be invested in an area that is out of favor and will make a killing.
Posted by: james hall at June 17, 2004 6:35 PM
I think there is a lot more to Rainwater than just being in the right place at the right time. In his recent Fortune interview he talks a lot more about his survivalist instincts, and I think he has hit the nail on the head. America needs to recognize that he is a billionare for a reason. Not to idolize Rainwater or anything but, he has been more right than anyone else I have heard of. I have been for the past five years trying to figure out where the next crash would be and how to capitalize on it so I will prevail over the people that didn't. Finally an answer that makes sense. Oil depletion--sure, Oil shortage--Absol freakin lutely !! What makes the most sense to me is the two steps after/before oil depletion. Agriculture investment and currency investment in countries that are "short on resources and long on people" I am not a survivalist, but I do believe in surviving tomorrow.
Posted by: Ben Baxley at December 27, 2005 11:57 AM
I truly respect Mr. Rainwater and his views. What investments make the most sense in agriculture?
Posted by: Peter Schrier at January 14, 2006 9:37 AM
strangely I made a killing by creating an "Anti-Bush" fund the first year he was in office. Whatever he claimed I bought the opposite: oil, gold, international, all have done swell.
I have been looking for ethanol and corn. Any ideas?
Posted by: jane at February 16, 2006 10:11 AM
It's worth also noting that the Billionaire mantra is quite simple. To quote Warren Buffet:
I love buying a business when it encounters a big, one time solvable problem.
The true strength of a Billionaire is in his ability not to take the ignorance of the crowds as fact. That is why no one ever understands when a Billionaire buys an ailing company. A pretty good rule when investing in companies is to do the opposite of what everyone else is doing!
Posted by: Nicholas Ochiel at February 21, 2006 4:58 AM
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