Urbana Corp: one year later


Urbana trading history



What happened since?


Shrinking of the discount


So why did I sell?










No positions in any stock mentioned

6 thoughts on “Urbana Corp: one year later

  1. Matt

    Great Post. I agree with you 100%. A lot of small things that bugged me about Urbana. They are not shareholder friendly despite the buybacks.

  2. red.

    I agree. People are too often swayed by outcomes and learn the wrong lessons.

    I understand these CEFs as options that’ll cost you 10% a year in opportunity cost. If you know beforehand when the discount will close (promoted by dividends or buybacks or whatever), then fine, if you don’t, then there’s no real way to place a value on it. As it happens, the market was saying “6 years before something happens” and I don’t see any basis in URB’s history to suggest that the market was being too pessimistic.

    1. Alpha Vulture Post author

      I don’t know about that 10% opportunity cost. The assets that Urbana owns are expected to generate returns, but I guess the opportunity costs also depends on how much alpha you expect to make from your average investment.

  3. deepvalue.com

    It wasn’t just you; I remember many value investors were at the end of their rope with URB-A at the end of 2013 and had blogged about exiting their positions. The frustration was understandable, but as it turned out also indicated a point of capitulation (if hard-nosed deep value investors sell in year-end exasperation at a discount of 50%, who else is left to capitulate?)

    I later posted URB-A on VIC, and still most everyone hated it near $1 for the same reasons. I also hated the drag of management fees; to get comfortable with it I had to speak with Tom Caldwell by phone on several occasions and press him about continuing the buybacks, and also talked with someone who has known him through the Canadian securities industry. My impression was that he is an earnest and well-meaning individual who actually does care about doing what he thinks is right for shareholders, but is in other ways par for the course in his industry (like most managers believes his management does create value, and like most is probably wrong in this).

    He does deserve some credit for continuing to buy back significant blocks of stock at a deep discount, when he was not forced to do this, and it reduced the amount he earns in fees. Very few to no CEF managers will voluntarily do this. Of course at any point shareholders would benefit very greatly from liquidation, which unfortunately will never happen. But at a 50% discount, it had become dramatically cheaper than almost all CEFS, most of which have far more shareholder-unfriendly management.

    I think you are right to consider fees as only partially offset by accretion from discounted buybacks. One other way to look at discounted CEF investing is that you can effectively obtain a form of non-recourse leverage through owning a portfolio of assets worth 2X your purchase price. But the CEF investor still remains dependent on buybacks or a change in sentiment to reap these rewards directly.

    1. Alpha Vulture Post author

      I don’t know how much you can really learn from talking to someone and to people that know him. I would be surprised if he didn’t appear earnest and well-meaning: otherwise he would probably have had a hard time raising money for Urbana (and his other businesses) in the first place. That’s why I prefer to focus on what people do instead of what they say.

      About the discount in comparison with other CEFs; one thing to realize that because of the dual class share structure it is impossible for an activist investor to get involved and push for liquidation. That’s why most CEF don’t trade at a discount this big.


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