Economics

Bill Browder would invest in companies at 0.5x P/E and such when Nobody knew how to value anything except for vodka and cigarettes

I have a pile of things I need to read and I have a pile of things I want to read. And there’s Red Notice by Bill Browder which was on neither pile. I picked up for $20 at the book store just because it looked good. I actually heard about Bill Browder a couple years ago from his frequent TV appearances. He also had a documentary on Netflix. Here’s a little known fact: Bill Browder is the grandson of the head of the American Communist Party who ran for President a couple times.

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Red Notice: A True Story of High Finance, Murder, and One Man's Fight for Justice by Bill Browder

Bill Browder has a story and it’s one hell of a story. This book has two parts. The first part, my favorite, is about his early day investments after the breakup of the Soviet-Union. Browder was where nobody else wanted to invest. This mean he bought stuff for ultra-cheap. He would invest in companies at 0.5x P/E and such. Assets where absolutely mispriced. The gap between price and value was extremely large. Capitalism wasn’t a well understood concept and they were basically just giving stuff away for free. Nobody knew how to value anything except for vodka and cigarettes. You could buy companies at a tiny fraction of its oil reserve. The book a couple examples of his investments and it’s fascinating. I kind of wish he made another book only about his investment in Eastern Europe/Russia after assets where privatized.

The second part of the book is the main reason why it was written. It’s the part where Browder goes to war against Putin. Browder was deported from Russia after trying to expose corruption in the country. He hired a lawyer named Sergei Magnitsky to be part of the team to help him out. Then in 2008 Sergei Magnitsky uncovered a massive tax fraud. He found evidence that a group of well-connected Russian officials had stolen a whopping $230m. He was arrested and tortured to make him withdraw his testimony. He didn’t. His conditions grew critical and he died. Then Browder went on a crusade to seek justice. It looked impossible and it wasn’t easy. The Russian says that Browder is the real criminal and has commited fraud. Russian issued a “Red Notice”, like the title, which refers to the extradition request served by Russia on Interpol, demanding Browder’s arrest. It was denied.

Browder is behind the The Magnitsky Act, a law named after Sergei Magnitsky, which was signed into law in 2012 by President Barack Obama. The law is intended to punish Russian officials responsible for the death of Russian lawyer Sergei Magnitsky in a Moscow prison in 2009. The bill received bipartisan support. At the moment, I believe the law has been expanded to cover the globe, not just human right abuse in Russia.

In the book, Browder has an interesting theory about Putin. At first Browder was a Putin supporter. Browder was an activist investor. He would go after corruption and exposed crook at companies and it worked…for a while until it didn’t it. Doing what he was doing as a foreigner it was surprising that nobody killed him. People die in Russia for much less. Browder believed he was protected by Putin at first. When Putin was first elected, he wasn’t the Putin of today. Putin didn’t have all the power. The Russian oligarch did. And Browder was going after the oligarch. Putin and Browder’s interest were aligned. Then the oligarch folded to Putin because he started jailing them and Putin gain the power. That’s when Putin and Browder weren’t working together anymore but it conflicted. So Putin tried to get rid of Browder and it got messy.

“This book reads like a thriller, but it’s a true, important, and inspiring real story. Bill Browder is an amazing moral crusader, and his book is a must-read for anyone who seeks to understand Russia, Putin, or the challenges of doing business in the world today.”Walter Isaacson, author of Steve Jobs and The Innovators