Urbana Corp: The Next Aberdeen?

Urbana Corporation (URB-A.TO) is a publicly traded company whose business consists in finding and investing in the undervalued equity of stock exchanges worldwide. They have been in this business since 2002, investing in large exchanges such as NYSE Euronext and the CBOE. 70% of their portfolio is comprised of publicly traded companies. Yet the company is trading at only $1.33 a share when NAV is $2.03 a share, presenting 50% upside potential from the current valuation.

Investment portfolio:

As mentioned above, 70% of Urbana’s investment portfolio is in publicly traded equities. Of these, the largest holdings are the NYSE Euronext at 36% and the CBOE at 28.2%. Both of these positions are very liquid should one wish to hedge their exposure and arbitrage away the gap between share price and NAV.

The remaining 30% of the investment portfolio is comprised of private investments, the biggest of which is the Bombay Stock Exchange (BSE) at 15% of total portfolio value. Recently George Soros made an investment in the BSE that confirms Caldwell is valuing the BSE investment at an appropriate level on the balance sheet. Caldwell is actively trying to persuade the authorities in India to convert the BSE from private to public ownership. This may happen in the next year. The remaining 15% of the portfolio is invested in smaller exchanges such as the Budapest exchange (the largest at 3.5% of the total portfolio) and the Minneapolis Grain exchange.


Urbana is managed and controlled by Thomas Caldwell and his firm, Caldwell Investment Management. Caldwell holds the majority of the voting shares of Urbana, with common shareholders holding the non-voting class A shares. In exchange for managing the investment funds, Caldwell charges roughly 3% a year of assets under management. This fee is on the high side but is acceptable given that management appears to be shareholder friendly, as their buyback program demonstrates.


Recognising the large discrepancy between shareprice and NAV, Caldwell has instituted a share buyback program last august. In the 4 months to December, Urbana repurchased 4.5% of the outstanding A shares. Caldwell stated in the year end annual report that Urbana will continue to repurchase shares until the discount to NAV is closed. In late 2010 the average purchase price for the share repurchases was $1.28. This is only 4% below the current price and should act as a floor to the downside.

Investment risks:

The risks to this investment are that Urbana`s investments do not perform well. Their largest holding NYSE Euronext has declined from its peak of $100 per share in 2007 to $35 per share today due to the increased commoditization of trading equities. If this trend continues and the NYSE continues to perform poorly, Urbana shares will suffer as a result. However as mentioned above, it is easy to hedge out this risk by shorting the correct amount of shares of the publicly traded portfolio of the investment portfolio. Another item to note is the large amount of warrants outstanding at $2.50 a share. However these expire in November 2011 and it would require a doubling of the current price before these become an issue.


This is a simple investment thesis that has limited downside risk. Urbana is trading at a large discount to NAV and has shareholder friendly management that is in the process of closing this gap through share buybacks. This should protect current investors from downside risk and act as a catalyst going forward.

Helpful information: Management posts updates of the Net Asset Value of the investment portfolio on their website. Click here to view these reports These reports are updated weekly.

2 Responses to “Urbana Corp: The Next Aberdeen?”

  • CEFInvestor Says:

    Nice post, thanks.

    What makes you say the management fee is 3% of AUM (which could explain most of the discount)? The 2010 annual report says:

    “Investment management fees accrue on the
    basis of 1.50% per annum of the market value of the equity securities in Urbana’s investment
    portfolio and 0.50% of the market value of the fixed income securities in the corporation’s
    investment portfolio. During the year ended December 31, 2010, CIM earned $2,353,731
    investment management fees from Urbana and absorbed no expenses related to Urbana.”


    • admin Says:

      Hi, thanks for the reply.

      If you look at page 11 out of 36 on the 2010 annual report, about halfway down there is a table that lists all the management expense ratios. I used management expense ratio excluding share issuance data. This reflects all costs to the shareholders of the active management, and comes in at just under 3% of NAV a year since 2007.

      I should have worded this expense in my report as costs to shareholders, instead of management fees since you are right and management fees excluding some other costs comes in lower, at 1.5% of NAV.

      I don’t feel this 3% yearly expense justifies a large gap to NAV since management is quickly buying back shares, and Urbana used to trade at a preium to NAV with the same expense structure just a few years ago.