(20-10-2014, 12:15 AM)BlueKelah Wrote: [ -> ] (19-10-2014, 11:59 PM)GFG Wrote: [ -> ]Ah now I see the link. Its incredibly tiny.
Thanks!
"Not sure what you mean by needing to keep it listed to monetize holdings" - I meant that usually retired management would be much less likely to delist the company, so that they can have a way to dispose their stake or reduce their stake when they want to. How else would they monetise their stake if its private
That's the whole idea of IPOs: for some its a way to get capital to grow, but surely for some it's an exit strategy to monetise their stake. (Although you'll never hear anyone saying that in the IPO prospectus!)
Won't it be easier to find a suitable buyer willing to pay NAV or even a premium to that if privatised?
Even if not selling after privatisation, for CDW with $61+ million net cash, if GO and delisted at 20cents, owner could then use the cash to pay for all the delisting cost easily and still have spare cash left. He could then still sit back and enjoy the spare cash and also the yearly profits the company is raking in since he is the 100% owner now.
You can't really monetize at good rate when your stock price is below NAV and daily trading volume is so low....
Yes of course I see the logic in your thinking. I think so too, but unfortunately in reality that doesnt happen.
There are quite a number of companies with share prices that are very substantially below the NAV, and many of these companies have tangible assets to back up the NAV. So why not delist them, either restructure, or even break up the company privately?
The reality is there are operational risks to doing that, not to mention delisting is not always a sure thing. It may be trading at below NAV, but when you try to delist it, the SHs want a premium suddenly, or are unwilling to sell out at below NAV.
So I dont even consider delisting as a way to realise my investment gains. (Unless I am the one doing the delisting!)
Let me give a case to illustrate this:
Lion Teck Chiang (of which i am vested)
It's NAV is something like $1.50 something. Its share price is barely half, around $0.73. It holds amongst other assets, 4 industrial freehold buildings in its book at market value.
The most recently valuation of just these 4 industrial assets (Lion Buildings) ALREADY accounts for the $0.70 plus per share you'd have to pay. In other words, if i have around $150 mil in capital (thats the approximate market cap with a premium to delist), I can delist it, sell off the 4 FH buildings (or do a sale and leaseback since their office is there) and basically get the other millions worth of assets like the steel inventory, trading business, property development business in Malaysia, Freehold 7 crescent bungalows etc in singapore... FOR FREE.
This has been the situation for years. Why doesnt the majority SH/management do that?
The reality is they want to keep it listed for various reasons, so if you're thinking there's a chance it can be delisted and you can be bought out for a premium, that's really a long shot. As a non substantial SH, even if I have 150 mil or can leverage from a bank to do a delisting, there's substantial risk involved. You'd essentially still need the existing major SHs to approve and cooperate, cos otherwise you'd be stuck with a sizable stake in a listed company with no way of delisting and with no way of executing your "break up" plan. So to rely on a 3rd party with capital to come in and do a delisting, is also going to be a long shot.