Sunday, April 07, 2013

Investment Adviser: Just Who Are You Advising For?

From the posting: Business Times Writes About Unfair And Reasonable!

limko said...

  • What comes to mind is the two occasions when Pharmaniaga planned for privatisation.
    On the first privatisation, "independant adviser" advised not to accept the offer, and the exercise did not go through. Subsequently, the price of Pharmaniaga slummed.
    On the second privatisation, another "independant adviser" advised to accept, and the exercise completed. Subsequently, the price of Pharmaniaga soars.
    On both occasions, the mionrity shareholders got screwed.
    Advise or lie?
 Good point.

For me, right now, there's indeed some changes when compared to previous years but I would say it's nor enough.

The next step is, we need our minority shareholders to be better advised.

An unfair order is unfair. End of.

It should be rejected.

Calling it 'unfair but reasonable' is just not acceptable.


lim hwa said...

I refer to the recent announcement by Goldis Berhad on 8 May 2013 for the capital distribution of IGB shares. From the first reading of the announcement, it seems the proposal is really to reward the shareholders of Goldis. However, with further understanding of the proposal, the proposal seems to me just another way of taking the value from the minority shareholders.

In my humble opinion, to put the unlisted share as an alternate option to cash to MI is as good as forcing the MI to have no option but just have to take up the cash option. My rationale is that one of the key objectives of us investing in stock markets / listed shares as compared other investments is due to liquidity. As the proposal is to distribute the unlisted shares, then such proposal is defeating the our objective.

To simplify it, assuming a listed co only owns a very profitable subsidiary (say with NTA of RM100 mil). The major shareholders then propose the similar structure to all the shareholders whereby the profitable subsidiary to be transferred to a non-listed company at say RM50 mil. Thereafter, all the shareholders will be given the options to choose (i) the unlisted shares or (ii) cash value per listed share which will be substantially undervalue as the valuation for the transfer is only half of the NTA.

Eventually, the major shareholders will own 100%/ majority of the unlisted company cuz i presume majority of the MI will not opt for unlisted shares due to liquidity.

With this, the major shareholders are essentially privatise the jewel of the listed company at a cheap valuation in the expense of the MIs' value.

I see the above illustration happens to GOLDIS now.

May I have your view on this case i.e. GOLDIS just to make sure MIs' are well protected before the same structure to be replicated for the next many more coming proposals if this first kind of proposal is successfully completed.