Thursday, May 23, 2013

Unhappy Goldis Minority Shareholder

lim hwa has left a new comment on your post "Investment Adviser: Just Who Are You Advising For?...":

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.


solomon said...

Finally, another ship Maemode failed to service it's debt.....this is in your radar if I am not too old to forget....