Posted the other day: Sanichi's Mind Boggling 44% Private Placement!
I got the following set of comments from solomon.
- From the Management angle, if the new shareholder can add value and synergies the existing biz, why not?
Well, perhaps only from the compliance and governance or EPS dilution angle, one is madly jumping abt? Let judge them in history and not forward.
Solomon,
Many thanks for your comments.
Many reasoning can be brought forward from a management/owner prospective.
However, I would like to think that I represent the minority shareholders, since I had always been one.
Well, what's important for the minority shareholders?
Do we want unfair dilution of earnings per share?
Do we want unfair dilution in future dividends?
Now if the company wants to raise money, why can't they raise capital via a rights issue? This way everyone is given a fair chance to participate. equally and fairly. A private placement? This is simply lopsided to the dark side. Does the minority shareholders knows exactly what is happening? And as mentioned before, placement of shares dilutes earnings and with it, future dividends.
In regard to the possibility of new shareholders could offer new prospects, like value and synergy to new business. Yes, that's always possible. In the business world, anything is possible. I do not doubt this at all. However, as a minority shareholder, why should such an exercise be done at the expense of the minority shareholders? Why can't the listed company buyout this new company. Why should it be done via private placements?
Sorry but from an investor and a minority shareholder point of view, I find it unacceptable.
Sorry that's my flawed opinion which I am entitled to.
Oh yeah, many listed companies have this notion that the minority shareholders represent other people's money and the minority shareholders do not matter. Haven't we heard the phrase "Screw them minorities?" before? Does it not exist?
Perhaps one day it might matter. A world where no one finds any plausible reasoning to be an investor or minority shareholders. Imagine, a stock market without any minority shareholders. Oops.! Perhaps I must be dreaming. LOL! Oh, do forgive me.
Posts
2 comments:
I do buy yr argument and get an insight of the issue. To make it clear, I am not paid by the said Company for this and merely expressing my views.
I should think that it is abt rule setting here. Well like the rest of us, we often get S-C-R-E-W if we are in the smaller subset. When we make a bit of noise, maybe the nut get loosen a bit sometimes.......
Perhaps, the Regulator should set a premium threshold for all the private placement since it dilutes the EPS and DIV. Again, it is square one, if they can access to the company cash flow.
Similarly, the 10% below mkt price mechanism for off mkt tranx is also a lowsy rule which I think open for abuse. Moolah, do tell me who will inspect all these deals whether this is fair or not?
solomon,
"... do tell me who will inspect all these deals whether this is fair or not?"
That sadly is one MASSIVE issue too.
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