Originally posted by Taurean7
Perhaps points made logically via a simple Q&A approach might better cover some of the concerns expressed.
Q1: Why would someone wish to buy out an unprofitable listed company?
A1: Because they can successfully offer a price significantly below the company’s fundamental value.
Q2: Why would the company’s owners agree to sell out at a price significantly below its fundamental value?
A2: Because the offer is higher than the market price, and they believe that the market is the determinant of a company’s value.
Q3: What represents the primary risk that the low buyout offer will succeed?
A3: Those shareholders who believe that the market determines a company’s value.
Q4: Why is the fundamental value not obvious?
A4: Because the company does not yet have earnings that can be applied to valuation metrics such as P/E or ROE.
Q5: How might shareholders avoid selling their holdings at undervalued prices?
A5: By identifying the irrational and emotional influences that determine the market price but do not reflect the value of the business.
Q6: What type of investor makes emotional price-based decisions?
A6: Retail investors – because unlike instos it is their own money at risk.
Q7: Why are early stage tech companies chronically undervalued?
A7: Because at that stage they have a high risk-averse retail shareholder profile.
Q8: What might be a fair fundamental value for CDY?
A8: Begin with the recent Blue Ocean Equities valuation as a base and go up.
Q9: With profitability arriving, what is the next ownership phase of Cellmid’s development?
A9: The commonly named ‘institutional phase’, where retail holders gradually sell their holdings to instos, who base their decisions on fundamental value (usually accompanied by the odd bit of manipulation).
Nothing positively or negatively biased or offensive there I assume.
All IMO
T7
G'day T7 .... In addition to your answers - here might be some extra "illogical" ... but "possible" answers...
Q1 - A2: Because they may have preferential knowledge
Q2 - A2: Because the Board recommends it and suggests it is in their best interests to do so
A3: Because they have no option but to do so .... (Review Chapters 6 & 6A of the Corporations Act 2001)
Q3 - A2: Preferential knowledge
Q4 - A2: Although valuation based on historic numbers is not obvious - DCF and/or the balance sheet (intangibles) may be more obvious
Q5 - A2: Make sure they don't get manipulated and by joining together to oppose unfair takeovers
Q7 - A2: Because it provides opportunity for those who might wish to accumulate and/or receive bonus issues and/or takeover the company
Are these the answers of a conspiracist ... or a demented holder ... or a holder who has witnessed the events of an unfair takeover?
We'll see.
