Sunday, 1 February 2015

Striking the Privatisation Lottery 4 Times

I am not sure if you have read the letter that I sent to Today, which was published on Tue (27 Jan). Here is the link if you have missed it: "Review Wave of Delistings on SGX".

Coming back to the topic, how many times do you hope to strike lottery in a year? For me, I struck the privatisation lottery 4 times last year (based on date of announcement of the offer)! Below is the list of lotteries that I struck:
  1. CapitaMalls Asia (privatisation at $2.35)
  2. STATS ChipPAC (takeover at $0.466; sold)
  3. UE E&C (privatisation at $1.25)
  4. CH Offshore (cash offer at $0.495)
Before you congratulate me on my "good luck", allow me to share an analogy on football with you.

For those who are fans of Premier League football, you would be familiar with the news that Gareth Bale moved from Tottenham to Real Madrid in 2013 for a transfer fee of between £77 million and £85 million. The latter transfer fee would be a world record. This was followed by the transfer of Luis Suarez from Liverpool to Barcelona a year later for a transfer fee of between £65 million and £75 million. Although the 2 Premier League clubs had hoped to retain their star players, the huge transfer fees nonetheless represent a huge windfall. After receiving the transfer fees, they went about reinvesting the fees into other good players, hoping to replace the star players that they have lost. However, the players that they bought have not yet been able to replicate the huge impact of their former star players in the club. If you were to ask the fans whether they would have preferred to keep Bale/ Suarez or take the huge windfall, I guess some would have preferred the former. As at today, Tottenham and Liverpool are in the fifth and seventh positions in the Premier League table. There is still much work to do to win the fourth position, which is the last position for Champions League qualification. So, one thing we can learn from this is: if we keep on "selling" our best "players", we will not reach the "Champions League" of world-class stock exchanges!

Notwithstanding the above, this is not to say that we should never accept any privatisation offers. Privatisation offers are a double-edge sword; we might gain in the short-term but lose in the long-term. It is important to assess each offer on its own merits and determine whether we might lose in the long-term before accepting the offer.


10 comments:

  1. Looks like you are a soccer fan yourself? Which EPL team are you supporting? lol

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  2. Hi Boring investor,

    I know what u mean by long term loss. Maybe cast your net wider and share with us US or Hong Kong Good companies next time?

    But if u ask me, I have no such luck at all! My lifetime only have pacific shipping trust and rokko privatitised.

    PST I only took 1 year payout the. Privatization happens, although the gain is ok, rokko? I just break even... Sigh...

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    1. When privatisation happens, we just have to move on... Hopefully, we'll find a better deal than the previous one. Like you mention, if the S'pore market becomes too small, we just have to move on to bigger markets.

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  3. Hi I love your analogy and admit that as a Liverpool fan I miss Suarez!

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    1. Hi, glad that you liked the analogy :)

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  4. Hi Chin Wai, seems that Chuan Hup, Falcon and CH Offshore halted trading last night. What are the chances you think of a counteroffer or possibilities of scenarios playing out? Am also a ahareholder like u. Haha

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    1. Hi weikun81, yes, I also think a deal between Chuan Hup and Falcon Energy at a higher price is likely. Let's wait and see what is the terms of the deal :)

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    2. Hi Chin Wai,

      Falcon offered $0.55! Congrats. Though i felt it was below what the IFA valued the company at.

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