Tuesday, July 21, 2009
Lessons From The Astro Exercise
Even when you predict correctly that a corporate exercise is forthcoming, you still risk not making money and even losing money because you do not have all the details of the exercise. Unless I am the actual CFO handling the deal or the bankers advising the deal, the risk in not knowing everything is there. If I do know everything, then I would be dealing on insider information, which is illegal.
a) Its likely to be a sale of foreign operations to Usaha Tegas, which is not a buyout offer for Astro shares. A buyout would set a minimum price to be offered to shareholders, thus raising the bar and transaction platform towards that level. Say the buyout is RM4.00 or RM4.20, the share price would gravitate towards that level. Since this is not a buyout of Astro shares, there may be some disappointment, hence some who were holding trading positions got out.
b) Silly to suspend the shares for one session and then to announce NOTHING. This is very poor form by Astro. Why suspend for one session and say nothing??? You could have made the same announcement that the company is considering some alternatives, without needing to suspend the shares. You suspend then NOTHINg concrete comes out, people will be disappointed.
c) The Straits Times seems to have a scoop on the coming deal. It cited a RM1 special dividend, which is very good. Getting rid of the cumbersome foreign operations to Usaha Tegas will bring cash to Astro without the accompanying risk and uncertainty and gestation period needed to bring forth positive cash flow from the overseas operations. But Astro made no such announcement??!!
d) How should one regard the shares at this juncture? I would still hold it till a proper announcement is made.
p/s photo: Ema Fujisawa