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Consider Capital repayment if share prices too low
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Laulan
Master |
27-Jun-2011 11:30
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Recently one S-chip, Passion was turned private and all share holders were paid 26 cents per share.   When I got in around 22 cents, it was undervalued.   This is an example of low price against NTA.   Why privatized? Because no point listing when shares are not in demand and traded lower and lower. Privatization is almost same with returning capital by reducing issued capital.   Reducing capital because of low share price vs NTA will benefit everyone.   The business will remain publicly listed, but the shareholders are paid back some money and still owning the shares.   In a privatization program, the shareholders no longer able to buy or sell shares.   There shareholders' money will be stuck forever until company liquidation or winding down, or otherwise bought or transferred to a willing private person or corporation. But unlike a listed company, a private limited company mostly doesn't allow transfers of shares   without board's approval. Thus company with huge amount of idle cash should consider returning capital to their shareholders, when their share prices are too low and not to use the cash for buy backs as I said it has little meaning.   |
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Hulumas
Supreme |
27-Jun-2011 10:36
Yells: "INVEST but not TRADE please!" |
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Back tracking to the genuine intention of listed company going public, just against their principles, your suggestion will not work! Only thing they might do set up a minimum of say > 38% of their contribution net profit translated into the forms of DIVIDEND & or  BONUS issue shares, & or SPECIAL SHARE PLACEMENT etc.
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Laulan
Master |
27-Jun-2011 10:20
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I would like to call upon all companies whose market share prices are far too low, i.e lower than their NAV or NTA per share, to consider reducing capital and make a capital repayment to their share holders to avoid idle cash being held unproductively.   If cash are not so abundant they could actually sell off some less priority assets for cash for such an exercise of capital repayment.   This will earn them good karma and since idle cash are not being used for the business, repaying the shareholders should be in the best interest of the market, although no good for long-term short sellers who are not shareholders actually.   Just don't buy back shares and placed them in the books as treasury shares since treasury shares have little meaning.   Just pay off the shareholders! There are too many companies whose share prices are way below market value. Responsible directors, kindly consider my advice. Cheers..     |
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