Delisted by Promotors - Boon or Curse
Printed From: The Equity Desk
Category: Market Strategies
Forum Name: Fundamental
Forum Discription: Discuss the operations and finances of any of your companies.Make the other participants aware on the investment opportunities available in a stock on PE free cash flow etc
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=1175
Printed Date: 04/May/2025 at 12:58pm
Topic: Delisted by Promotors - Boon or Curse
Posted By: prosperity
Subject: Delisted by Promotors - Boon or Curse
Date Posted: 01/Sep/2007 at 12:09pm
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Because i do not want to talk in air, i am taking a specific example of Hindustan Zinc plans of getting delisted by promoters after they acquire remaining big percentage from Govt (really soon) ... But still this topic of companies getting delisted because promoters holding goes above 90percent and they no more want it to be listed ....
This topic is a general topic and Hindustan Zinc is just a case in point ..
1) Assume that i am bullish on Hindustan Zinc for next 5 years, for whatever reasons (lets not debate those reasons here - one can have different thread if one wants to on that)
2) Now company's shareholding crosses 90percent and they have right to get it de-listed ... and asks me to tender all my shares ...
3) But being bullish for next 5 years, i feel whatever company is giving to take back my shares is much lesser than what company should be valued at ...
4) Do i have the option of retaining my shares and making a fortune out of it ..... But how ? - If the shares are not traded ...
Question 1) Are they still deemed as shares and me having a percentage holding in the company ?
Question 2) If yes, then can i sell it to the company anytime later that i want (after 5 years) ?
Question 3) For these 5 years, Would i be getting dividends etc. on shares which are not listed ...
Can someone throw some light on above ....
PS: Hindustan Zinc: if it gets delisted - the holding company i.e. Sterlite would now change from holding company to be having Hind Zinc as 100percent subsidiary - and holding company discount would vanish (if at all present) ... This is a side thought but lets focus on main points/questions above !!
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Replies:
Posted By: kulman
Date Posted: 01/Sep/2007 at 12:32pm
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Can some good soul throw some light on above ....
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Though I don't fit into this qualification criteria still let me post what I feel-
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: smartcat
Date Posted: 01/Sep/2007 at 12:53pm
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>> good soul
>> qualification criteria
I'm disqualified too. If everybody keeps this sort of criteria, I don't know how I'll be able to increase my post count.
Personally, if the promoter wants to sell, I would give away my shares - even if I have an idea about what the value of the share should be. But as long I'm making a decent profit.
For me, management's intent to delist implies shareholder unfriendliness. I wouldn't want to be left holding the heavy baggage. Holding on to shares (like iflex shareholders are doing) reeks of 'shareholder activism' - which we retail investors should not indulge in.
There are lots of other juicy low-hanging fruits to pick. What's the point in holding on to illiquid shares?
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Posted By: prosperity
Date Posted: 01/Sep/2007 at 1:14pm
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Thanks Kulmanji and SmartCatji for your responses ....
A good soul is one who helps out others with no selfishness in mind ... And the fact that you answered my questions prove that you folks are good soul ..
I am impressed by the humbleness which you (specially Kulmanji) have ..
BTW, i have corrected my words from "good soul" to "anyone" since your humbleness ne mujhe sharminda kar diya
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Posted By: kulman
Date Posted: 01/Sep/2007 at 1:43pm
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And the fact that you answered my questions prove that you folks are good soul ..
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Hurray!!!
 You know what....I have shown your message to my wife with whom I had an arguement this morning over this same issue. Thanks for supporting me !
The sad part is still she isn't fully convinced!
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: Vivek Sukhani
Date Posted: 01/Sep/2007 at 3:40pm
| Buy-back if done through reverse book building is a wonderful thing. Buying from open markets is discouraging. The delisting offer price should be arrived at by reverse book building mechanism. Prosperity, buying back and getting it delisted is fine so long as they dont force me to close out. I am holding shares of cadbury's and the company is also increasing its offer price and I am enjoying my ride. Also, it makes a lazy but quite a decent stock for me in the sense that other FMCG stocks are underperforming....its all garaz ki raz-niti.......one who is more eager has to pay and one who is not so willing will get more.....let the promoters show the intent, I will take a call how much they will jack up their offer. I for one enjoy these special event games. See, most of these MNCs will delist its only a matter of time....when a company like HUL has jumped in the fray, its only a matter of time, so play your game without bothering so much.....at least these stocks wont give you wild swings...treat them as high yielding bonds and trust you me at times bonds do better than stock....... |
Posted By: prosperity
Date Posted: 01/Sep/2007 at 4:29pm
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Vivek ji,
Thanks for your reply. I am interested in knowing more details of your Cadbury's delisting story ... I knew nothing and on your mentioning of it - googled and am aware of following:
http://www.cadburyschweppes.com/EN/MediaCentre/PressReleases/holding_exceeds_90percent_25-02-02.htm - http://www.cadburyschweppes.com/EN/MediaCentre/PressReleases/holding_exceeds_90percent_25-02-02.htm
http://www.moneypore.com/DtCadburyQ2FY03.htm - http://www.moneypore.com/DtCadburyQ2FY03.htm
http://findarticles.com/p/articles/mi_m0DQA/is_2002_March_14/ai_84147170 - http://findarticles.com/p/articles/mi_m0DQA/is_2002_March_14/ai_84147170
But after second open offer at same rate (Rs. 500) in JUNE 2002 - did they managed to increase their shareholding from 90.2 percent to what ?
And you say - you still holding it ... after 4 years of getting delisted from bourses ?
how has the ride been (4 yrs holding without it being traded on exchanges) .... can you pls. share the details ...
ALL,
any advise specifically on hindustan zinc delisting, considering that i (shareholder) is very bullish on zinc for next 5 yrs ...
Thanx !!
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Posted By: smartcat
Date Posted: 01/Sep/2007 at 4:31pm
To me, it looks like you are holding something precious that Cadbury wants and you are demanding a big ransom. Please give back the shares to the company or else their CEO might go bald.
Any stock that we hold should have -
- Good liquidity. If I want money for some reason, I should be able to sell my shares and get the cash in 2 days. This is not possible in delisted shares.
- Price discovery mechanism. Only listed shares with daily buying/selling can have this.
If the delisted stock constitutes a small percentage of the overall portfolio, then 'playing games' is fine I guess. But if Hind Zinc (for eg) is 10% of portfolio, I wouldn't be able to sleep well at night if it delists.
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Posted By: smartcat
Date Posted: 01/Sep/2007 at 4:33pm
| Sell Hind Zinc, buy Sterlite. Are you bearish on Copper by any chance? |
Posted By: prosperity
Date Posted: 01/Sep/2007 at 4:34pm
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Also what do you mean by "so long as they dont force me to close out"
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Posted By: kulman
Date Posted: 01/Sep/2007 at 4:39pm
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Another major disadvantage of delisted companies, according to some participants is their price charts can't be plotted to arrive at supports, resistances and targets.
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: prosperity
Date Posted: 01/Sep/2007 at 4:41pm
In non-ferrous : I am bullish ONLY on ZINC and LEAD like anything (high OVERWEIGHT RATINGS TO ZINC/LEAD)
I do NOT want to own a market performer like Copper (hence don't want to own Sterlite)
And i know Anil Agarwal also feels the same.... He has said that publically to Shareholders in Vedanta's results summary (2-3 quarters back)... that he is very bullish on Zinc/Lead and not so much on others !!
I have more reasons for my bullishness but that should be a separate thread ....
On the side-note, I wish TV18 to be delisted and only NETWK18 to be listed for reducing the holding company discount ! They can change my TV18 shares to NETWK18 shares ..... GBN they cannot delist .... But WEB18 should be listed ... Waiting for Raghav Bhal to accumulate money through his TV18/personal ventures so that he can has enough cash to get TV18 delisted !!
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Posted By: smartcat
Date Posted: 01/Sep/2007 at 4:52pm
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Posted By: kulman
Date Posted: 01/Sep/2007 at 5:00pm
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thanks SmartCat....I didn't realise this.
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 01/Sep/2007 at 5:06pm
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But on the charts there would be huge gasps!!!I know that the chatlal still has about 15% of his initial eserve position with him. That is what you call a love for a stock or is that another Buffet out there - closing the exchange for 10 years!
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 01/Sep/2007 at 5:07pm
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Well, dad had reckitt and colman in his account....and the management had a court verdict in its favour and so he had to surrender his shares. Although at a profit but I would have never given the share in any other case as I am such a loyal user of Dettol. This is what I mean by closing out the same thing happened in case of sterlite. the management sent a cheque and then sent a later that if you encash the cash it will be deemed that you have accepted the offer. He got tricked and got the cheque encashed. From that day on, he hasnt touched a single share of sterlite group. He has india Foils in a small quantity although a major portion I liuidated when the takeover news was in buzz.
I am toying with the management in case of cadbury's, Organon(formerly, Infar), Ondeo Nalco and SKF. would have liked to do that with syngenta as well but decided against it as the price became a bit too mouth watering. I played a game with abbott as well and although i offered in the buyback but bought more before the offer expired. alfa Laval i didnt participate and will buy more tickets if comes to 940-960 levels.
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Posted By: prosperity
Date Posted: 01/Sep/2007 at 5:23pm
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Thanks for those details Vivekji ... You seem to have lots of experience in dealing with delisting offers from promoters !!
BASANT-JI,
you have posted on the topic but have not answered my questions... I am feeling more assured that i have annoyed you deeply ... If not, please answer my first post on this topic ...
Basantji, I have learnt a lot from you and TED ... so much so that i was on verge of forgetting "my own style of investing"
On your insight of never buy a cyclical for long term, i sold out my entire ONGC and bought TV18 which grew more than 3 times... i was also wanting to do that ... but your thoughts gave me the final kick .. or chingari .. to do that ...
But i was also contemplating to sell my Tisco holdings over past year ... good that i did NOT sell it ... because TISCO is very different from ONGC ... eventhough both are commodites ... and Hindustan Zinc has been superb !
Now i am consciously controlling your influence on me ... because i was on the verge of forgetting my investing style ...
- I am thankful to you and TED that i sold out ONGC and invested in TV18
- I am thankful to myself that i prevented myself selling out TISCO, which i was contemplating so many times, because i started thinking that yes, commodities are not for long term...
Strong words came, because above was a very strong revelation of what was happening with my emotion deep within me, which i was unaware for almost a year !!
I guess i have summed up myself on this ... Hope you forgive me for my strong words ...
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Posted By: Vivek Sukhani
Date Posted: 01/Sep/2007 at 7:12pm
| Well, I dont think a team will ever grow if members dont fight or question each other. But, the purpose must be for the team , of the team, by the team. You have to develop a sense that either the team wins or the team loses....no individuality over there. Basant sir is not to be thanked for TV-18......too petty a thing. If tomorrow he goes wrong in something, will you rise up against him or what........stocks are too petty a thing over bonding. In my opinion he has been a teacher par excellence. Just yesterday, I was having a discussion with my mentor cum employer cum guardian, and my dad just said that in stocks you just work out how much downside it has for when a thing will go up, no one knows.....I admire my dad's humility just as I do with basant sir. We must respect that markets may make them wrong anytime....they are no Gods, but they have an inspirtional value but at the end of the day we will like to be called by our names but will always liked to reminded that what we become is very hugely owed to our mentors. In markets, I may get into a stock which they wont like and yet outsmart them, but that shouldnt be used to belittle them. I generally never say good things about TED or basant sir, for I am of the strong opinion, what you think and feel for a person is always known by that person, and if you dont speak it the better he knows that......for me, its either we pass or we fail...I pass and you fail or i fail and you pass is not a scenario. I will never buy a dish or a nucleus but for people who have conviction, I will try to put my charting studies so that they may average properly. You have said something for ONGC.....trust you me, there are very very few stocks which carry as much value as does ONGC but am I wrong in backing this stock and its price has not moved......sure, I may be labelled a loser but I dont care, for deep down i have so much deep faith on this that I CANT BE LOSER IN THIS. So, brother prosperity, never worry for such incidents for at least you have been brave enough to question and Basant sir will never be wrong to you...believe you me, if there's anyone who has been a thorn in basant sir's discussion, it is vivek Sukhani and it is because I know this, i can say that dont have such illusions like he is angry or unforgiving..... |
Posted By: basant
Date Posted: 01/Sep/2007 at 7:33pm
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Thank you Vivek for sending my point across. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 01/Sep/2007 at 8:01pm
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On a personal note Prosperity jee, your words were very sincere and I liked them a lot. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: smartcat
Date Posted: 01/Sep/2007 at 8:33pm
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I wonder what kind of returns can be made by blindly buying shares of a company that intends to delist. What has been the average offer price over the current market price? 20% atleast? And then, there is a further upside when the management ups the offer price.
Isn't Bosch trying to delist MICO? Any other delisting candidates?
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Posted By: kulman
Date Posted: 02/Sep/2007 at 9:26am
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It may not be relevant here.....Not sure if this helps answer SmartCat's query... Open season Should investors press the sell button when open offers come at a premium to prevailing share prices? A ready reckoner.
According to Sebi data, there were 132 open offers in 2005, 105 open offers in 2006 and 67 offers so far this calendar year. In many cases, the acquiring companies have paid or are paying hefty premiums for buying out target companies.
In such a situation the million-rupee question for the shareholder of these companies is whether they should sell out to the acquiring company or hold on to their stake.
Analysts advise short-term investors to exit the target company. However, long-term and patient investors may stay invested depending on the fundamentals of the business.
When it comes to taking a decision of whether to hold or sell out, investors should consider factors like target company’s competitive position, growth prospects, industry outlook, premium offered, valuations, the acquirer entity and management control of the target company. If the acquirer has a substantial stake in the target company after open offer, there is a possibility of de-listing of the shares in the future.
Says Agarwal, “Most MNCs look at open offers to delist from the bourses and to do away with the various regulatory norms.” For example, companies like Philips and Cadbury have been delisted.
If the promoters are planning to delist the company, there is no reason to be in the stock.
Also, investors have to remember that when they tender shares in open offer, the tax liability is higher than what it would be were they to sell on the stock market.
Source: http://www.business-standard.com/general/storypage.php?&autono=296580 -
Source: http://www.business-standard.com/general/storypage.php?&autono=296580 - ------------- Life can only be understood backwards—but it must be lived forwards |
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Posted By: basant
Date Posted: 02/Sep/2007 at 10:34am
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Absolutely relevant. But before we make a blanket conclusion that stocks rise post the open offers (which they normally do) we should see that the time line in the above thesis is within a full blown bull market so to that extent the monry would have grown had the investor taken his money and put it in some other stock.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: prosperity
Date Posted: 03/Sep/2007 at 12:25pm
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Small Note: Most/All of these are NOT delisting candidates - otherwise how do we know their market price if they really are delisted after the open offer ...
I believe these are open offers different than delisting offers !
In that sense, i guess - Kulmanji was trying to say that this might be irrelevant to this topic of delisting ....
But still a good article ..
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Posted By: Vivek Sukhani
Date Posted: 03/Sep/2007 at 10:13am
Basant Sir, most of the investors are not as intelligent as you are in being able to locate how long will a bull market last and which of the stocks will outperform etc etc. A company going for a buyback doesnt fll in the eventuality of a stock market crash/correction. so, everytime a normal not-so-intelligent investor must go for buyback kinda stocks just for an accasional outperformance and for safety. Hindalco has done much better than Sesa in the last 1 year, but compare the stock market prices of the 2 companies. auto ancilliaries have got tossed and forgotten but what about MICO. Where has Monsanto gone in last 2 years, but look at syngenta....All i am saying is that one doesnt know future with any certainty and so as much we can ascertain our returns within the overall realm( meaning, FD is not an option), we should get into them. I recently made an entry into ballarpur because of its buy-back offer. I worked out that for a small shaereholder, the buy-back price is coming out to be 140 rupees per share pre-split in case he decides to offload all his shares in the buyback so it became a crying buy at 124 when the offer was announced and i was so surprised that even after the day I managed to get it 124 odd....most probably all analysts would have been sleeping then, I beleive. Now 140 is assured for a small shareholder, so there is no issue in whether the shares will be accepted in the offer. Important term here is small. Now, for Ambuja Cements, I have done my calculations as follows. Holcim already holds nearly 30 p.c. so, assuming all free float is offered for buyback , 2/7 of them will at least be accepted( as 20 p.c. is being offered for buy-back and 70 p.c. will be what will be offered). Now, suppose if someone buys 70 tickets at 135, his 20 tickets at least will be accepted for buy-back. So, for the balance 50 tickets his costing works out to be ((70*135)-(20*154))/50 which is roughly 127....now one should take a call based on this worst case scenario. If you are comfortable keeping an Ambuja for 127, one should get into Ambuja else you can ignore that. When the company goes for delisting. the intention becomes more of desperation so the investors/traders play on that des[peration and make a very fast buck.....
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