Subscribe to this topicForums > General Investment Discussion > Topic: Seeking opinions
| Jun 2nd 2008, 08:26 Scott Nestler |
Seeking opinions | |
| Hello All, I attended the first shareholders meeting of Crystal Springs yesterday and I wanted to get some other opinions. http://www.csvc-sl.com/ 2 Companies, 1 with about 8-9 month of performance and IPO'd at 0.50L a share and trading at 0.69L a share. Second company 2 months of performance and IPO'd at 1.00L a share and trading at 1.00L a share. When merging the companies, what should be used to determine the ratio? Closing price, IPO price or what the CEO believes the company is worth. Thank you in advance, Scott Nestler FYI, NIC owns 202k shares in CSV and I am on the BOD of CSV |
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| Jun 2nd 2008, 08:30 Cash Yiyuan |
Re: Seeking opinions | |
| Closing Price and IPO price should be considered. CEO is just a figurehead of the company, not the ultimate say and end of all. |
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| Jun 2nd 2008, 09:43 Andy Grant |
Re: Seeking opinions | |
| None of the above, 30 day average. | ||
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| Jun 2nd 2008, 10:04 Bogart Beck |
Re: Seeking opinions | |
Thirty day average is a reasonable practice and is often used in RW acquisitions for valuation purposes. This is typically done to try to normalize a pricepoint because often news or rumors of deals are leaked to insiders and shareprices move unpredicably based on traders speculative bidding and general market sentiment as to whether the deal has merit. |
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| Jun 2nd 2008, 10:30 Delicious Demar |
Re: Seeking opinions | |
| If I could weigh in, I think you are placing too much trust on the accuracy and reliability of the markets. The exchanges all suffer from a lack of liquidity that makes share price a) volatile; and b) subject to both gaming and influence by a relatively small number of shareholders. I am NOT suggesting that this has occurred in this case, because I have not followed it closely. From what I understand, though, these companies have a lot of tangible assets - a large amount of cash in one of them from the IPO, and land assets in both of them. To some degree, the net asset value per share needs to be taken into account when deciding on a conversion rate, in order to provide some reasonable check against the vaguaries of the market... just a thought... dd |
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| Jun 2nd 2008, 10:51 Marc Attenborough |
Re: Seeking opinions | |
| I would agree with DD... the markets here are extrememly unefficient. In RL, IPO price has absolutely no bearing, and market price plays a small factor because of shareholder attitudes. When acquiring a company, you should be concerned with what the company is ACTUALLY worth, not what other people THINK its worth. For example, look at the recent RL acqusitions of Countrywide, Bear Stearns, and the attempt on Yahoo. It had nothing to do with share price, it was about the values of the companies themselves. In a merger situation like this, I think it would make the most sense to look at the basic valuation methods like cashflow, debt to income, and NAV of both companies and look at the pricing a new combined stock that propertly reflects that ACTUAL value of the company. If you ignore the true valuation then one company's shareholders will likely expirience diluted equity. Since a lot of companies in SL trade substantially over their book value, I can tell ya that this is not the popular answer, but I assure you that it is the correct one. |
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| Jun 2nd 2008, 10:54 Marc Attenborough |
Re: Seeking opinions | |
| Oh, and by the way, the CEO's opinion carries no weight either. This is basic math, not somone's overly optomistic value of their company. | ||
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| Jun 2nd 2008, 11:27 Sportsbets Writer |
Re: Seeking opinions
Edited by author Jun 2nd 2008, 11:45 |
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| That is good news for us CSLL shareholders :) Shareprize boosts from 0.65 to 0.99 just overnight ! CSLL was the better stock and way more profitable, so that "bonus" is fair and you CSVC Shareholders benfit also with the merger i think. Sportsbets Writer 31.000 CSLL Shares |
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| Jun 2nd 2008, 11:47 SynCere Talon |
Re: Seeking opinions | |
| I think Bogart and Delicious have valid ideas in the conversion. I really am not happy with the thought of the stocks I paid 1L per share being down graded to the current value of the other company that IPO'ed at .50. Not to mention the fact that the market prices across the board on the exchanges have had a dramatic drop over the past month. No matter how you slice it Bogart does not own stock in the CSLL company, he does own a conciderable amount in NIC, so yes he does have a "vested interest" in how this all plays out if it will affect his NIC shares, but only in relationship to that. If your gonna take that line of thought then we should all attend every meeting out there cause the companies are so intermingled in this way, and if Bogart has expressed a desire to attend a shareholder meeting and no policy says he can't then he should go. However being that he is not a shareholder the company does have a right to deny his request. I think matters could have been handled better. I also am not happy that personal opinions about competing exchanges are blatently bantered about at meetings and in forums. This is not good business, it not business at all and puts a bad light on all that participate in it. Each exchange does their business as they see fit, whether we agree with that or not. Instead we should be taking the opportunity to improve the quality of our own exchange policies and requirements. I know this is not a RL exchange, and no we don't want the stringent requirements of such, but isnt it funny how the historical evolution coinsides. If a CEO wishes to vote all his shares (which I dont agree is right) and set the conversion rate because there have been no formal policies set in place to circumvent the event then who is to blame? Does SLCAPEX have any policies in place for such mergers? Are any of these policies posted that the exchange shareholders may read. It has always been my understanding that a smart investor is an informed investor, (at least that is what I was taught RL). I plan on attending the next meeting and am hoping the CEO has sat down with the board to discuss all of this before hand. In RL at every company I have worked for the board has had the final word and the CEO is the mouth-piece, (and again I know this is SL not RL)but come on if RL worked like SL we all wouldnt be here. I would be most interested to hear the opinions of any RL financial experts that may be lerking around in the forums. |
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| Jun 2nd 2008, 11:48 iVentures Volitant |
Re: Seeking opinions | |
| In SL, public companies stock prices can be very volatile. There could be a wide price spread in the 30-day window, regardless of any big events announced, or stock prices can remain relatively flat. Another factor to consider is that there is also the risk that the price spread can be .05-.10 with under 100 shares, considering that the total outstanding shares are over 1M. This methodology wouldn't necessarily be a good indicator as the CEOs can have easily manipulated the stock prices within the timeframe. I wouldn't necessarily agree that the 30-day stock price average would be the methodology to be used with mergers in SL, even though in RL it's considered to be a common practice. A viable option would be the valuation of both companies based on its NBV/FMV. However, understand that the stated numbers are based on the CEOs estimates on the companies books of its assets and liabilities of the reporting period. If you consider Bear Stearns (no offense to them, but great example), their stock price was trading over $100, even above $120+ prior to its announcement regarding its insolvency. Why? Because even though shareholders "believe" that the company is worth about this amount, the company is "actually" worth much less since they were highly leveraging on their real estate holdings and most assets had to be written off. Also, I do not own any CSLL nor NIC positions, so these are merely my independent thoughts. iV |
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