K1 Ventures

Yes, the GO is very likely to fail. But at 0.13 the valuation still seems to be cheap.

this is why one should always check the proportion of free float available.

So if the offer becomes unsuccessful, the price will fall to between 11-12 cents. This would be a good buying opportunity. The div yield would be more than 4%. Keppel and Steve Green could still up the offer if they wanted the company bad enough. They almost nearly got it in the bag. I think a 1- 2 cent increase will persuade the nos. needed to take K1 private to throw in the towel.

the market reaction is already saying that the floor is at 0.13.

if u buy the stock now, this is a very cheap option with massive convexity.

why sell it away for 1-2c more when u have so much upside with the given floor? risk-reward is favorable.

Am not advocating holders to sell. Just encouraging, the offerors to raise their offer price just a bit more and they will succeed.

(13-09-2012, 08:14 PM)VestedInterest Wrote: So if the offer becomes unsuccessful, the price will fall to between 11-12 cents. This would be a good buying opportunity. The div yield would be more than 4%. Keppel and Steve Green could still up the offer if they wanted the company bad enough. They almost nearly got it in the bag. I think a 1- 2 cent increase will persuade the nos. needed to take K1 private to throw in the towel.

In their last extension they already mentioned no upping of price. What amazes me is that if the offer fails then those who accepted will have their money returned.Why can't he just accept those money by those who accepted the offer. It will be become a partial offer acceptance. don't know what game is he playing here.anyone can offer an explanation

(13-09-2012, 09:31 PM)Jacmar Wrote: What amazes me is that if the offer fails then those who accepted will have their money returned.Why can't he just accept those money by those who accepted the offer. It will be become a partial offer acceptance. don't know what game is he playing here.anyone can offer an explanation

k1 is an evergreen fund, it doesn't have a wind-up date. That means that to grow it must either retain most of its profits, or regularly raise funds via placements or rights issues.

Steven Green will probably not want to do a rights issue because he owns 14% and will have to cough up a lot of money to avoid being diluted. That means placements would be his preferred method of fundraising.

A placement was in fact done to BV Investment in 2004 at $0.29 per share. However, today k1 trades well below its NAV. Any placement would be severely dilutive to existing shareholders, including Keppel and BV who would not be happy about it.

So Steven Green is stuck. He doesn't want to do a rights issue, and he can't do a placement. He can't make new investments until he sells the existing ones to raise cash. So one option is to drum up interest in k1 shares, to hopefully drive the price up to at least NAV which would allow a placement. But he can't just flog the shares in public. One solution is to make an offer. The takeover bid serves two purposes:

1. It draws attention to the fact that k1 is trading far below NAV; and
2. If people are dumb enough to tender their shares he will strike the jackpot

IMHO he was probably surprised that they went from 62% to 72% after the first closing. If they had 65% they would probably have abandoned the bid right there. But it seems they decided to try their luck to see how far they could go. They only reached 76% at the end of the second closing, so it looks like they've given up.

Why did they put in the 90% condition? Because at 90% they can force out the minorities and delist the company. Once they own 100% of the company they can extract much more cash from it by charging all sorts of fees. If the company remains listed, the only cash they can easily take out is via dividends.

(13-09-2012, 10:01 PM)d.o.g. Wrote:

(13-09-2012, 09:31 PM)Jacmar Wrote: What amazes me is that if the offer fails then those who accepted will have their money returned.Why can't he just accept those money by those who accepted the offer. It will be become a partial offer acceptance. don't know what game is he playing here.anyone can offer an explanation

k1 is an evergreen fund, it doesn't have a wind-up date. That means that to grow it must either retain most of its profits, or regularly raise funds via placements or rights issues.

Steven Green will probably not want to do a rights issue because he owns 14% and will have to cough up a lot of money to avoid being diluted. That means placements would be his preferred method of fundraising.

A placement was in fact done to BV Investment in 2004 at $0.29 per share. However, today k1 trades well below its NAV. Any placement would be severely dilutive to existing shareholders, including Keppel and BV who would not be happy about it.

So Steven Green is stuck. He doesn't want to do a rights issue, and he can't do a placement. He can't make new investments until he sells the existing ones to raise cash. So one option is to drum up interest in k1 shares, to hopefully drive the price up to at least NAV which would allow a placement. But he can't just flog the shares in public. One solution is to make an offer. The takeover bid serves two purposes:

1. It draws attention to the fact that k1 is trading far below NAV; and
2. If people are dumb enough to tender their shares he will strike the jackpot

IMHO he was probably surprised that they went from 62% to 72% after the first closing. If they had 65% they would probably have abandoned the bid right there. But it seems they decided to try their luck to see how far they could go. They only reached 76% at the end of the second closing, so it looks like they've given up.

Why did they put in the 90% condition? Because at 90% they can force out the minorities and delist the company. Once they own 100% of the company they can extract much more cash from it by charging all sorts of fees. If the company remains listed, the only cash they can easily take out is via dividends.

This still don't explain why he puts in the clause to return the money and not accept the 76-65=12% for those stupid enough to offer their shares.

That sounds rather complicated. My own thinking is

1) The offerors have the intention to try and privatise the company. They started with 0.135, probably with some further reserve in their banking facilities to raise the offer if the acceptances are ok. For some (whatever( reasons, they changed their mind later on in the process.

2) There are more flexibility on the things you can do to the capital structure of the company once you take it private. Helm has almost paid down its debt by now, and they have the option to relever that to extract cash for additional investments, which would be inconvenient to do with minorities asking for distributions plus the underlying leverage might not be acceptable for a publicly listed company.

3) At their level the management of a company such as K1 would have no shortage of "visitors" showing them "deals" that they could potentially do. What they have seen may have encouraged them to make the offer.

Just my thoughts and speculations. The offer is now likely to fail. But potential investors would do well to consider that K1 has a decent (or lucky) track record and their underlying investments are not a bad bunch. Whether this is a good investment - depends on what else you have on the table, their potential and timeframe to realisation.

(13-09-2012, 10:40 PM)Jacmar Wrote: This still don't explain why he puts in the clause to return the money and not accept the 76-65=12% for those stupid enough to offer their shares.

The way the takeover vehicle is constructed makes it difficult or even impossible for its members to split to loot fairly.