Silverlake Axis

[weijian]

It is understandable for Best World, who is suspended, to go for a EAO to allow shareholders an exit option AND work within the parameters of the share buyback mandate obtained in the AGM.

However, Silverlake is not suspended and trading freely on the market. Wouldn't it be better to just do a regular share buyback instead? For instance, GK Goh, with its excess cash and share price trading at <NAV, is doing a regular share buyback + cancellation of its shares. This has the twin effects of (1) returning cash to shareholders and (2) driving up the share price. Wouldn't the majority shareholder benefit more from a share buyback action instead?

[Squirrel]

It is understandable for Best World, who is suspended, to go for a EAO to allow shareholders an exit option AND work within the parameters of the share buyback mandate obtained in the AGM.

However, Silverlake is not suspended and trading freely on the market. Wouldn't it be better to just do a regular share buyback instead? For instance, GK Goh, with its excess cash and share price trading at <NAV, is doing a regular share buyback + cancellation of its shares. This has the twin effects of (1) returning cash to shareholders and (2) driving up the share price. Wouldn't the majority shareholder benefit more from a share buyback action instead?

That’s a very good question. On an average day, volume on the name would be between 2-3 million shares. In order to buy back 242 million shares, the company would need probably about 500 days assuming they are 20% of traded volume, which is more than 2 years of time.

So why would the company decide this? This is purely speculative on what follows next. Either

1) they really want to achieve the effect of a very large share buyback in a minimal amount of time for the best effect on the shareholders. Imagine everyone’s earnings ratio being boosted up by 10% immediately, or
2) the majority shareholder wants to achieve an increased shareholding without nudging up the share price. All in all, the only reason I can think of for this is that the majority shareholder wants to privatize and delist the company for cheap. Think of it this way, the free float is reduced significantly with this equal access offer, and the hurdle to getting more than 90% of shareholdings has suddenly gotten much lower. 

The main thing question now is, is the majority shareholder seeing something in the horizon ahead on the business performance that we don’t?

[weijian]

Hi Squirrel,
An action is meaningless if the intention is not taken into context. So the end goal of a share buyback is not to complete the share buyback. It is to deliver value to the decision maker.

(1) I think the Chairman would actually serve everyone (including himself) better by keeping to his abstract mathematical concepts (and managing the business), rather than financial engineering to have an "immediate 10% boast" to earnings.

(2) From the PR, it seems like Mgt has the flexibility to keep as treasury shares and/or cancel them in whichever portion they seem fit. So it is not a given that the majority shareholder will increase his portion after this this, although it would be the same effect if those treasury shares are used as currency for his next sale to the company.

As OPMIs, we have to live with this information asymmetry. But let's just say that there is really some perceived great opportunity lurking in the horizon, the logical action would be to do a general offer to mop up even more shares on the market! (why stop at this EAO that has a 9% ceiling)

[Squirrel]

Hi Squirrel,
An action is meaningless if the intention is not taken into context. So the end goal of a share buyback is not to complete the share buyback. It is to deliver value to the decision maker.

(1) I think the Chairman would actually serve everyone (including himself) better by keeping to his abstract mathematical concepts (and managing the business), rather than financial engineering to have an "immediate 10% boast" to earnings.

(2) From the PR, it seems like Mgt has the flexibility to keep as treasury shares and/or cancel them in whichever portion they seem fit. So it is not a given that the majority shareholder will increase his portion after this this, although it would be the same effect if those treasury shares are used as currency for his next sale to the company.

As OPMIs, we have to live with this information asymmetry. But let's just say that there is really some perceived great opportunity lurking in the horizon, the logical action would be to do a general offer to mop up even more shares on the market! (why stop at this EAO that has a 9% ceiling)

Honestly, I would tend to think of the Chairman from a more positive angle than negative. I understand that there has been discussions about related transactions in the past that brought about quite a huge drop in share price during then. Management has since learnt their lesson and reduced related transactions accordingly.

Anyway back to the above points. On 1), it might be simply the management thinking out of the box to try and deliver an immediate boost to shareholder value with cash in the company. It would probably be bang for the buck when the $80m is solely going towards purchasing shares from current shareholders (excluding the Chairman) at above current share price. Post purchase, all shareholders would benefit from a smaller share base. For Best World, I really think it is just bad that they put up such an EAO for a share that has halted trading for so long. Especially with the underlying business delivering robust results during the period it is suspended. Silverlake, definitely feels more shareholder friendly. You can choose not to tender and yet have liquidity available to sell at a later stage.

On 2), I assume as long as it is repurchased back, even if it is kept as treasury shares, it would be taken out of circulation. It can always be sold to raise cash or paid out as ESOP or used for M&A purporses, but that would bring on additional value to the company. In short, it reduces the amount of equity in circulation that benefits from the business or its dividends.

For your last point, just a very simple reason. By doing an EAO, the $80m is not coming from his pocket. It's coming from the company's cash balance. There is flexibility in what to do next. You do not have to risk with a bridging loan in order to take out the company (especially with the current volatility in the markets). And you get to reward current shareholders in the process.

I do have to emphasize. Even though my post earlier seems to speculate the aim being the majority shareholder trying to increase his shareholding, this whole exercise is hugely beneficial to minority shareholders. It gives the minority shareholders optionality. There are steps one can take in order to maximise their probable profits.

What I think is certain for sure from this exercise is

• The Chairman thinks that the shares are worth more than $0.33
  
• The percentage shareholding of the Chairman would increase after this exercise
  
• The exercise gives minority shareholders optionality to further improve returns on the position
  

It's a good development, would be my conclusion.

[¯|_(ツ)_/¯]

SLA@305
https://links.sgx.com/FileOpen/SAL%20-%2...eID=706948

A quick summary of EAO for valuebuddies who is keen to explore some arbitration opportunity:
SLA said on Monday that it would buy back up to 242m shares, or around 9% of its total issued shares, at 33 cents each off-market.

SLA had been my top 3 holdings and since 2015 short seller report, it's price had dropped from above $1 to about 20 cents in C19 crisis.  There are many reason why I pick up SLA - a particular striking one is it's steady and pervasive high profit businesses in regional financial sector.  Granted, Mr Goh is a chatty person but he does exhibit the right business acumen that I could understand. 

I'm not exactly sure why a EAO instead of the usual offer.  I will leave it to fellow valuebuddies to share the differences.  I suspect the correct reason is cost related aka it's cheaper (or faster) to launch a EAO instead of the normal offer.  Mr Goh had did his sum and EAO would be the best vehicle to buy-back a big chunk - proof of Symmetry At Work!

The question for opmi is this: 
Are you buying, selling or holding?

For me, my interest in SLA started when valuebuddies shared their view on the short seller stories.  I picked up SLA slowly at roughly 50cents and had been adding slowly now and then when the price drop.  From my observation, Mr Goh launch this financial engineering at the perfect time. Although the share price is not at the lowest, it is near the bottom.  Especially those who had brought a lot of SLA, this would be the best time to let go without crashing the market. (which I was waiting patiently for 23 cents to buy more)   

With this EAO, Mr Goh had show his hand. There will be subsequent buy-back and I wonder Mr Goh will withdraw back and wait out for the next crash or he would be more aggressive and make a higher offer.  This to me is not important.  What's important is Mr Goh intention of grabbing to a bigger pie is clear.  How and what is coming, will shows the reason why he did what he did now.

And, my decision is to buy more.  

Gratitude.
 
 

[¯|_(ツ)_/¯]

SLA@32



When you buy a company, do you want the share price to go up or down? 

SLA is one that I pyramid down.  Most of the time, I only buy shares that goes up. If it goes down, I won't buy.

SLA is an exception, for me.

I hope that this is a good learning experience for me. 



Gratitude.

[weijian]

You probably want to stay away from a jockey who has riding multiple horses in multiple competitions. Of course, that is unless you are Elon Musk.

Of course, YMMV.

OFFER OF SILVERLAKE PRIVATE ENTITIES

The Board of Directors (“Board”) of Silverlake Axis Ltd. (“Company” together with its subsidiaries, “Group”) wishes to announce that the Company has been approached by its Executive Chairman and ultimate controlling shareholder, Mr Goh Peng Ooi (“GPO”), with a request to indicate its possible interest to acquire GPO’s shareholding interests in various private entities owned by GPO (Silverlake Private Entities”) (“Proposed Acquisition”).

https://links.sgx.com/FileOpen/SAL%20-%2...eID=783380

[Alex018]

You probably want to stay away from a jockey who has riding multiple horses in multiple competitions. Of course, that is unless you are Elon Musk.

Of course, YMMV.

OFFER OF SILVERLAKE PRIVATE ENTITIES

The Board of Directors (“Board”) of Silverlake Axis Ltd. (“Company” together with its subsidiaries, “Group”) wishes to announce that the Company has been approached by its Executive Chairman and ultimate controlling shareholder, Mr Goh Peng Ooi (“GPO”), with a request to indicate its possible interest to acquire GPO’s shareholding interests in various private entities owned by GPO (Silverlake Private Entities”) (“Proposed Acquisition”).

https://links.sgx.com/FileOpen/SAL%20-%2...eID=783380

Sounds like PGO used silverlale axis to cash out his side business

[weijian]

Well, Mr Goh already owns 74% of the company as of last annual report. So no point buying him in shares I suppose. Or does he prefer cash?

THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF THE TARGET COMPANIES (AS DEFINED BELOW) AS AN INTERESTED PERSON TRANSACTION

The Proposed Acquisition will be funded by way of the internal cash resources of the Group.

https://links.sgx.com/FileOpen/The%20Pro...eID=804175

[dreamybear]

So why would the company decide this? This is purely speculative on what follows next. Either
......
2) the majority shareholder wants to achieve an increased shareholding without nudging up the share price. All in all, the only reason I can think of for this is that the majority shareholder wants to privatize and delist the company for cheap. Think of it this way, the free float is reduced significantly with this equal access offer, and the hurdle to getting more than 90% of shareholdings has suddenly gotten much lower. 

And so the privatization really happen some 2 years later .... and this one comes with options

This is not the only case of delisting after EAO, is it going to be a "playbook" for cash rich companies looking to privatize ?

https://www.businesstimes.com.sg/compani...ash-option
"A GROUP led by Silverlake Axis chairman Goh Peng Ooi has made a voluntary unconditional offer to take the enterprise technology company private at S$0.36 in cash per share, it was announced on Monday (Aug 26).

Alternatively, shareholders may choose to receive a combination of S$0.30 per share in cash, together with one new redeemable preference share (RPS) in the capital of the offeror, E2I, for each offer share.

New offeror RPSes are not and will not be listed on any securities exchange, and do not carry any voting or dividend rights. They will be mandatorily redeemed five years from their issuance at the redemption amount of S$0.18 apiece...."