Privatisation matters

[dreamybear]

While welcome, minority shareholders may not be better off just by having more guidelines/regulations. For e.g. : Stock A has always traded around $0.50 - $0.75 with low valuations(P/E, P/B), low dividend yield for X years. An offeror comes along and offer $0.90 which IFA deems not "fair and reasonable" because of NAV considerations, etc.

In this scenario, it may be better for a shareholder to accept the offer and move on ? I think at least the shareholder now has a choice ?

If indeed so, I was thinking ....
1) one of the deeper issues cld be is the mgmt doing anything to address low valuations even if it cannot dictate the share price e.g. participation in investor roadshow, engaging with analysts, active participation in social media, SBB etc ?
2) Isn't the BOD supposed to be creating value for shareholders ?

If a company IPO at high valuations and privatize at low valuations, it's like shorting its own stock ???

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Industry lauds new IFA guidelines, but says more must be done to address issue of independence
https://www.straitstimes.com/business/in...dependence
"...Mr Lee said the perennial problem of low valuations and poor liquidity in the local stock market cannot be resolved by legal or regulatory means.... "

[Wildreamz]

Personally, yes. Opportunity cost matters, no point trying to second guess something (whether or not there is a better offer etc.) that is out of my control. Unless it's a company whose management I believe in, and the undervaluation is not dependent on asset value, but long term earnings growth.

[weijian]

If indeed so, I was thinking ....
1) one of the deeper issues cld be is the mgmt doing anything to address low valuations even if it cannot dictate the share price e.g. participation in investor roadshow, engaging with analysts, active participation in social media, SBB etc ?
2) Isn't the BOD supposed to be creating value for shareholders ?

For (1), as long as Mgt is creating growth, cash comes in and is shared with everyone, the share price will eventually move. We should not forget that the Market is a weighing machine over the long term, and the long term will come for the patient OPMI. There is really no need to spend too much time in roadshows/ analysts. I am not saying the participation is not important but in the local context, I realized focusing too much on it tend to hype up the stock a lot and when the business fails to perform, investors are in for a rude shock. And of course, the contrary is true too in the local context - too many companies stay the same weight over the long term

For (2), I do not think it is the fiduciary duty of the BOD to create value. IIRC, their fiduciary duties are mainly to keep to the company/listing rules and not commit fraud. So they can do their fiduciary duties without creating value. The only exception is when there is a takeover, then they have the fiduciary duty to accept the highest offer. But if there is only a single offerer (which often is the party that appointed them in the 1st place), then there isn't too much decision making involved....

[dreamybear]

If indeed so, I was thinking ....
1) one of the deeper issues cld be is the mgmt doing anything to address low valuations even if it cannot dictate the share price e.g. participation in investor roadshow, engaging with analysts, active participation in social media, SBB etc ?
2) Isn't the BOD supposed to be creating value for shareholders ?

For (1), as long as Mgt is creating growth, cash comes in and is shared with everyone, the share price will eventually move. We should not forget that the Market is a weighing machine over the long term, and the long term will come for the patient OPMI. There is really no need to spend too much time in roadshows/ analysts. I am not saying the participation is not important but in the local context, I realized focusing too much on it tend to hype up the stock a lot and when the business fails to perform, investors are in for a rude shock. And of course, the contrary is true too in the local context - too many companies stay the same weight over the long term

For (2), I do not think it is the fiduciary duty of the BOD to create value. IIRC, their fiduciary duties are mainly to keep to the company/listing rules and not commit fraud. So they can do their fiduciary duties without creating value. The only exception is when there is a takeover, then they have the fiduciary duty to accept the highest offer. But if there is only a single offerer (which often is the party that appointed them in the 1st place), then there isn't too much decision making involved....

The purpose may not be to hype. I am referring more to things like posting company updates(which are not critical enuff for sgx company announcement's), better articulation of company operations/strategy/growth prospects, better market(local/overseas) recognition of the company/company's brands) etc. 

Growth automatically benefits controlling shareholders, so by default there is probably full alignment of interests. 

However, the retail investor gets what is shared by the company and the rewards are also less certain(e.g. amt of dividends, share price appreciation). If the roles of IDs* are to provide checks-and-balance/safeguard minority interests, shdn't there be discussions abt what is the management doing to support a healthy market valuation of the company so that minority shareholders are treated fairly, e.g. the level of dividends/SBB instead of a "depressed" trading share price ?

IMO, for the weighing machine analogy the author was referring more to his home market/operating domain(framework, depth etc). It matters for retail investors how much the share price moves. If there is significant company growth but the share price moves only by little due to lacklustre interest, then market participants will not find it worthwhile and move on to more attractive markets. Then in the end, is it a "healthy" weighing machine ?

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*Independent Directors: Who are They and What is Their Role?
https://singaporelegaladvice.com/law-art...-who-role/