Friday, 18 April 2014

Maybulk: EGM on April 17, 2014 (2)

Yesterday the EGM of Maybulk was held to acquire even more shares in POSH with the purpose of holding a minimum equity of at least 20%. The resolution was carried by an overwhelming majority:

I hope the minority investors did have the opportunity to voice any concerns they might have had, I haven't read any newspaper articles describing the EGM as of now.

In the mean time, the details of the POSH IPO at the SGX are revealed:
  • Price per share S$ 1.15, near the bottom of the pricing range of S$ 1.13 to S$ 1.24;
  • Amount to be raised: S$ 383 Million;
  • Listing date: April 25, 2014.

To compare these prices with those paid by Maybulk, a few conversions have to be made:
  • Maybulk is a Malaysian company accounting in RM;
  • POSH is a Singaporean company accounting in S$, 1 S$ = RM 2.59;
  • The deal between Maybulk and POSH was done in USD, 1 USD = RM 3.24 or S$ 1.25;
  • Next to that, shares of POSH have just been split, 7.5 new shares for 1 old share.

In other words, for each share Maybulk bought in 2008 for USD 6.50, it will now own 7.5 shares bought at USD 0.87, or S$ 1.083. That means that the POSH shares that Maybulk bought in 2008 have appreciated by only 5.8% (one measly per cent per year), using the IPO price as benchmark.

However, things are worse when counted in RM: in 2008 1 USD was equal to RM 3.52, in other words the USD (and thus the investment in USD) is devalued by 8.0%. So actually Maybulk is sitting on a small loss for it shares it bought in 2008.

The shares it bought at the Rights Issue are faring better, they were bought at a price of USD 4.00. But that offer was open to all shareholders of POSH. The question is if that was indeed correct (from a legal point if view), given the irrevocable undertaking by PCL towards Maybulk. I think that offer could not have been made, and a legal expert (who I asked for advice in this matter) agreed with me. A rather strange affair.

Returning back to the issue of the EGM, the real issue at hand was if the Put Option (giving Maybulk a return of 25% on its investment of 2008) should have been exercised, that at least would have given some profit on its investment, even given the depreciation of the USD vs the RM.

That money could then have been used for a massive dividend to all of its shareholders, who could then decide what to do with the money. One option would be to buy POSH shares (either by subscribing to the IPO or by buying in the open market), not only at a lower price than was received  through the Put Option, but also with each shareholder directly in control (receiving dividends straight in their wallet, and the avoidance of the holding group discount, typically 30-40%).

But that Put Option was never decided on in the EGM, despite the huge size of it (close to RM 1 Billion) and it being a RPT. Another rather strange affair.

For the sake of the minority investors in Maybulk, I hope that in the long run the investment of POSH does work out, and that either there will be some profitable exit down the round, or that POSH does start paying substantial dividends to Maybulk (until now the amounts have been tiny).

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