I am out of this counter. Big fish buying at discount to market. If the current market price is already considered to be undervalued. Why then does the management issue large amount of new shares at almost 10% discount to market price.
This compare to Hu An in which fund are buying at a premium for their stake. Hu An also have a better market position and competitive advantage as compare to Erata in the highly competitive market. I might be wrong but for me, i rather place my bet on Hu An.
Share price tank after CMIA and and a Mr KBK bought share at $0.2135. In the world of private equity, some said that a sucker is born everyday. Never mind promising the other party the moon and the cows as long as they know nothing is guarantee. That is not a joke, it is the rule. Eratat is just too eager to bring in high sounding name. So willing to pay such a high cost to bring in a fund. None the less it is result that counts. And the question is will the beauty contest gets better with the new shareholders.
At first I was sceptical too....nearly wanted to sell - but maybe I said to myself, give it 1 more day.
Phew! The stock is now 25.5 cents, as the market seems to see the positive side of the deal. Additionally, the purchase by CMIA should be a thumbs up to Eratat's 4Q results - coming soon. No fund manager would be so dumb as to buy a few weeks before a negative quarterly result. They would have sought assurance from the management that no bomb will be released. If they are lucky, they buy ahead of a stock price catalyst, such as a strong set of results. Dont know if this is the case here. Just have to wait & see....
Hi Happin, If the coming result will be good... why does the management short-change other shareholders by not issuing right issue? And do you really need that money so badly to give a 10% discount to market price when the share is already valued at 3-4x PE? You might be right that the fund may have the insight of the coming result.... but i think this is not right for the management to sell new shares at such low price. your thought?
I agree that management could have done better for all shareholders if this deal could wait until after a possibly good 4Q result & the stock price rose some more. Well, I spoke with my broker, and he said - Put yourself in the shoes of CMIA. U think they will agree? They of course wont agree to delay until after 4Q result cos they also expect good stock movement later - why would CMIA behave like a gongkia and pay more ? So those fund managers would have asked for the deal to be done before 4Q result - or no deal. Like that, the management may also be forced to make a quick decision....and the rest is history."
Sometimes I see a different perspective after talking to my broker. Sometimes we investors see from only 1 point of view.
It is a matter of who is in the stronger position. Is the fund manager in stronger position or the company management? If the management are forced to accept the deal, does this implied that they need this money urgently or there are other consideration?
