Synear IPO in 2006 @ S$0.54 per share and delisted @ S$0.186 per share on 25 Nov 2013 Investors okay Synear delisting but some say offer price @ S$0.186 too low
7 Sep 2013
Investors have backed a move by frozen food company Synear Food Holdings to delist from the Singapore Exchange (SGX), although there were dissenting voices at a special general meeting on Wednesday. The motion to delist was backed by 95.22 per cent of the shares represented at the lengthy gathering at Laguna National Golf and Country Club.
The delisting and exit offer of 18.6 cents needed to be approved by at least 75 per cent of shareholders at the meeting and not opposed by 10 per cent or more. While the offer won overwhelming backing, some investors were unhappy at the price being offered for their stock.
A shareholder who wanted to be known only as Bernard told The Straits Times: "The emotion in the ballroom was charged, and many were unsatisfied with the proposed offer and said it was too low. The company's latest report said that net asset value per share... as at June 30 was 234.2 fen (or 48.8 cents), so why is there such a huge discrepancy?"
Another shareholder, who wanted to be known only as Madam Ng, 58, said in Mandarin that the offer was unfair: "There were a few shareholders who said they had bought Synear shares at more than $1 or $2, and this offer price is way below that."
The offer was put on the table in October last year through an announcement by Synear and special purpose vehicle Fortune Domain. Fortune Domain is owned by Synear executive chairman Li Wei, his cousin, Mr Fu Qiang, and the company's chief executive, Mr Wang Peng. The trio owned more than 50 per cent of Synear's shares.
An Aug 12 filing with the SGX indicated that investors holding more than 75 per cent of Synear's share capital intended to vote for the voluntary delisting.
This meant Wednesday's motion would have been carried unless shareholders with smaller stakes turned up or were appointed proxies to vote it down. While there was dissent, the level of opposition fell short of that needed to halt the delisting.
Synear listed in August 2006 with its shares priced at 54 cents. They hit a high of $2.44 on Oct 26, 2007. In a circular sent out to shareholders last month, independent financial advisers Ernst & Young Corporate Finance noted that the fairness of the offer depended on the financial ratios and price comparisons which one used to draw a conclusion.
For example, when the offer was made, it was at a 10.1 per cent premium of Synear's last traded price of 16.9 cents on Oct9 last year. Synear shares closed flat at 18.5 cents in Wednesday.The Gambler's FallacyGambling with Other People’s Money
Imagine a superb poker player who asks you for a loan to finance his nightly poker playing. For every $100 he gambles, he’s willing to put up $3 of his own money. He wants you to lend him the rest. You will not get a stake in his winning. Instead, he’ll give you a fixed rate of interest on your $97 loan.
The poker player likes this situation for two reasons. First, it minimizes his downside risk. He can only lose $3. Second, borrowing has a great effect on his investment — it gets leveraged. If his $100 bet ends up yielding $103, he has made a lot more than 3 percent — in fact, he has doubled his money. His $3 investment is now worth $6.
But why would you, the lender, play this game? It’s a pretty risky game for you. Suppose your friend starts out with a stake of $10,000 for the night, putting up $300 himself and borrowing $9,700 from you. If he loses anything more than 3 percent on the night, he can’t make good on your loan.
Not to worry — your friend is an extremely skilled and prudent poker player who knows when to hold ,em and when to fold ,em. He may lose a hand or two because poker is a game of chance, but by the end of the night, he’s always ahead. He always makes good on his debts to you. He has never had a losing evening. As a creditor of the poker player, this is all you care about. As long as he can make good on his debt, you’re fine. You care only about one thing — that he stays solvent so that he can repay his loan and you get your money back.
But the gambler cares about two things. Sure, he too wants to stay solvent. Insolvency wipes out his investment, which is always unpleasant — it’s bad for his reputation and hurts his chances of being able to use leverage in the future. But the gambler doesn’t just care about avoiding the downside. He also cares about the upside. As the lender, you don’t share in the upside; no matter how much money the gambler makes on his bets, you just get your promised amount of interest.
If there is a chance to win a lot of money, the gambler is willing to take a big risk. After all, his downside is small. He only has $3 at stake. To gain a really large pot of money, the gambler will take a chance on an inside straight.
As the lender of the bulk of his funds, you wouldn't want the gambler to take that chance. You know that when the leverage ratio — the ratio of borrowed funds to personal assets — is 32–1 ($9700 divided by $300), the gambler will take a lot more risk than you’d like. So you keep an eye on the gambler to make sure that he continues to be successful in his play.
But suppose the gambler becomes increasingly reckless. He begins to draw to an inside straight from time to time and pursue other high-risk strategies that require making very large bets that threaten his ability to make good on his promises to you. After all, it’s worth it to him. He’s not playing with very much of his own money. He is playing mostly with your money. How will you respond?
You might stop lending altogether, concerned that you will lose both your interest and your principal. Or you might look for ways to protect yourself. You might demand a higher rate of interest. You might ask the player to put up his own assets as collateral in case he is wiped out. You might impose a covenant that legally restricts the gambler’s behavior, barring him from drawing to an inside straight, for example.[/b][/b]