A good friend of mine, Ayush and his brother Pratyush write an excellent blog.
They have also recently started a new website http://www.screener.in/
This, I feel, is an excellent website for any serious investor. Not only does it give you screeners and filters, but it also gives you last 10 years' data as well as numerous value-adding content, email updates, etc.
Registration is free. Do make good use of it.
Disclosures;
1. I am not connected in any professional way with the above website.
2. One of the owners of the site, Ayush, is a good friend of mine. However, he did not tell me to write about/promote the site. In fact, to be honest, he does not even know that I am writing this post. My sole purpose behind writing this is that investors should be made aware of this good resource.
3. I am a user of the above mentioned site.
Sunday, September 23, 2012
Wednesday, September 12, 2012
A bit more on open offers..
I had recently written a post on the acceptance ratio in open offers and I got a lot of interesting feedback on the same on the blog as well as on email.
Someone claimed that there is nothing special or interesting in the actual acceptance ratio being so high vis-a-vis the theoretical acceptance ratio. Someone else thought that I have an itch to blog, which is why I have put up a useless post. :-)
Well, everybody has an opinion, which should be respected. But someone also suggested that a bit more details about open offers and the opportunity to earn in them would be helpful. I think thats a very valid suggestion, which is the reason for this post.
Even though I supposedly have an itch to blog, in this case, there is not much need for me to write about it. Kiran has already written on this topic in great detail. I would request that anyone who is interested in knowing more about open offer trades should go through the excellent post by Kiran. Kiran's post also contains a link to a word document, in which he has analysed the open offer in greater detail. Kindly go through the same too, I assure you that it will be extremely helpful.
After going through the same, I think you will appreciate the importance of acceptance ratio in open offers. And why the high actual acceptance ratio is actually such a big deal.
Hope this helped..
Cheers and happy investing!!
Disclaimer(s)!!
1) All the posts on this blog, including this one, are for educational and discussion purposes only.
2) I post articles on individual stocks as well as varied topics like behavioural finance, industry analysis etc. None of the material posted should be regarded as advice to buy/sell any stock. My articles are not recommendations to buy/sell individual stocks, and should not be construed as any form of investment advice.
3) I may have positions in stocks discussed. As a professional advisor, I advise clients regarding investments. They also may or may not have positions in stocks discussed, depending on their decision.
4) PLEASE DO NOT TAKE BUY/SELL OR ANY INVESTMENT DECISION BASED ON ARTICLES YOU READ ON THE BLOG. These are only meant to provide information and initiate discussion. Final decision is and always should be, yours and only yours!
Someone claimed that there is nothing special or interesting in the actual acceptance ratio being so high vis-a-vis the theoretical acceptance ratio. Someone else thought that I have an itch to blog, which is why I have put up a useless post. :-)
Well, everybody has an opinion, which should be respected. But someone also suggested that a bit more details about open offers and the opportunity to earn in them would be helpful. I think thats a very valid suggestion, which is the reason for this post.
Even though I supposedly have an itch to blog, in this case, there is not much need for me to write about it. Kiran has already written on this topic in great detail. I would request that anyone who is interested in knowing more about open offer trades should go through the excellent post by Kiran. Kiran's post also contains a link to a word document, in which he has analysed the open offer in greater detail. Kindly go through the same too, I assure you that it will be extremely helpful.
After going through the same, I think you will appreciate the importance of acceptance ratio in open offers. And why the high actual acceptance ratio is actually such a big deal.
Hope this helped..
Cheers and happy investing!!
Disclaimer(s)!!
1) All the posts on this blog, including this one, are for educational and discussion purposes only.
2) I post articles on individual stocks as well as varied topics like behavioural finance, industry analysis etc. None of the material posted should be regarded as advice to buy/sell any stock. My articles are not recommendations to buy/sell individual stocks, and should not be construed as any form of investment advice.
3) I may have positions in stocks discussed. As a professional advisor, I advise clients regarding investments. They also may or may not have positions in stocks discussed, depending on their decision.
4) PLEASE DO NOT TAKE BUY/SELL OR ANY INVESTMENT DECISION BASED ON ARTICLES YOU READ ON THE BLOG. These are only meant to provide information and initiate discussion. Final decision is and always should be, yours and only yours!
Monday, September 10, 2012
An interesting observation on open offers..
This post is a result of an over-a-cup-of-tea-discussion with Mr.Niren Parekh. Niren is a very good friend and an excellent investor. Also, he is too lazy to start a blog! The post is a result of an observation made originally by him and so I cannot claim this to be my own brain-work.
Open offers are excellent special situation cases. Although the absolute return in such offers is typically not very large, if done properly, they can offer excellent short-term returns with relatively less risk. Annualised returns in most cases will be in the high teens.
The amount of open offers have increased in the recent past due to increasing M&A activity and also due to low valuations, leading to promoters wanting to increase their stakes. This has led to some interesting opportunities for astute investors..
The Basics
Open offers get triggered for a variety of reasons. It could be as a result of change in ownership control of a company (e.g. ESAB) or it may be completely voluntary (e.g. Tata Sponge).
In an open offer, an existing or a new promoter (or a third party) makes an offer to acquire the shares of the non-promoter shareholders at a certain price, as mandated by law.
After following the entire legal procedure, the promoter opens this offer and the non-promoters shareholders tender their shares in the open offer.
The Acceptance Ratio
Lets suppose that ABC Ltd has a total share capital consisting of 500 equity shares. Current promoter holds 200 shares, making his holding 40%. Non-promoter shareholders hold 300 shares, making their holding 60%. Now, to increase his stake, the promoter makes an open offer for an additional 20% (100 shares).
The non-promoter shareholders will tender their shares in the open offer. Total non-promoter shares are 300, out of which the promoter wants only 100, making the acceptance ratio 33%. Which means, out of every 3 shares tendered by non-promoter shareholders, only 1 will be accepted by the promoter and money will be paid for it. The remaining 2 shares will be returned back to the shareholders.
Now, this entire calculation is based on the assumption that all non-promoter shareholders will tender. What if some of the non-promoter shareholders are not interested in tendering? Then, with respect to those who do tender, the promoter will accept more than 33%. (Finally, he wants 100 shares. From whom and how much they come, doesnt matter!)
So, the theoretical acceptance ratio we calculate before the open offer begins and the actual acceptance ratio we see after the offer ends can be vastly different. This happens because some shareholders are not interested in tendering. Some others do not know what tendering means and completely miss the open offer! So, for those who do tender, the acceptance ratio becomes higher! This is where an astute special situations investor can make money.
Let us look at a few open offers in the recent past.
Now what we see is a HUGE difference between the theoretical and actual acceptance. This tells us that there is a high proportion of investors who have not been tendering in the open offers, investors who can also be referred to as brain-dead investors in a lighter vein! Even in the case of Akzo and Thomas Cook, the acceptance ratio has been phenomenally high. Specially in the case of Akzo, it was 100% for the small shareholder category. Any special situations investor who would have participated in these offers would have made a LOT of money. (I have not shown the annualised returns in these open offers here, since thats not the topic of this post.)
Of course the question arises..how can one profit from this observation? Can we make some educated guess as to how much will the actual acceptance ratio be, so that positions can be taken accordingly?
I have been tinkering with various factors like the extent of 'retail' and small shareholders, % of shares in physical form, etc. But so far, I have been unable to figure out a way in which the actual acceptance ratio can be predicted with fair certainty..well, the search continues!
I eagerly look forward to the open offers of Shanthi Gears and Future Capital. Lets see if this trend continues.
Till then..
Cheers and happy investing!!
P.S. This post is only to point out the extent to which the 'brain-dead investors' exist in open offers. Therefore, no discussion has been done on the returns in these offers, taxation implication, time and legal risks etc.
Disclaimer(s)!!
1) All the posts on this blog, including this one, are for educational and discussion purposes only.
2) I post articles on individual stocks as well as varied topics like behavioural finance, industry analysis etc. None of the material posted should be regarded as advice to buy/sell any stock. My articles are not recommendations to buy/sell individual stocks, and should not be construed as any form of investment advice.
3) I may have positions in stocks discussed. As a professional advisor, I advise clients regarding investments. They also may or may not have positions in stocks discussed, depending on their decision.
4) PLEASE DO NOT TAKE BUY/SELL OR ANY INVESTMENT DECISION BASED ON ARTICLES YOU READ ON THE BLOG. These are only meant to provide information and initiate discussion. Final decision is and always should be, yours and only yours!
Open offers are excellent special situation cases. Although the absolute return in such offers is typically not very large, if done properly, they can offer excellent short-term returns with relatively less risk. Annualised returns in most cases will be in the high teens.
The amount of open offers have increased in the recent past due to increasing M&A activity and also due to low valuations, leading to promoters wanting to increase their stakes. This has led to some interesting opportunities for astute investors..
The Basics
Open offers get triggered for a variety of reasons. It could be as a result of change in ownership control of a company (e.g. ESAB) or it may be completely voluntary (e.g. Tata Sponge).
In an open offer, an existing or a new promoter (or a third party) makes an offer to acquire the shares of the non-promoter shareholders at a certain price, as mandated by law.
After following the entire legal procedure, the promoter opens this offer and the non-promoters shareholders tender their shares in the open offer.
The Acceptance Ratio
Lets suppose that ABC Ltd has a total share capital consisting of 500 equity shares. Current promoter holds 200 shares, making his holding 40%. Non-promoter shareholders hold 300 shares, making their holding 60%. Now, to increase his stake, the promoter makes an open offer for an additional 20% (100 shares).
The non-promoter shareholders will tender their shares in the open offer. Total non-promoter shares are 300, out of which the promoter wants only 100, making the acceptance ratio 33%. Which means, out of every 3 shares tendered by non-promoter shareholders, only 1 will be accepted by the promoter and money will be paid for it. The remaining 2 shares will be returned back to the shareholders.
Now, this entire calculation is based on the assumption that all non-promoter shareholders will tender. What if some of the non-promoter shareholders are not interested in tendering? Then, with respect to those who do tender, the promoter will accept more than 33%. (Finally, he wants 100 shares. From whom and how much they come, doesnt matter!)
So, the theoretical acceptance ratio we calculate before the open offer begins and the actual acceptance ratio we see after the offer ends can be vastly different. This happens because some shareholders are not interested in tendering. Some others do not know what tendering means and completely miss the open offer! So, for those who do tender, the acceptance ratio becomes higher! This is where an astute special situations investor can make money.
Let us look at a few open offers in the recent past.
Now what we see is a HUGE difference between the theoretical and actual acceptance. This tells us that there is a high proportion of investors who have not been tendering in the open offers, investors who can also be referred to as brain-dead investors in a lighter vein! Even in the case of Akzo and Thomas Cook, the acceptance ratio has been phenomenally high. Specially in the case of Akzo, it was 100% for the small shareholder category. Any special situations investor who would have participated in these offers would have made a LOT of money. (I have not shown the annualised returns in these open offers here, since thats not the topic of this post.)
Of course the question arises..how can one profit from this observation? Can we make some educated guess as to how much will the actual acceptance ratio be, so that positions can be taken accordingly?
I have been tinkering with various factors like the extent of 'retail' and small shareholders, % of shares in physical form, etc. But so far, I have been unable to figure out a way in which the actual acceptance ratio can be predicted with fair certainty..well, the search continues!
I eagerly look forward to the open offers of Shanthi Gears and Future Capital. Lets see if this trend continues.
Till then..
Cheers and happy investing!!
P.S. This post is only to point out the extent to which the 'brain-dead investors' exist in open offers. Therefore, no discussion has been done on the returns in these offers, taxation implication, time and legal risks etc.
Disclaimer(s)!!
1) All the posts on this blog, including this one, are for educational and discussion purposes only.
2) I post articles on individual stocks as well as varied topics like behavioural finance, industry analysis etc. None of the material posted should be regarded as advice to buy/sell any stock. My articles are not recommendations to buy/sell individual stocks, and should not be construed as any form of investment advice.
3) I may have positions in stocks discussed. As a professional advisor, I advise clients regarding investments. They also may or may not have positions in stocks discussed, depending on their decision.
4) PLEASE DO NOT TAKE BUY/SELL OR ANY INVESTMENT DECISION BASED ON ARTICLES YOU READ ON THE BLOG. These are only meant to provide information and initiate discussion. Final decision is and always should be, yours and only yours!