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Monex - share buyout problems

Posted On Friday, 06 July 2001 03:01 Published by eProp Commercial Property News
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Follow the big money. It was always touch and go whether 42% principal shareholder BoE would pitch a reasonably priced take-out offer to Monex minorities.

Property-Housing-ResidentialApparently it didn't. The price was too low. So some of the larger minority shareholders (including Investec and Old Mutual) rejected it, leaving BoE with no alternative but to underwrite a R220m Monex rights issue (terms not known yet) to refinance the company.
This was bad news for the property company and its minority shareholders, who have seen the share price tumble from 400c in 1999 to trade between 75c and 90c now even though a conservative NAV is about 280c. Many will have lost patience. They're tired of forking out cash to sustain a disappointing investment.
The only good news is that the larger minorities rejected BoE's proposed take-out price because it was too low. The inference is that they will continue to hold Monex shares at the present price (90c) and will follow their rights because they believe the company - and therefore its shares - has a potential that is being heavily discounted.
The ugly news is that many minorities are once more going to take a beating. They now have three choices. They can follow their rights to avoid substantial dilution; they can sell at the present low price; or, if they don't follow their rights, they can retain their diluted holding and hope for the best that Century City, Canal Walk and Monex's other brands will deliver better results than market analysts expect.
In principle, the best advice is: follow the big money and take up the rights. But don't expect any fireworks in the short term. It could take 18 months to two years before the share price responds to improving results. If Monex shareholders want faster action before then, they should sell. There are many other shares to buy that are likely to deliver sooner than Monex will.
Lastly, it makes no sense to continue holding Monex shares. The dilution effect is likely to be too great.

Last modified on Thursday, 24 April 2014 17:28

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