By Dawn Bennett. Originally published at ValueWalk.
Just exited my Dragon Ukrainian Property position at a touch over 15p. This is a pretty disappointing result. It is far less than the company’s NAV which is more than double this amount.
The tender offer has been accepted by over 50% (59.61%) of the shareholders at 15p. This means it will happen. The remaining shareholders have until August the first to tender (brokers may have earlier deadlines) If more than 75% accept it’s likely the company will be delisted, if 90% accept the minority gets squeezed out.
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Looking at who owns what, 90% will not be achieved and 75% seems very unlikely, but not impossible.
I think they were able to achieve this in part due to their RNS saying they would put another $5m into the oblon residences – drawing out capital returns. This could, of course, be a bluff on the part of management.
One of my few investing rules is I don’t go into companies with dominant shareholders (45%+). As a little guy I simply do not trust I will be treated fairly so I stay away. This has both saved and cost me quite a bit over the years… As with all rules, I will bend on occasion, but not this time.
I could be missing out – one likely option is another offer at a fairer price in 12-24 months time. Another option is a change in investing mandate/fall in the share price, though I think this is less likely. I suspect the remainder will be tightly held so there will be few interested sellers. Ukraine is a volatile environment to hold and I wouldn’t want to hold long term at this price, even though most of the property is in the safer east. I’m also increasingly nervous about delisting.
Not overly happy at this – I dont enjoy selling things for less than they are worth but in this case I think its the best way to proceed. Best way to do it is look for a bid north of 15p, or if you have to tender.
Made about 14% on my post in May.
I am up 33% against the post in February 2016. This isnt as good as it sounds as I had to wait much longer after the capital return…
I am struggling a bit for new ideas with markets looking pretty fairly valued. Ideas are, as ever, appreciated.
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