Stock is down 7.4% as I am typing.. I believe it would continue to head downwards, as this would be lengthy and involve a huge cost to SCB, and potentially exit from US (very, very small chance).
**Currently it is trading in London close to 24% down from previous close.
For a company with a market cap of roughly 35billion and being down 25% is a whopping 8.75 billion, I do not think there is much more downside, given their exposure to US is probably like 20% of their business. Probably they get fine a couple billion dollars. Do not see it going down much further today. Probably rebound when more information comes to light. However as in any fraud cases, you'll never know the stupidity of some people.
Staying away from this one for now. Speculative bet would be to buy.
Tuesday, August 7, 2012
Knight Capital Group..a lifeline US$400m.. an opportunity?
A bit of divergence from Merger Arb to event trades. Caught my eye although it is not in Asia.
Well it seems that the firm has secured sales of $400 million dollars worth of convertible/preference shares which can be converted to common stocks at $1.50. The major investors are Getco, Blackstone, Jefferies, TD Ameritrade, Stephens and Stifel.
If we just calculate a theoretical price based on number of shares and current price,
We get to this figure of $1.91 as the expected share price of Knight Capital. However for Getco and Blackstone to continue having a member on the board, they have to keep at least 25% of the preference shares subscribed. Same goes to Jefferies if they want to have a say on the third additional board member. So theo price should be higher, calculated by my system to be $2.19.
Another way of looking at this is using projection of earnings and divide by the number of new outstanding shares to get the EPS. Use a P/E to project where the price would be.
Did a very simple example
Well, I would think that it would be highly unlikely that the P/E would be at 15, but there is a small chance of it going back there.
More like it will take some time to recover to those levels. I am looking to short Knight.
Well it seems that the firm has secured sales of $400 million dollars worth of convertible/preference shares which can be converted to common stocks at $1.50. The major investors are Getco, Blackstone, Jefferies, TD Ameritrade, Stephens and Stifel.
If we just calculate a theoretical price based on number of shares and current price,
| millions | Current Price | |
| Total convertible issued | 267 | 1.5 |
| Current Outstanding Shares | 98.21 | 3.04 |
| Theoritical price | 1.91 | |
| Potential Upside on Short | 37.04% |
We get to this figure of $1.91 as the expected share price of Knight Capital. However for Getco and Blackstone to continue having a member on the board, they have to keep at least 25% of the preference shares subscribed. Same goes to Jefferies if they want to have a say on the third additional board member. So theo price should be higher, calculated by my system to be $2.19.
Another way of looking at this is using projection of earnings and divide by the number of new outstanding shares to get the EPS. Use a P/E to project where the price would be.
Did a very simple example
| Based on P/E | P/E 10 | P/E 15 |
| EPS | 0.199 | 0.199 |
| P/E | 12 | 15 |
| Price | 2.39 | 2.98 |
| Potential Upside on Short | 21.32% | 1.65% |
Well, I would think that it would be highly unlikely that the P/E would be at 15, but there is a small chance of it going back there.
More like it will take some time to recover to those levels. I am looking to short Knight.
Thursday, August 2, 2012
APB, Thai Beverage, Heineken, F&N, Coca- Cola and Kirin
Seems like this is a complicated one. The dateline is on 3rd Aug for F&N to reply to Heineken's offer for the 40% stake in APB.
First of all, it started when OCBC, Great Eastern and Lee Rubber decided to sell its stakes in F&N (22%) amd APB(8.6%) to Thai billionaire Charoen Sirivadhanabhakdi. Obviously this does not rest well with Heineken.
Heineken has no obvious interest in the other parts of F&N save the brewery side and has made an offer of $50 for F&N's stake in APB. The offer is not conditional upon any due diligence or financing. Just subjected to the Boards recommendation to shareholders, shareholder approval and regulatory approval (if any). The offer will be extended to the APB minority shareholders as well. Currently F&N owns 40% of APB and Heineken owns 42%.
To complicate matters, Kirin Holdings (2503.T) owns 14.7% of F&N. and Mr Charoen is currently amassing shares in F&N raising his stake to 24.1% (as of 31st July 2012). This translates to roughly 40% of voting shares in F&N. I have not seen any Japanese firms giving up on overseas assets especially as growth is slowing down in Japan and where Kirin is involved, they are more likely to acquire than divest. Mr Charoen has made his decision obvious by trying to amass more shares in F&N to make sure they do not divest their stakes in APB.
Rumours are also flying that maybe Coca-cola will make a bid for the soft drink assets of F&N.
However as I look at this, I am not confident Heineken will get their hands on APB so easily. I am abit sceptical when there are cornerstone investors like Kirin, whom will not likely want to change status quo, and Mr Charoen, who just got his hands on F&N and APB shares. Unless a deal is done where these players can roll their interest into the new company, very likely nothing will happen.
I was actually tempted to short APB but have kept myself out of this. Lets see the verdict tomorrow.
First of all, it started when OCBC, Great Eastern and Lee Rubber decided to sell its stakes in F&N (22%) amd APB(8.6%) to Thai billionaire Charoen Sirivadhanabhakdi. Obviously this does not rest well with Heineken.
Heineken has no obvious interest in the other parts of F&N save the brewery side and has made an offer of $50 for F&N's stake in APB. The offer is not conditional upon any due diligence or financing. Just subjected to the Boards recommendation to shareholders, shareholder approval and regulatory approval (if any). The offer will be extended to the APB minority shareholders as well. Currently F&N owns 40% of APB and Heineken owns 42%.
To complicate matters, Kirin Holdings (2503.T) owns 14.7% of F&N. and Mr Charoen is currently amassing shares in F&N raising his stake to 24.1% (as of 31st July 2012). This translates to roughly 40% of voting shares in F&N. I have not seen any Japanese firms giving up on overseas assets especially as growth is slowing down in Japan and where Kirin is involved, they are more likely to acquire than divest. Mr Charoen has made his decision obvious by trying to amass more shares in F&N to make sure they do not divest their stakes in APB.
Rumours are also flying that maybe Coca-cola will make a bid for the soft drink assets of F&N.
However as I look at this, I am not confident Heineken will get their hands on APB so easily. I am abit sceptical when there are cornerstone investors like Kirin, whom will not likely want to change status quo, and Mr Charoen, who just got his hands on F&N and APB shares. Unless a deal is done where these players can roll their interest into the new company, very likely nothing will happen.
I was actually tempted to short APB but have kept myself out of this. Lets see the verdict tomorrow.
Monday, July 23, 2012
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