Thanks for the link, I am not planning this as a long term hold though. And I don't think it is a fraud. There is no way that Chinese state companies are bidding on this if it was. And I don't think the CEO would have bought 1 million shares if it was. Given how the bidding war has gone, and how the founder has muscled his way back into this company, I think he still has a fair bit of guanxi.
I see this as a bet on merger closing, and if nothing materialises in next 3-5 months, I am out with limited downside risk. I will probably sell a portion of my position by late August if there is no definitive agreement.
Yeah I think that is the main reason he got involved. Zhejiang Supcon was listed in lated 2020 and got a ridiculous valuation.
Wouldn't surprise me if it was mismanaged too by the previous CEO, so a double whammy. Clean up the business and relist it in Shanghai and instantly own a large net equity stake without putting up much capital of his own.
Okay. By the way, I fund I worked for many years ago owned Wuxi Pharmatech. I seem to remember it was a billion dollar company, give or take. After it was privatised and relisted in China / HK, I think the combined valuation of the successors Wuxi Apptec and Biologics is probably 50x that number
I think the likeness here is that both were based on a rumor of a take private happening. And both are in Asia where transparancy isn't all that great.
There are four major differences between this situation and MX though:
-A bid has already been made, just no definitive agreement.
-The time line is pretty clear, 1-2 months.
-Insiders have a pretty clear economic incentive to make this deal happen (play arbitrage game between US exchange and Shanghai exchange which would value this company higher).
-It does not seem likely that HOLI will go into a cyclical downturn soon (like happened with MX) with their large order book.
There was another rumor today that insiders are close to finalizing the take private:
This is old, but should be read. http://brontecapital.blogspot.com/2011/07/hollysys-blog-post-inspired-by-railway.html
Thanks for the link, I am not planning this as a long term hold though. And I don't think it is a fraud. There is no way that Chinese state companies are bidding on this if it was. And I don't think the CEO would have bought 1 million shares if it was. Given how the bidding war has gone, and how the founder has muscled his way back into this company, I think he still has a fair bit of guanxi.
I see this as a bet on merger closing, and if nothing materialises in next 3-5 months, I am out with limited downside risk. I will probably sell a portion of my position by late August if there is no definitive agreement.
Buying out the company and then re-listing on the mainland could make sense, even if it were a fraud
Yeah I think that is the main reason he got involved. Zhejiang Supcon was listed in lated 2020 and got a ridiculous valuation.
Wouldn't surprise me if it was mismanaged too by the previous CEO, so a double whammy. Clean up the business and relist it in Shanghai and instantly own a large net equity stake without putting up much capital of his own.
Okay. By the way, I fund I worked for many years ago owned Wuxi Pharmatech. I seem to remember it was a billion dollar company, give or take. After it was privatised and relisted in China / HK, I think the combined valuation of the successors Wuxi Apptec and Biologics is probably 50x that number
This reads even worse than Magnachip (MX).
please explain - not familiar with the MX story. just in short
I think the likeness here is that both were based on a rumor of a take private happening. And both are in Asia where transparancy isn't all that great.
There are four major differences between this situation and MX though:
-A bid has already been made, just no definitive agreement.
-The time line is pretty clear, 1-2 months.
-Insiders have a pretty clear economic incentive to make this deal happen (play arbitrage game between US exchange and Shanghai exchange which would value this company higher).
-It does not seem likely that HOLI will go into a cyclical downturn soon (like happened with MX) with their large order book.
There was another rumor today that insiders are close to finalizing the take private:
https://seekingalpha.com/news/4005175-hollysys-automation-gains-on-report-management-buyout-consortium-finalized
So I made this one of my largest positions again today.