Posts tagged ‘Rights Issue 供股’

After the reverse stock split action discussed in our previous article 《威利國際 (00273.HK) 的「吸水大法」》Willie International Holdings Limited (00273.HK) , again, announced the proposal of rights share issue at a great discount, which caused the stock price to plunge 16.76% today.

According to Webb-siteWillie International Holdings Limited (00273.HK) is a member of “Chung Nam Network” listed as follows:

Allied Weli Development Limited
Capital VC Limited – 首都創投有限公司 (002324.HK)
CHINA YUNNAN TIN MINERALS GROUP COMPANY LIMITED – 中國雲錫礦業集團有限公司 (00263.HK)
Cordoba Homes Limited
Dragonite International Limited – 叁龍國際有限公司 (00329.HK)
ENERCHINA HOLDINGS LIMITED – 威華達控股有限公司 (00622.HK)
Forefront Group Limited – 福方集團有限公司 (00885.HK)
Freeman Financial Corporation Limited – 民豐企業控股有限公司 (00279.HK)
Hao Tian Resources Group Limited – 昊天能源集團有限公司 (00474.HK)
HERITAGE INTERNATIONAL HOLDINGS LIMITED – 漢基控股有限公司 (00412.HK)
LONGLIFE GROUP HOLDINGS LIMITED – 朗力福集團控股有限公司 (08037.HK)
MASCOTTE HOLDINGS LIMITED – 馬斯葛集團有限公司 (00136.HK)
National Investments Fund Limited – 國盛投資基金有限公司 (01227.HK)
Poly Capital Holdings Limited – 保興資本控股有限公司 (01141.HK)
RADFORD CAPITAL INVESTMENT LIMITED – 萊福資本投資有限公司 (00901.HK)
Tack Fiori International Group Limited – 野馬國際集團有限公司 (00928.HK)
UNITY INVESTMENTS HOLDINGS LIMITED – 合一投資控股有限公司 (00913.HK)
WILLIE INTERNATIONAL HOLDINGS LIMITED – 威利國際控股有限公司 (00273.HK)

The price trends of most of the above publicly traded stocks in the “Chung Nam Network” have an obvious indication of “Chung Nam Style” : Reverse stock split + Share placement or Rights share issue = Forever Dilution!

The charts below showed how stocks with “Chung Nam Style” look (as great as “Gang Nam Style”!). A big step-up of issued shares most probably represents a share placement or rights share issue. A great step-down of issued shares with a corresponding step-up of stock price very likely means a reverse stock split.

 

 

 

 

 

 

 

 

 

 

Although some people may regard such kind of behavior as  “deceiving”, there’s nothing illegal as long as all parties played by rules. Investors are responsible for what they are investing unless they are being misled. Nevertheless, please pay special attention and be cautious if any of you have invested or are planning to invest in the above stocks.

Lastly, take a look at how HAO TIAN RES GP 昊天能源集團 (00474.HK), a member of “Chung Nam Network”, made use of the company’s money from here:

《昊天能源集團買遊艇作推廣用途?》

 

– Mr. Alpha

Treasure Hunting Reverse Mergers and Acquisitions

Treasure Hunting Reverse Mergers and Acquisitions

The recent anticipation of reverse mergers and acquisitions (M&A) caused the prices soar of Celestial Asia Securities Holdings (CASH) series stocks, namely CASH Financial Services Group Limited (CFSG) 時富金融服務集團  (00510.HK) [up 42.67% on 2012-09-19] and Net2Gather (China) Holdings Limited 網融(中國) (01049.HK)* [up 38.89% on 2012-09-19]. Tracing back a few months ago, another similar case happened. Vanke Property (Hong Kong) Company Limited, a wholly owned subsidiary of  China Vanke Company Limited 萬科企業股份有限公司 and Wing Tai Properties Limited 永泰地產 (00369.HK) entered into an agreement on 13 May 2012 such that Vanke would use HK$1,079 million to acquire 73.91% of the total issued shares of Winsor Properties Holdings Limited 南聯地產控股 (01036.HK) from Wing Tai.

Seeing such a trend of China private companies to get publicly listed on Hong Kong Stock Exchange (HKSE) through this shortcut (reverse M&A), some individual investors began to rush for shell stocks (underlying companies are no longer actively involved in business) or stocks that were deemed to be qualified for reverse M&A, looking forward to getting more than 100% return after the takeover, despite the little (or negative) company profit and low liquidity of most of these stocks. It seems to be no difference from playing with fire since quite often those investors/speculators have to deal with thinly traded as well as highly volatile penny stocks.

For almost all cases, patience is required because only God and insiders know when the M&A will take place. In other words, opportunity costs can be pretty high! Even worse, some of the shell companies would probably perform reverse stock splits and then issue rights at a huge discount. UL CREATIVITY 無限創意控股 (08079.HK) is a real world example of such corporate actions. This is actually a tactic adopted by shell companies to dilute the shares of existing investors and deter new individual investors from purchasing the shares.

Anyways if we are clear about the risks behind speculating shell stocks, here are some common characteristics (not rules!) of shell stocks:

  • Simple business nature of the companies (easy to be understood by acquirers)
  • Business at the mature phase of the business life cycle
  • Big discount on the stock prices compared with the corresponding companies’ net asset values (NAV)
  •  Low debt ratios (No acquirer would like to repay debts for the acquiring companies)
  •  Huge portions of shares owned by major shareholders so as to make things more controllable and to reduce any uncertainty caused by other shareholders (This is one reason why most shell stocks are very illiquid)

Lastly, it is preferable to pick stocks that pay a substantial amount of dividends regularly (see our earlier post “On Dividends”) in order to compensate:

  1. liquidity risk because of low turnover and large bid-ask spread, and
  2. opportunity costs since this “Treasure Hunt Game” can take years (or forever).

 

Mr. Alpha

* In early September 2012, the company proposed to change the name to “Celestial Asia Securities Holdings Limited 時富投資集團有限公司”.

Image Source: http://www.devon.gov.uk

威利國際 Willie Intl (00273.HK) Closing Price minus VWAP Deviation and Price Volume Distribution 2012-07-16

威利國際 (00273.HK) 於2012-07-16 的收市價減VWAP偏差率,以及股票成交價位分佈

玩財技了得的威利國際 (00273.HK), 近日又動作多多,繼去年供股一供八後,現在又宣佈下個月股份十合一。而最近獲公司董事多番增持的消息帶動下,股價在不足半個月內炒高逾兩倍!

附圖見這一個多月以來,該股收市價減VWAP偏差率的10天移動平均值都是正數,且趨勢向上,意味著有人買貨掃上,破了阻力位。從2012年7月16日的股票成交價位分佈圖可見,股價升破了阻力位$0.133 (當時的50天移動平均價),收報$0.163。當天的VWAP偏差率為9.42%,而市價以上成交量 / 市價以下成交量的比例為1.92。這解釋了收市價和VWAP的正數偏差,亦可以說收市價和VWAP之偏差圖歸納了每天的成交價位分佈。

最後要提一點,公司董事的增持成本只是$0.1左右,遠低於現價 (2012年7月18日股價收報$0.26)。似乎公司的「吸水大法」,萬試萬靈。

-Mr. Alpha