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.
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.
Deep Value Investments Blog 
Still an excellent return all things considered. I held this one on and off but was never confident enough to take a significant position.
I agree the market does look toppy with not much standing out as being obviously cheap. I’m currently about 75% in cash. I’ve started buying back into Bowleven (BLVN) at 25p and Enteq (NTQ) at 21p. Both valued at less than net working capital I’ve also a reasonable holding in regeneration company UAI because of its yield and discount to NAV.
Thanks Doug, UAI sounds interesting – will need to understand portfolio much better. I’m bearish on UK property but discount is very healthy and PPP perhaps lowish risk.
Thanks for the idea.
You might like DCI.LON. Similar situation in that the assets are cheap, and you can buy them for cheap as well.
Thanks Sajid, I did invest in DCI, I then changed my mind as there was evidence the assets were in the books too high and would take a while to sell… I posted on it a while back….
So the latest turn of independent directors in favour of the offer is interesting. Classic take dark scenario is now a risk.
More interesting is that Lars Ernest Bader is building up a stake still, presumable to get to 25% to block any delisting?
Interesting one to watch – what are your thoughts here?