Balrampur Chini Mills- Buyback Case study

Part 2

For this part let us assume that the date today is 6th February, 2017.

Case:

On 30th  January 2017, the whole timeline till the date of extinguishment of equity shares has been intimated by company through letter of offer.

Within the letter of offer, we get to know the actual shareholding as on record date ie. 13th January 2017, we used  Sep 2016 shareholding in the above calculation as that was available on 2nd January 2017. 

        Acceptance for Small Shareholders = 217/2131=10%

        Acceptance for General Shareholders=  98/2655=4%

Till today, the price is up 21% from purchase price. If post buyback price comes in the range as per our assumption, this quantum of profit will only be available in the case where only 85% shareholder under Small category will not tender.

So we would like to square 50% of the position here and book 21% profit on the capital and leave  rest to capture the uncertainty in the acceptance ratio and post buyback price. You may have a different viewpoint and we would love to know why? 

What Happened?

In order to see what happened (Please click on 3 at the bottom of the page)

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