Better known, perhaps, as the “forced seller.”
The phrase has cropped up in news of a tender offer from Indochina Capital Vietnam, an otherwise blameless investment trust listed in London, where the board are thoroughly fed up with their share price trading at a 50 per cent discount to NAV.
The Board is aware of potential internal liquidity issues of certain shareholders and it is concerned that this may be creating an overhang of Shares for reasons unconnected with the Company, its performance or prospects.
The quick solution, Indochina hopes, will be a tender offer for up to 20 per cent of the stock at a price set by auction, along with an aggressive buyback of a further 15 per cent.
If the discount persists IndoChina intends to hold another tender offer next summer – again for 20 per cent.
And just to make doubly-sure this all goes to plan, the former head of prop trading at Salomon Brothers, Gordon Lawson, has been drafted onto the board. Chief executive Peter Ryder is himself an ex-Salomon man.
But who are these people with potential internal liquidity issues?
Less-than-firm hands, we suspect, who were drafted in to support last year’s flotation and who promptly had their fingers burnt.
As for the tender offer, we should welcome more examples of this type of direct action from investment trusts. Discounts have always been large in this sector, but recently they have become laughably so.
Related links:
Exchange welcomes the first Vietnam company to list on its Main Market – LSE