- 62.5p – the share price of Brixton, a UK commerical property company, on Friday night.
- 38.4p – the value of Segro’s all stock offer for Brixton, announced on Monday morning.
- 44p- the current share price of Brixton.
- 32% – the damage done to Brixton’s share price.
What the market missed:
An interest swap that went very badly wrong.From Brixton’s 2008 annual report (page 29).The market value of our net debt as at the end of 2008 was £730.0m compared with a book value of £862.2m. This reduction of £132.2m compares with £13.5m at the end of 2007 and is equivalent to 49p per share.
This amount is not recognised in the balance sheet unlike the fair value provision of derivative financial instruments which increased by £138.3m to £173.2m at the end of 2008, equivalent to 64p per share. Of this increase, £123.2m arose in the second half of 2008 and this was due to the ssignificant reduction in short and long term interest rates in November and DecemberConclusion:
Beware of chasing distressed situations that have had a big run-up during the ‘Dash for Trash’; it can be dangerous for your wealth.
Related link:
EMH – The Dead Parrot of Finance – FT Alphaville
Segro finalises lower offer for Brixton – FT