The posts about the junket company that was bought has got me thinking about something. Does anyone else think they are going use the better valuation, at least I hope it is better, to make accretive acquisitions by issuing shares instead of paying cash? I'd be surprised if it wasn't part of the listing strategy.
Very possible but I think if they do the deal will be structured the same way the others have been with payments being made over time. So the initial payment could be made with stock or cash from selling stock. But these rooms like Royal Arc that have a lot of cash play will probably be accretive to EPS over time, not immediately, because of the lower margins.
I haven't done the math on a possible share issuance because it all depends on the share price and how much money selling X number of shares would raise. If the price were to rise to $6 selling around 3.5M shares would get them the $20M they need to pay an up front payment for a room like Le Royal Arc. Then you would have to figure the benefit of the cash flow vs. the share dilution of about 3%. One thing is for sure, the companies listed in HK use share issuance a lot to finance acquisitions. First Natural Foods being a good example. I know Neptune has issued a ton of shares to acquire VIP rooms over the last year or so.