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Xinyuan Real Estate Co., Ltd. Message Board

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  • growth.value growth.value Oct 16, 2012 4:39 PM Flag

    XIN 2 years from now - Where were you when XIN sold for under 5 bucks?

    @Hmmm, First, the scenario 1 is based on the assumption that XIN is worth much more than $3.0 per ADR. Second, many XIN investors have a buy and hold strategy on XIN because they believe XIN is worth at least $5-10 per ADR. If they know XIN's price will cap at $3.0, many of them would have sold most if not all of their XIN shares a while ago when XIN was above $3.0. In the last three months, XIN completely underperformed S&P 500. With upside only about 30 cents from the current price level, they may be better off to invest in something else. The relative opportunity cost will be huge if XIN does not offer enough upside potential.

    PS: I see many management buyout in US firms with about 30% premium got declined by minority shareholders. Apparently, they feel the premium should be more than 30%, and they said the management tried to steal the company from them. The good thing about many US companies is that in the management buyout situation, the deal has to be approved by majority of shareholders other than the one who throws in the buyout offer.

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    • From the "be careful what you wish for files," it'd be extremely dangerous to vote down a 30% premium on a China stock, since as you've previously noted, there's no guarantees in place to protect minority shareholders.

      Instead of raising their offer, the Buyers might turn around and offer less, with a view to buying the company below the holding company level. Even worse, they could go the kamikaze route.

      That point you make about disinterested shareholders only being allowed to vote on a Buyers' offer (so the Buyers themselves wouldn't get to vote the shares they already own in favor of their own offer) does still apply to most China stocks' top company, the holding company, it's just not effect below that level, where the "real" companies live.

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