Actually, it is more likely that this offer will be undersubscribed. When institutional ownership is low, shareholder response to Dutch Auction tender offers is also extremely low. My guess is that the offer range is increased by $0.10-$0.20/share, to $3.00/share at the high end, or the deal gets done at $2.80/share with fewer than 60,000,000 shares purchased. The low trading volume is indicative of shareholder apathy and a shareholder base that is not focused on this deal. But if you believe your own claim, I wholeheartedly encourage you to maintain your short of this stock. The company has some partnerships with major players in the works, and these deals are likely to come together soon. It will be fun to hear your take on things then....
The Dutch Auction is a very good thing for both long term shareholders who believe in the ultimate value of the company and for uncertain shareholders who would like to exit. The company will very likely need to raise the high end of the offer range above $2.80 if they want to get close to purchasing 10 million shares. Even at $3.00, the buyback is a great deal for long term shareholders, since the result will be the per share alue increases for every share repurchased below fair value. The company holds $3.39 of cash and equivalents, and the tangible book value alone is north of that. Since the business can operate without the need of all these tangible assets, it should be valued in addition to the book value, making this company easily worth $5-6/share. So, the Dutch Auction gives a seller a better price than the open market and it creates value for shareholders who have patiently waited for this rational use of excess cash.
As if that matters?? The deal will close in 3 1/2 weeks and, at $2.38, that's a minimum 2.9% return (after the egregious .05 ADS fee from JPM) and more likely a 15.5% return, when this deal gets done at $2.80. And if you convert the ADS shares to ordinary shares, the return improves to 5.0%-17.6%--in all of 27 days. I hope those mystical arbs steer clear and the shorts like you are fleeced. Good luck covering, my friend.
Nice try again. The per-share book value is about to increase substantially. Buying back $3.50 of book value at $2.80 is incredibly accretive, and this offer is for 15% of the outstanding shares. I would not call that dilution, my friend. And you can be pretty sure the shareholder activism will be picking up on this one. I encourage you to increase your short. Wait and see...you will learn the hard way.
Nice try again with the fear mongering. The tangible book value of this company $3.50. The operating business is worth another $1-$2 to a strategic buyer. This Dutch Auction buyback will be done a $2.80--and they may not even clear the $28M they want to buy, since I doubt they can shake loose 10M shares with offers below $3.50. With $4.50-$5.50 of value here, I would be thinking about covering my short ASAP...if I were foolish enough to be short right now. Best of luck, my friend.
Sorry about your bad bet shorting this and best of luck covering.
And why do you think a RMB1.1 billion wealth manager and their affiliates based in China and steeped in the pharmaceutical and nutraceutical industries were willing to buy 1.6 million shares at $2.00? Have you considered the possibility that selling a 1,500 year-old Chinese herbal medicine, which can be cultivated 50x more efficiently than others, might be an exceptionally successful business?
You might want to open your eyes just a little.
I think Zhenyu is an honest guy and wants to do the right thing for shareholders. A larger buyback would be enormously accretive for shareholders and will make him a hero among anyone who (still) owns this stock. He mentions 'pursuing methods to maximize shareholder value' a couple times in his prepared remarks, which is a foreign concept to some foreign companies. Zhenyu remains a U.S. citizen with California roots, and I think he wants to create value for his shareholders.
Yes, that will be an unhappy realization for sellers. The stock was walked down by someone intending to take out their stop losses...or to set a lower trading level ahead of a tender offer. The board just approved an increase of the stock repurchase plan from 30 million to 50 million ADS shares, and this would be totally unnecessary if they intended only to continue their 10b-18 plan. Since they are limited to buying less than 25% of the average daily volume under 10b-18 and the volume has been around 40,000 shares daily, they can only buy roughly 10,000/day or 2.5 million annually. They bought 2.0 million in 2013 for $4.9 million and still had 7.5 million remaining under the previous plan. The only reason to increase the buyback plan is to actually tender for stock. My guess is the stock is being intentionally walked down ahead of a tender.