SKT Sky Network Television Limited.

[Quantitative Easing]

Shareholders too should not let emotion get in the way of a fair offer. If I have paid $1m for a house, the housing market crashes and now its valued at 500k. If someone came and offered me $600k I would be foolish not to take it. But since I paid $1m for it I would say no? Don't think so. Past price, what people paid for a stock etc, should have no bearing on anything in the future. Granted, I know a lot of people foolishly cannot sell a stock at a loss and would continue holding.
.

Na i feel like most people would hold on till the housing market recovers back to over 1 million... Unless they are having cash flow issues. Again for sky are we looking at purely based on share price or it's intrinsic value? Even on houses where murder or crime has occurred it does not sell that much below intrinsic value. So i think intrinsic value is important, that's why i suggested a low ball 6-7 EBIDTA...

[mistaTea]

It's not going to be sold for less than 30 as that would be below an independent valuation.

Infratil raised $300m. They're paying off $50m debt, so that leaves them $250m. If they're going halves, that means they've valued it at $500m, which is pretty close to 30c.

$500m is a nice round number. 30c is also ASB Morningside valuation. That's where I see a likely deal being done.

Yeah I was thinking along similar lines. Morningstar and Simply Wallstreet both had similar valuations of around $450M before the MC. They both seem to take pretty conservative assumptions of earnings and a high discount rate...

Be that as it may, if both of these outfits took the view that the business was worth $450M before the CR...then it is hard to see how it would go for $50M less than that AFTER $150M of new capital has just been injected (which is what 24c/share would represent).

Not rational at all. Which is why I personally think $600M is closer to where it ends up in the absence of a bidding war.

[blackcap]

Na i feel like most people would hold on till the housing market recovers back to over 1 million... Unless they are having cash flow issues. Again for sky are we looking at purely based on share price or it's intrinsic value? Even on houses where murder or crime has occurred does not sell that much below intrinsic value. So i think intrinsic value is important, that's why i suggested a low ball 6-7 EBIDTA...

No they would not. They would sell their house for $600k and buy like for like for $500k.

Past price is totally irrelevant when evaluating opportunities.

Or an alternative example. Lets say you bought a business for $1m that had free cash flows of 100K per annum. (PE you need is 10) Now lets say there is a
market shock and the cash flows are going to be 40k per annum ad infinitum (valuing the business at $400k by your metrics) If someone came and offered you $600k for the business it would be stupid and nonsense to say "no I will not sell because I paid $1m for it".

[Quantitative Easing]

No they would not. They would sell their house for $600k and buy like for like for $500k.
".

But then in 5 years the 600k house would be worth 1.2m and the 500k house would only be 1.0m, if you took it as blanket market recovery..so by selling you miss out on 200k of future profits and probably less rent as i assume 600k house might bring in more rent than a 500k house. I suppose you are right about Sky though, it doesn't have a bright future (barring a takeover) with Martin in charge. So a very low ball offer might get approval from shareholders.

[Quantitative Easing]

Or an alternative example. Lets say you bought a business for $1m that had free cash flows of 100K per annum. (PE you need is 10) Now lets say there is a
market shock and the cash flows are going to be 40k per annum ad infinitum (valuing the business at $400k by your metrics) If someone came and offered you $600k for the business it would be stupid and nonsense to say "no I will not sell because I paid $1m for it".

Of course you would try and sell it at that instance as your cashflows would be severely affected...

[winner69]

But then in 5 years the 600k house would be worth 1.2m and the 500k house would only be 1.0m, if you took it as blanket market recovery..so by selling you miss out on 100k of future profits and probably less rent as i assume 600k house might bring in more rent than a 500k house. I suppose you are right about Sky though, it doesn't have a bright future (barring a takeover) with Martin in charge. So a very low ball offer might get approval from shareholders.

Seems a fair comment .....takeover good for shareholders or many years of pain for shareholders as the dog dies

[mistaTea]

No they would not. They would sell their house for $600k and buy like for like for $500k.

Past price is totally irrelevant when evaluating opportunities.

Or an alternative example. Lets say you bought a business for $1m that had free cash flows of 100K per annum. (PE you need is 10) Now lets say there is a
market shock and the cash flows are going to be 40k per annum ad infinitum (valuing the business at $400k by your metrics) If someone came and offered you $600k for the business it would be stupid and nonsense to say "no I will not sell because I paid $1m for it".

All very true.

Being rational at all times is key, regardless of what you are investing in.

But it is also fair to say that you can't have a bob both ways Blackcap.

On one hand you (correctly) suggest that people facing a realised loss need to make sure they are being perfectly rational because if the business is only now wiorth $350M and the benevolent Infratil offers $400M...they should grab it with both hands, because they are actually getting the best possible outcome they could hope for. Fine, makes sense.

But then your original post indicates that 24c would get through because a lot of the shares have recently been issued at 12c...so a number of shareholders would be realising a profit at 24c. You do not mention anything about them pausing to reflect on whether or not 24c represents IV...it is just that they will be induced because the price is higher than what they paid. Apparently that is all good though.

If we are talking about IDEALISM...it shouldn't matter what you paid fullstops. Even if you paid 1c/share for Sky...it should then be irrelevant that 24c happens to be a 24 bagger for you... if the business is actually worth, say, 40c then it would be irrational to sell for cheap.

But there in lies the problem...most people are not rational. And because they are not rational, anybody planning a takeover bid needs to factor the irrationality of human beings into their opening offer in my view.

[Balance]

So much speculation about takeover.

Question is why post capital raising, not pre capital raising when the company desperately needed a white knight.

Would have been a walkover then for an interested party to take the company over.

Think that through carefully.

[Quantitative Easing]

But then the real question is how was Rugbypass worth NZ$60M and Sky only worth 300M? Easy...Rugbypass was probably worth no more than 5M...Martin taking our dividend money and squandering it.

[Yoda]

I think the million-dollar hous analogy is like the whole share market not one share. If you have a 1 million dollar house with a mortgage there's no way you can sell it for 600. You end up with 400 in negative equity to repay. You would have to do some improvements to the house to bring the value up. And then sell.Likewise , sell the shares for a lower price and take the loss, but stay in the share market and reinvest to make up a loss but stay in the share market