06 Dec 2021
Tan Ming-Liang and Lim Kailing are offering HK$2.82 per share in a bid to delist Razer.
Razer was listed in 2017 at an IPO price of HK$3.88. This will not go well with some shareholders who have bought at higher prices than the offer price.
The insiders shouldn't be blamed since the market determines the share prices. Investors should know the risk of stock investing - there's no guaranteed profits.
But a delisting offer timed at a point where the share price is below the IPO price will appear to be opportunistic. I believe shareholders would prefer the stock remain listed such that there's a chance share prices can go up in the future.
Some may complain that Tan in 2020 received US$10.457m in compensation (US$9.871m was in shares). This was more than the US$805k net profit generated by Razer. He was reportedly looking to buy a GCB in Jul 2021 at a price tag of S$52.8m. Some shareholders may feel they got the shorter end of the stick while the insiders benefited.
I have no issue with such compensation as I think the performance made him well deserved for the reward. He took the risk to start the business and managed to grow it to a US$1b revenue business and turn it profitable. Revenue grew at 33% CAGR in the past 5 years. I just don't like the delisting offer.
One of the consequences of being a publicly listed company means you have one more stakeholder to answer to - the public shareholders. They may not understand the insiders' situation and will only look after their own benefits, who doesn't? Such seemingly 'low-ball' delisting may leave a bad taste for these investors.
Razer contemplated to list in the US because they believe that they would get a higher valuation. Firstly, most of their revenue were generated in the US and the US market has a deep and wide investor base. Secondly, it has lots of liquidity due to QE and inflating Razer's share price shouldn't be a problem.
But it would be a slap on Razer shareholders' face if Razer delist and relist in the US at a higher price.
Competitor Corsair is trading at PE 17x and PS 1x. Razer is trading at PE 49x and PS 2x. Logitech at PE 14x and PS 2x. So it seems like Razer's offer isn't that bad as it is already the most 'expensive' among the 3 players. Shareholders don't think this way. They will compare the offer price against the price they bought and feel unfair if the offer price is lower.
It would be better if they just keep the company listed and continue to focus on the business. Leave the share price to the markets. No good reasons were given for the delisting offer. I find it disappointing and expect better from a well-respected entrepreneur of a popular consumer brand. It looks opportunistic with this offer.
Shareholders will vote on the offer and need 75% to approve it and not more than 10% against it during the meeting. I am not sure how the shareholders are taking this. I'm not a shareholder.
Delisting is quiet normal when share prices are low. 2019/20 saw quite a few sgx companies privatised. whether it is owners took it private or VC saw the low price and jumped on it. usually if it is privatised by VC, the offers are peg to average market price (read: low ball); if privatised by owners they usually give a fairer value. so, open eyes wide and see who are the owners and insiders before owning a stock. as retail investors, our words do not carry as much weight as uncle Sam Goi. there is probably nothing much we can do about it.
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