2GO suspended after voluntarily delisting reveal
Shares of 2GO Group [2GO 9.10 17.9%] [link] were suspended for trading yesterday after the 2GO board requested time for the investing public to consume the news that its parent company, SM Investments [SM 889.00 4.3%], plans to voluntarily delist 2GO through a tender offer. SM plans to use the tender offer to purchase 378.8 million common shares of 2GO (15.39% of the company), which is the entirety of 2GO’s public float. The tender offer price will be set by a fairness opinion. No timelines were provided.
MB BOTTOM-LINE
Maybe SM is just trying to capitalize on a long trend of poor historical performance (both as a stock and as a business) to get a good price for an asset that seems poised to deliver big gains for SM in the medium-term as a pillar of its bet on the growth of the middle-class.
This isn’t that crazy of a move considering 2GO’s relatively small public float, but we’ll have to wait for the fairness opinion price to get a sense for the magnitude of the spend that it will take to complete the deal.
At yesterday’s closing price of P9.10/share, it would cost SM P3.4-billion to do the deal. Side note: here’s another example of insiders trading on non-public information.
By all accounts this announcement was a complete surprise to the investing world. SM didn’t telegraph this move at all. We learned about it after the stock was halted at 1:25 PM on Tuesday, and yet a close inspection of 2GO’s trading on that day (and the day before) will show that trading volume was absolutely off the charts. From January 1 to February 24, 2GO averaged around 12,000 shares of volume per day, at an average price of P6.86/share.
Then, starting on Monday, the volume spikes to 535,000 shares traded. 2GO’s price jumps by 10%.
Then, the next day, in the hours before the halt, 2GO’s volume hit 1,130,000 shares traded, and the price spiked to P9.10/share. It took insiders two days to buy 1.5 million shares of 2GO, which is more than the sum of all the shares that have been traded in 2GO since the middle of November. Why the sudden panic to own a stock at P8/share or P9/share?
Based on the previous patterns of these mysterious buying panics, can we imply that the tender offer price will be 10-15% higher than the close?
If the tender offer price comes in at P10.00 to P10.50, that’s not going to be a good look.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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