Net Assets (Equity) is greater than Market Cap

[Lucstar]

Guys, very quickly

Say hypothetically, publicly listed Company A has net assets (equity) of $30mil and has a market cap of $15mil. Does this mean a certain investor can buy up a majority stake to take ownership of the company and then immediately liquidate to make a $15mil profit? Is this viable and what are the issues with this hypothetical strategy?

Any input appreciated.

Cheers

 

[doctorj]

Some questions/thoughts
1) What is the nature of the assets? Is there a secondary market for them or are they carried based on value in use?
2) Could you purchase the company without driving up the price?
3) What is the cost of winding up the company? Sales cost? Redundancies? Legal? Etc

 

[gooner]

Guys, very quickly

Say hypothetically, publicly listed Company A has net assets (equity) of $30mil and has a market cap of $15mil. Does this mean a certain investor can buy up a majority stake to take ownership of the company and then immediately liquidate to make a $15mil profit? Is this viable and what are the issues with this hypothetical strategy?

Any input appreciated.

Cheers

Theoretically yes

But you can't sell goodwill (well not easily.........)

 

[nioka]

Does this mean a certain investor can buy up a majority stake to take ownership of the company

Any input appreciated.

Cheers

A majority stake does not give ownership of the company. It does not even give complete control.

 

[bellenuit]

Boom Logistics (BOL) is a good example of this at the moment. They claim net tangible assets of 55 cents per share and the SP is currently just 32 cents.

 

[nunthewiser]

Guys, very quickly

Say hypothetically, publicly listed Company A has net assets (equity) of $30mil and has a market cap of $15mil. Does this mean a certain investor can buy up a majority stake to take ownership of the company and then immediately liquidate to make a $15mil profit? Is this viable and what are the issues with this hypothetical strategy?

Any input appreciated.

Cheers

Have you got a "hypothetical" stock code so we can have a "hypothetical " look

 

[brty]

GSL and TIM had assets many times the value of the company when they were placed in the hands of the receivers and delisted. Those assets are proving to be worth nothing like what was in the books and we are talking property here not goodwill.

There are often times when small spec miners have more cash than the value of all the shares, but these are often burning that cash at a fast enough rate that any attempt to takeover the company to grab that cash often finds it has been spent.

A few blokes in the '80's decided to buy lots of companies to get at their assets, by borrowing lots and breaking up the companies. Bond, Skase, Spalvins and Elliot come to mind here.

brty

 

[prawn_86]

Guys, very quickly

Say hypothetically, publicly listed Company A has net assets (equity) of $30mil and has a market cap of $15mil. Does this mean a certain investor can buy up a majority stake to take ownership of the company and then immediately liquidate to make a $15mil profit? Is this viable and what are the issues with this hypothetical strategy?

Any input appreciated.

Cheers

Also, dont forget that if you were to buy a majority stake you would push the price up while you were purchasing, so you may end up spending say $25m to get control.