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It's madness because even though I give it 75% in the company to survive, it's still a highly leveraged company in a dying industry in the worse time in history next to 2009 financial crisis.
You can't just invest all your money here, it can go under or dilute you for refinancing or dilute you for CVA etc. It's fine as a hight risk high reward investment as part of a contrarian portfolio.
It's supermasively undervalued in any scenario except that of bankruptcy in first half of 2019. If literally anything else happens people with average at or below 10p will make money.
It's not that hard if you invest in a lot of companies, so as to diversify properly and never ever sell before you get the multiple.
The thing about this type of investing is in the multuples. Min 3x max 10x, so like I said in another post you invest in 10 companies, 3 go bust 4 do nothing and 2 make 5x and one makes 10x. You make a lot without that much risk.
The problem is that it requires a hard stomach. When stocks get at very low prices the volatility in percentage change is enormous. A company going from 5p to 2.5 p is 50% of the investment gone.
Generally it's not recommend. Most people can't handle it that's why stocks fall as they do. Also doing this kind of investing in a sigle stock is just madness.
PYUECK that's very good advice for everyone, thanks.
The shareprice is not a "poor results" kind of market expectation. The current share price means the market expects Debenhams will go to administration very soon.
It's enough for Debenhams to hold it's ground and not go to aministration for the share price to correct to the 10s. Even mediocre results will push the price up.
If the share price was 50p would you say the exact same things? No.
So your view of Debenhams going to liquidation in January is based on the share price, which has absolutely nothing with weather it goes to administration or not. Their financials and viability analysis show that if they go to administration it will be in 2021. Their short terms loans of 130m are easily serviceable. The long term loans of 200m (Bond), depends on their performance until 2021.
On the other hand the take overs, mergers and bidding wars, are very dependent on the stock price. The low share price allows bidders to get it far cheaper, because the bid is always a multiple of the share price (probably like 3-4x usually)
So I would place my money on bidding, not the administration or CVA scenarios.
He will have to wait 2-3 years for Debenhams to go to administration with the current market conditions and based on their latest financial results. If he wants to take advantage of the synergies with HOF, they have to roll up their sleeves and do it now while it's fresh. HOF heavily loss making and in 2-3 years it will move it's own way forward.
@chuzey
Ok someone thinks it's fake. It's fine don't sweat it. They are entitled to their opinion. You've done enough.
No one would waste the time to write something that only repeats what's already known. That's far less probable than the CEO using casual language.
Not every corporate memo gets approved by compliance and bod. I've seen letters far more sloppy for the same occasion.
Peace
Of course there is a chance it's be fake, but If I had to choose if it's fake or real, I would pick real.
Language aside, the content is exactly the proper content for the occasion. It's accurate, straight to the point, inspiring in the end, and at the same time careful not to provide any misleading information or anything that's not already public, (so no market abuse or insider trading risks).
If it's fake it's very well written, and If someone would fake something like this, they would also add more salt and pepper to shake the market up. They wouldn't be that vigilant.
That said the red flags for me would be that it's a printed distributed letter and not an email, as well as the use of his picture on the top left. I wouldn't be expecting those.
nah they already refused his "behind the scenes" loan shark offers. A private placement will dilute other shareholders, as well as give him control of the BOD without a take over offer, so it's not to shareholder's bests interests nor their BODs best interests.
Like they said he should just bid. There is no excuse not to the price doesn't get much better than this.
Very interesting, thank you for the clarification this changes things.
It can only be good news if they are in any sort of negotiation with MA. There definitely is a deal between them is good for MA and the shareholders, at least the shareholders with average price at or below 25p. I don't know about the rest.
Thank you very much for uploading the letter, it's very entertaining for us to be so close to the action. It's very rare that someone follows up to his claims on the internet, so you have my respect for that.
This letter seems to have been issued last Friday when MA did the Loan shark offer, and before the BOD replied to the press. I would not conclude your claims that Sergio believes that they will find a way to work with MA, but there might be a chance that they are in fact talking with him, as shown in the letter. However, seeing that Ian Cheshire invited MA to put his money where his mouth is publicly on Sunday via some sort of ultimatum, I find it hard to believe that Ian was conversing with MA at this time.
So the letter doesn't offer anything concrete and thus I would not consider it market affecting news. The statement written on the letter was already made public on Friday.
Very cool indeed, thanks again.
It depends on the details, from what you're saying it looks like good news.
No offence but the reason I need proof is because anyone can make a forum account and say anything.
I can say MA is my mate and he told me he is bidding for 25p on February, but what good does that do, let alone the fact that serious statements like this given without any proof fall under market manipulation.
Proof or it didn't happen. Like the fact that this site doesn't offer an option to upload a file is enough of a reason.
go to imgur.com upload the image and share the link of the image here.
Administration is the first scenario. What I mean by "no one wants it" is that the shareholder's won't approve any refinancing or dept to equity swap, so it will collapse to administration, and yes at that point there is nothing to be approved. I honestly don't see this happening. See interserve which is where Debenhams will be if it needs refinancing that badly. Shareholders need to approve a dept to equity swap with the creditors.
With CVA I don't agree that there will be dilution close to zero taking the current financial situation of the company. If it deteriorates a lot more maybe so, but again it will take a couple of years for that.
The why do that is already answered in my earlier post about portfolio diversification. This combined with contrarian investing statistically gives you the chances you need. 3 out of 10 companies will turn around, 5 will do nothing and a couple will die. You still make money because of the multiples. The ones that turn around give you 5-10x whereas you only lose 1x from the ones that die. Why hold to zero? Because unlike the debenhams doomsters want you to believe, in reality, none of us here knows anything. Only company insiders know the real chances of survival, how long it will take for bankruptcy, the slack etc, how much the company would worth to another owner etc. More information is needed than management accounts and balance sheets to access that, and none of us here has this information. The ones who have it can go to jail if they trade on it.
Long term holders have it really tough. People who bought this when it was north of 50p, are definately screwed but a deep value investor wouldn't buy at that price. Most deep value investors started buying lower than 20p, My average price is at 10. I can average down more but I won't because I've already invested the amount I want to invest here.
Saitoman if MA bids and his bid is accepted by the shareholder and BODs your shares will be sold to him for the amount that was accepted. You won't have to sell them in the market, unless you chose to do so.
Usually bids happen on the weekends for this reason, so that the market is closed, and it doesn't spike up the price.
Nohearts in a public company everything has to be approved by the shareholders, including the refinancing. Listen to some scenarios on top of my head.
1) No one including MA wants Debenhams. Shareholders don't care anymore, they prefer to kill it instead of refinance it - Shareholders agree to a dept to equity swap that dilutes them to next to nothing. In that scenario Debenhams will be privately owned by the debitors, and yes in this case MA can step in and buy it directly from them. This however is the most unrealistic as well as long term scenario. It will need years for Debenhams to reach that worthless state, where BOD agrees it's worthless and at the same time requires immediate refinance to survive.
2) Debenhams needs refinancing and shareholders still care. - The BOD will ask for approval of as much refinancing needed to pay part of the loan, say 150m out of 300 (if they fail to sell MDN). They will obviously offer refinancing priority to shareholders ofc and practically the creditors will end up owning a 20-29% stake, the shareholders will refinance some by buying new issued shares that dilute them and then they will do a reverse split ETC. In this scenario he will still have to bid and get BOD and Shareholder approval. I am not sure if MA can contribute with his 29% stake potentially increasing it without a takeover offer. I think Debs needs to be delisted for that.
3) Debenhams would like refinancing but they prefer to do a CVA instead. This may dilute the shareholders of some percent of their equity, like 25% but not enough for MA to be able to "snatch" debenhams from someone, there still won't be any controlling owner, the company will remain public etc.
4) Debenhams needs refinancing, and someone else steps up to buy the business with a better offer because, let's face it, the brand's value, the millions of customers shopping there are worth more than the mere 150m dept. He loses everything in this case, I think even his own stake (I am not that familiar with UK mergers and acquisition laws for public companies)
HOF was a private company. It's very different than the public company. You just deal with the owner or administrator like you say and you are done.
So Debenhams can't just be "snatched". He tried to snatch a controlling stake via the backdoor with his "loan shark" offer" but the BOD protects the investors.
Acquiring debenhams is a great business move from MA. He will get a very big piece of the pie from the mid tier high street department stores.
If anyone saw his 2 hour debate about the future of high streets, he almost admitted wanting to do exactly that, which makes perfect business sense.
His aim should be to have controlling stake, if not full ownership in both HOF and Debs so as to control both BODs. He will look into taking advantage of all possible synergies between the two and change their value proposition slightly so that they are not anymore competitors, so as to get an even broader market. In addition him controlling so much retail space will give him even more power in his landlord negotiations.
Lastly he will save so many advertising costs, marketing, back office, and administrative costs, and at the same time Debenhams will give him access to international markets via their owned stores and franchising.
I am pretty the "Debenhams is dead going to zero lol" people don't understand the value of those synergies, the empire that can be built, nor that this time right now among Brexit fear is the time to do it. Comparing all this to the "mere" short term dept of 120m and the 200m bonds -not even taking into account that the dept can be repaid my magasin- the dept doesn't even mater.
Waiting for Debenhams to go to administration might be too much of a risk, the company might turn around requiring his takeover bid to be north of 500 million. Even if the company falls to CVA or administration in a couple of years, since it's a public company everything will have to be approved by the shareholders, requiring a bid from him even then, with the risk to be rejected.
The time is now. Bad sentiment, brexit, the SP to the floor. It doesn't matter if the SP is 5p , 3p or 2p. A bid of 150 - 200m will be accepted by the panicked shareholders at those levels anyway, and he will have a relatively healthy business to expand his empire.
l honestly think we will see his bid next 3 months.
That's so true. Interserve is already bankrupt announced shareholder dilution to pay off debts and it's nowhere near as bashed as Debenhams is in investing forums and articles. So many want to see Debenhams fail.
I am not a conspiracy theorist - however there are people creating accounts only to bash Debenhams stock posting day night, after midnight, on weekends like it's their full time job without even being short. It's surreal.
DC, I assure you the holders know why it's priced where it is, there is no denial. It's a high risk / high reward investment. Holding is the only way to go in investing. There is nothing else no alternative, anything else you do you lose. When you buy a stock you commit. If it fails it fails, then it all comes down to portfolio diversification, investing as much as you can without affecting you phycologically etc.
If you invest in 10 stocks with 5x possible return, then 4 collapse, 3 stay as is, 1 makes 5x and 2 make 10x, guess what, you make money, and lots of it. That's why deep value investing and contrarian investing exists. That's why you misinterpret holding with "denial"
I will hold until 0.0p.