Quick update: Osram Special situation
Disclaimer: This is not investment advice. PLEASE DO YOU OWN RESEARCH.
Ouch, another day, another problem. Yesterday, one of my Special situation stocks Osram lost around -7%.
What happened: The largest shareholder Allianz Global Investors (AGI) announced that they do not support the offer as they consider the price of 35 EUR per share as too low.
A few observations from my side:
- AGI had purchased more Osram shares in the past few months. Beginning in July they announced that they crossed the 10% threshold
- However in their press release they talk about >9% stake so they have sold shares in the past 4 weeks, clearly at a price of lower than 35 EUR. So while AGI is critisizing Osram managment for not believing in their company, AGI (or parts of them) also seems to have some problems in believing their own investment thesis.
- The press release reads like a marketing pitch for their “active management approach” with high fees which clearly is under threat from passive startegies
- They state that “at the moment they would not accept the offer” which in my opinion is not a super hard statement and we are relatively early in the acceptance period
- Although AGI states that that they are investors since the initial listing (which is natural if you had owned Siemens shares which they surely had), in various articles it has been mentioned that AGI’s average purchase price is much higher than the 35 EUR offered as they seemd to have increased their position significantly when the stock still went up.
- As the basis for their current opinion they use an “independent fairness opinion”. Why do they need that ?
In summary I would say that to a large extent this looks like a marketing move from AllianzGI to establish them as a “very active” manager and to be able to somehow justify their 1,7% TER for their funds.
What to do now ?
One of my readers recommended that now would be the time to “short the hell out of it” another thinks that this is now already over (and no, this is my own idea). Some readers commented that “this obviously did not go the way that I expected” and that “this is already over”.
Just to set the record strait: In my initial post I clearly mentioned that this could happen:
Major risk is in my opinion politics (loss of jobs), chances to the upside could come from activists pushing for a higher price. In the meantime there could be clearly hick-ups (not reaching the 70% because of activist involvement) but Bain and Carlyle are pros.
Of course now more of the existing shareholders could think: Well, maybe there is more than 35 EUR in this. On the other hand, with the increased discount, more arbs will be interested and if they buy they will certainly tender.
I think it is also fair to assume that Bain and Carlyle foresee something like this and have contingency plans.
In summary (and I could be very wrong of course), in my opinion nothing has changed: We have a somehow weak statement from a 9% shareholder that he might not accept. As a consequence, the spread got wider, i.e. pricing in the potentially larger risk. The acceptance period runs for another 4 weeks and the sponsors of the bid clearly will have some counter measures prepared.
So in my opinion it doesn’t make sense to sell at this stage and at this price..