I am a shareholder in GAME Digital (LON:GMD) and have a question for more experience investors than me.
If I decide to reject the offer, am I prejudicing myself in any way? For instance, if the offer goes ahead and I have rejected it, does that mean my shares will not be sold as part of the takeover and I will be left holding shares which cannot be traded?
Or does my opinion not matter as all small shareholders will get dragged along assuming there is a majority in favour of the takeover?
I'd appreciate understanding where I stand.
Cheers
Francis
Hi Francis,
I think you know what I would do, but that's by the by - I'll try to answer the question you are actually asking, from my experience, but there are probably better informed views to be had.
In terms of levels of acceptance there are a number of milestones to consider.
- First would be >50% - which would give SPD overall control of what Game does. Not particularly relevant I think, at the 40%+ already on the scoreboard I would say there is effective control. In such a circumstance there are regulations that purport to protect the interests of minority shareholders, but whether you put much faith in them is a matter of ,erm, faith.
- At 75% acceptance the company will be de-listed . If this threshold is reached before the end of the offer period, you will still have to the opportunity to accept (although, beware how long it might take your broker to action the request). If this threshold is reached only at the acceptance date, I think (subject to correction by those that know better) there is a small risk that you may have missed the boat and either (i) end up holding shares in a de-listed company or (ii) only been able to sell in the market for a limited time and possibly at a discount to the offer price (there's limited appetite to hold unlisted shares) . It is probably more likely however that there would be a short extension to the offer at this stage as it is the simplest way for the buyer to remove the nuisance of small holders.
- At 90% SPD can (and have indicated that they will) compulsorily purchase the remaining outstanding shares at the offer price.
So getting down to brass-tacks :
- You own shares in a company that is already effectively controlled by SPD, but have until 11th July (less broker delays) to guarantee 30p / share.
- If SPD achieve 90% take-up you will be bought out at 30p / share.
- "The danger zone" is 75-90% where there is a risk that you end up holding virtually un-tradable shares in an un-listed company with a single majority owner.
- A competing bid comes in a better price - with SPD already having effective control this I would deem to be as near to impossible as you can get.
You intimated elsewhere that Odey (and other major shareholders? I haven't followed the story) may hold old and could potentially keep the level below 75% and therefore retain the listing. Maybe these bigger guns would have more power to protect the interests of minority holders than you would individually, but not I would argue to a massive extent. SPD could probably make a reasonable case to move the entire of Games estate under the BELONG banner and/or located in SPD stores, where SPD gets 50% of the profits (but zero risk?) as the Joint Venture partner, before getting a percentage of the remaining profits as a shareholder. The best upside I could see here would be if SPD chose to ultimately make an improved offer to the remaining shareholders, just to remove the irritant - it seems a bit unlikely to me.
I'm obviously not painting an optimistic picture of the outcomes for digging your heels in, simply because I cannot see one. However, I should point out that I could have missed something.
I can certainly understand a feeling of regret about the situation if you feel [i] that you are being bought out a substantial discount to "true value" (I have some sympathy with that thought, but with how much certainty and over what timescales would that "true value" have been released?) and/or [ii] that you are being bullied into selling at this price (again I have some sympathy with this view - but whatcha gonna do?)
I hope that is of some 'help', but at the same time I am genuinely curious if there was some more optimistic outcome that you are/were hoping for?
PS - I am still a (very and increasingly) minority shareholder of one company that de-listed a good few years ago. This was really just a vanity project on my behalf for personal reasons. The company actually treats me quite well, sending me the full Report and Accounts every year and giving me the opportunity to make a nuisance of myself at the AGM (never yet taken them up on that offer). But as the company makes significant losses each and every year and only stays afloat by printing new shares for the Chairman I cannot imagine how diluted my shareholding has become.
Not a typical example though as this is a football club in the EFL.
