Elite KSB RTO?
Disclaimer:vested in the stock, so opinion will be biased.
Elite KSB latest happenings is that the CEO will buy back the china feed mill business so as to improve the attractiveness of Elite KSB as a RTO candidate. Besides that, a final year dividend of 5.5 cents and another 6.6 cents from capital reduction is coming up soon. This has excited traders who bid up the stock.
The money from the dividends will be used by the CEO to buy back the China business, thus the generiosity of the dividends. Whether the price of the stock can remain significantly high above cash value depends on the possibility of RTO. Common sense tells me that chances of RTO is quite high else why would the CEO go through the trouble of capital reduction, buy back of asset and issue a generous dividend when earnings for year was much lower? He could have taken the easy way out and just delist the company.
As the IPO fever has cooled recently, if a company is keen on listing, a RTO may be a better alternative as the company need not search for new shareholders and issue at a lower price.
Entry filed under: Watch your step.