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3/11/2009

Good that NOL shares were hammered down

Yesterday there was this market rumour that NOL may be making cash calls and its shares were duly sold down. This is what investors should do when companies take the convenient way to demand cash from cash strap shareholders, in a very difficult time like this. I hope investors will continue to sell off companies making cash calls. And it is highly irresponsible for such companies to do so when some don't even need the money or have other sources of fund. What is happening? Are these companies so broke or they have lost their pants somewhere and needing the small shareholders to pay for their folly? Robbing poor Peter to pay Paul?

7 comments:

Matilah_Singapura said...

Cash call ==> liquidity 'crisis'.

It is not unusual to have a liquidity crisis in these times. Anyway, this is still a rumour — perhaps to drive down the share price... who knows?

If investors entered into and agree to voluntary contract, and one of the conditions is that they agree to honour a call for additional cash, then they are obliged to adhere to the terms of agreement.

Redbean, don't jump the gun lah with your pontificatory judgements. It's only a rumour amd it could be true or false.

redbean said...

didn't i say that it was a rumour? i am just cautioning against irresponsible companies intending to do more cash calls. dbs, capitaland, chartered have already done that and their share prices have suffered. now who is next?

nol is now down 5.5c. whether it is a rumour or will happen, the shares are being attacked.

DB10 said...

GLCs, one by one, are all calling for money. Need to top up the reserves, more bullets to buy foreign toxic assets

Anonymous said...

Redbean, I am a novice at this. Please see if I am making sense or talking cock.

Healthy companies with large debt to asset ratios may want to reduce these debts by raising money from shareholders. This is not necessarily bad because such reductions will up the NAV of the shares,previously saddled with large debts, although diluted.

Confucian.

Anonymous said...

In good times such actions may be looked upon as a sign of getting more funds for expansion, but in bad times it may mean a sign of desperation.

redbean said...

when the economy is in a healthy state, it is a fair proposition to raise funds for growth or to reduce debt.

now we are in a crisis situation. the shareholders, big and small are all cash strap. one or two companies doing so may still be absorbed by the market. when every joker thinks for himself and rush ahead to raise fund before the fund dries up, we will get into trouble.

let's say another 20 companies ask for money and each asking for $300m, that will be $6b of liquidity wipe away.
and how many investors can keep on emptying their banks to pay for these companies?

worst, some of the companies don't even need the cash.

highly irresponsible is the word.

Anonymous said...

The early bird catches the worm and soon dies of food poisoning! The others also die because they were too "responsible" !

Confucian.