The ARA deal

$ARA Asset Mgt(D1R)

Weeks ago, as I could not find any decent deals and that the market in US shown signs (in charts) of stalling, I decided to liquidate most of my fair-valued investments as well as event driven trades.

As such, the portfolio shrank and ARA Asset Management became, and still is, 50% of my entire portfolio, which is of a very modest amount. It was 50% because I couldn't find any outstanding deals, and it was a very low risk trade. Even when it fell from 1.71 to 1.68, I simply held on as I think there is nothing official being filed at SGX. Hence, no worries. At 1.68 it would be a 12% annualized return, but I do not want to increase my holdings due to risk.

So I am glad that the scheme is passed with overwhelming majority today at the meeting in Suntec today. Of course, a few investors were very vocal and rightly point out that retail investors are being denied of any future prospects in this company. Some questions were raised but not answered, and I am not sure if the board was simply not bothered, or that they were tired of answering questions that were raised earlier (than today). Still, none of them raised their voice and replied amicably.

Some of the questions that were raised but not answered:
a) Is there any way that AVIC/WP will take preferential shares?
b) Although ARA mentioned that they need capital, why is it that funds from the last rights issue utilized at such a snail pace (probably infer by the asking party if they really need these capital)

My view is that $1.78/share is a fair deal; though not an exciting or generous one, but good enough to entice most early investors to realize the profits and arbitragers to take on positions. I was the latter, since I felt that the safe price to enter ARA was below $1. Granted, there were periods in which I could buy it at that price, but I started investing really really late. Still, given the opportunity, I wouldn't say that I definitely will buy ARA because it was cheap based on earnings, and earnings, to me, is volatile.

While I can understand that many "long term" investors (funnily enough, they keep stressing this term when they stood up to question the board during Q&As), that is just how the game works. Investors who has bought before the announcement wish to realize their profits are not wrong to do so since,

a) there is a small but possible chance that the deal might be voted down and the price is certain to go back to where it was before the deal announcement due to traders.

b) there is not much upside to justify the risk.

And in selling their shares, the buyers are likely arbitragers.

Most people who voted yes knew that the future might be sweeter if they held on, but that is just how the game works. Move on and find another gem. It is the dream of all  investors to buy a stock and hold on till it is a multi-bagger, but sadly ARA wouldn't be one of them.