[sandyc316]

For long time investors it’s shocking!.. feels like a move like Demonetization, a surgical strike (not sure on whom… maybe Goenkas?) which brings a lot of pain and hurt. But the promoters have thought this through because for someone who is watching from outside they might not see much wrong in this –
1) The warrant price is at 55% premium to the current stock price. That is very good premium. Not the promoter’s fault that the market has set such a low valuation.
2) The money that is being raised is equal to the current market valuation of the company! How did the company find investors who are fool enough to put in money equal to market cap of the company? Incredible job by the promoters!
3) If Reliance were to issue warrants at Rs. 3100 (at 55% premium assuming cmp – Rs. 2000) equal to the market cap of Reliance, how would the market react? Will investors feel cheated?

[bitran]

One word.. Disappointed. Felt like being slapped hard on the face by Promoter..

Putting my emotions aside, tried to think hard on why SKR has done this? He knows for certain that the company is very much undervalued. Then why giving away this much equity to another person/entity?

1. He is trying to bring some strategic partner onboard and they negotiated hard for a decent stake. When giving them the required equity, promoter percentage may go down and hence he also needs to increase the promoter percentage which resulted in this much dilution.( May be the PO team who invested at Rs10 already should also be given a stake to compensate or are they the strategic investor?)

2. Why at this price? The investor could have bought a certain percentage of shares from open market. With the price anyway under 10 and even under 5, there will be lot of equity to accumulate. The moment the share cross 15-20, many retail investors will book profits. ( Or is that the intention? Give them some X% equity and let them pick the remaining from open market and thereby raising the stock price to a respectable level? In such a case, the strategic investor average would be higher as they have to buy from open market for remaining quantity. To compensate for that this price of 7.7?)

3. Why do he require this much money now? PO money is locked for Axis settlement & LOC money for Daum settlement. Or Is it that they want to settle Daum, even before they get LOC and LOC is delayed or cancelled? Or this equity is for the lender who gives the LOC?

4. Why can’t he explain the situations openly with investors in conference call? Why do we have to second guess on his actions? Where is the corporate governance?

[bitran]

@SKR, ( If you are reading this )

If there is a reason why the management is doing this, we have the right to know. Most of us will understand if the promoters needs to increase the stake as they have toiled hard for the company but we really do not appreciate you leaving us to second guess things. The dilution is very hard on retail investors who did not get anything out from the company for long. Some of them are staying with the company for 7-8 years. All other similar companies are flying high in this bull run and BCG under Rs5. Can you think about the opportunity cost for the retail investors? We believed in each and every word you uttered in the past conference calls. Don’t you feel, it is your responsibility to reward the shareholders? How long we have to wait to gain anything out from BCG? If rewarding the shareholders is not a CEO’s responsibility, then it is whose responsibility?….

[odysee]

@sandyc316, Reliance shares are not manipulated to be quoting around 2000. And they did not go up to 5000 plus a few months back, to fall back to 2000 ( equivalent of BCG Rs 5 going to Rs 13, and dropping back to 5 and being maintained there for 2 months, to enable a massive convertible warrant proposal at 7.70.
Yes, the long term investors, who so fervently believed in SKR and the company, are confused and feel cheated, as nothing in the last many months of interaction with the management through conference calls or personal visits indicated even a potential scenario of this kind.
We await the notice for the AGM to shed some light on this unfolding drama. Mr Reddy’s ability to disappoint retail shareholders remains intact and undiminished as of now, and is gathering strength even as outstanding issues are getting resolved.

[sandyc316]

@odysee You can not take that argument to the outside world and make it stick against the promoters. Thats the sad reality.

Unfortunately even though for us, the long term investors, the confidence in promoters is shaken and maybe received irreparable damage, for rest of the market nothing changes. It will not lead to the market valuing the company any lower than it currently does.

Only because we’re so emotionally invested that we can feel the betrayal that nobody else can.

[drjaysee]

Dear All,
My perception is SKR would have received LOC approval and he want to increase promoter holding since he knows very well about the value and potential of BCG in the long run. The current price of BCG is undervalued and that’s why they have kept the price at the lower level for the past 3 months (so that they can fix the PW price at the low level as per SEBI norms -average of 6 months). It’s better let’s all wait for some more time and see the drama. Now the BCG’s price will spike like anything in the coming days before AGM to get rid of retail investors (profit bookings) & again promoters will grab some more quantities from retail investors since promotors knows very well about BCG’s potential. Let’s control our emotions and be patience and We will get clear picture in couple of days.

[ramganesh1982]

I see there r multiple problems here with great deal of permutation combination of solutions .. from my understanding there r some open problems the management will be facing w.r.t handling market ..
There are too many shares with public and many r holding their stocks with feviquick for years .. now additionally new investors added to the tally after Oak exit and pledged stock release (more to come when axis also releases). In order for the management to take control of shares percentage (promoter to pull back shares from public and operators) .. either they have to shell out a lot through buy back plans which the company obviously won’t b interested in – as it has spent enough time with debt and financial issues in the past .. or option b) approach operators 🙂 and deal with them which is obviously is illegal .

The current approach in one way is good as it sounds . The reason is that they can later (after a year) bring down the equity base (may be like subex) . And it’s a legal approach . Moreover many retail investors will drop the stock including the operators group as it is diluted to the core – worrying for its loss of intrinsic value (+ it’s bad history) . So only those who still believe will stick and benefit (which will obviously b a lower percentage)

All said – I hope the management tries to be open and straight forward .. will have to wait and see who has taken over lakhs of shares in the last few days – if it’s the promoter or the person/entity who is entitled to get preferential warrant – this might benefit long time retail investors – the point is if someone has an avg of more than 8rs .. they will b in a dilemma … One thing is very clear to me – retail investors never have a say in any company – we are just like parasites who can benefit from the host – or just treated that way by market which is huge and quite complex

[vgsatwork]

If SKR keeps major (named share holders in SHP – both individuals and corporate) shareholders happy by NOT diluting the stake, he wouldn’t have any issues getting approval for the preferential warrant.Quick Back of the envelope calculation suggests that if all these shareholders have to keep their stake constant even as retail shareholders stake is diluted significantly, he would have the support of more than 60% shareholders and can push this through without any issues.34 crore shares could be explained using this theory. That way he would have incentivised these shareholders NOT to keep the price the low and let the stock appreciate and exercise their warrants…

[Shivashankar]

My assumption is he may issued warrants to Brad Cohen and Jacob nizri and promotors themselves.and his close friends.lets wait and see.

[Sobha]

There are two sides to be examined here. With the proposed dilution, the EPS will come down to just above 5. As skr has already told, with the LOC procedure complete, the EPS will go upwards by 30%. Further, there is enough unreported earnings. There are at least some subsidiaries, the income of which is not at all included in the present EPS. Lycos alone will add 5 – 10%. More than that there will be annual increase of 15 or 20% in the next two years with this money and LOC, as working capital condition is improved. This will make the EPS again near to Rs. 9 in the next two years. So if there is a target of 500 that will come down to 400. Not below that.
Having said that the other side also is to be considered. None of the above arguments frees the management from its unethical and fraudulent behavior. The present dilution clearly proves that the entire stock price manipulation was done in the interest of the management only.
Even while diluting, he could have done it together with the earlier preferential offer. Again he has extended the time by one year in order to increase his voting rights convincing the retailer that once the earlier PO was accepted, everything will be fine. Thus, he has given 7% shares to his close friends and classmates. Even now, he is not disclosing things fully. If so, the subsequent question comes that, how such a fraudulent promoter can be trusted in the future?

[sagraa]

Only wishful thinking is that he will allocate these warrants to himself and couple of years down the line company does share buyback to reduce equity.
If this is the case then it is extremely positive.

[JRS]

Mr.SKR

Hats off to you, you should have started producing suspense movie and you would won Oscar Award.

I remember a scene in Dangal movie, where Aamir Khans nephew tells Mamaji always keep things suspense.

Why can’t you be transparent and why you keep things so suspense. Nor Axis, nor Daum, nor LOC your suspense is making market speculative.

you have given a weapon in the hands of manipulator to manipulate, the weapon is your suspense.

You say you don’t understand market, but your moves shows it clearly you are Master.

Your one statement of issuing Warrant is raising so much of speculation, as it is not clear to understand.

I am sorry to say, you don’t deserve to be a CEO of public limited company, better you try your luck in politics.

[drpram]

I completely agree with optimus primus at his post#9580..
In one word.. Cheated but excited and happy..

At last the bug has come out of its box.. The share price and issues were kept under purposely..He kept everything ready for the business to ripe and wanted to grab shares. But it started raising continuously from 4 to 12. He brought down the share price by making the OAK to sell his shares.. Waited for a low price and so not to settle the daum and axis settlement…
He of course achieved the mission and from now on the shares will rise..
Now i am more confident that each and every expectations if us will be settled and the stock will find its value..
Cheated in the sense the shares will be diluted to a significant proportion
Excited in the sense, it will move and most issues will be settled..
The members may be angry with me if i say He need not give any respect to retail investors..who are we really?? Abused him, scolded him , just money minded and put our money just for our personal greed.. If share moves 5× , 50% of the retailers will sell and exit..
My aim too is to sell half of my shares if reaches 5× , and wait with rest..
Sorry, these are just my wild guess and thinking..not to harm anybody’s sentiment..
But, I hope the coming days will be bright.. Expect axis settlement before 13th and Daum subsequently..
We just need the share price to go up .. I think it will happen soon.. Do not worry about dilution and the feeling of getting cheated and all..

[myainvest]

Lot of speculations and burstouts. I’m only interested, if this move will result in increase in share price? That’s all I need and why I invested in BCG in first place or in any other shares for that matter! Not worried about other ethical/ unethical things!

[VivekRT]

BCG should not be compared to any of the following companies.

Affle is a new and clean company and would always get higher valuations as compared to a established player. business model is also different.

TTD is a usa listed company and so one the basis of its valuation in the Usa market one can not expect such high valuations within Indian markets.

[VivekRT]

I also believe the the company or the promoter is also actively involved in building a digital marketing eco system and for the same they have been constantly investing in startups around the world as venture investor or on a contract basis. It would be interesting to see new acquisitions with the loc money to strengthen our position in the digital marketing field worldwide. that will eventually lead to rerating and will open up new doors for the growth to step in. in my understanding we have crossed the dark tunnel and are finally into light.
Let us be sure of the fact that we have #BrightDaysAhead.

[VivekRT]

I believe that there is only one thing that is most important for Brightcom group at this level. LOC
Even if bcg settles Daum and we reach some decent valuations. it would be difficult to sustain them without growth. we will be able to achieve growth and free cash flows only above the threshold of $475 million. currently our digital marketing revenues are at around $325 million. in order to increase digital marketing revenues, the company needs huge funds and that can be availed by LOC against the receivables of the company.
As there management is making constant efforts on the LOC front and assuming that if all goes well and the loc comes through. we might easily achieve our target of generating digital revenues above $500 million.

[VivekRT]

#LOGAN

sometimes things need to be done in order to reach where we belong.

[Logan]

@VivekRT, I also believe that. See I don’t give importance to Daum and Axis as they don’t impact the business much but I know how important they are for changing market sentiment. The sentiment will change only if these are closed. But problem is with their transparency.

Suppose you have some health problem and you go to a doctor and the doctor tells you that you need a surgery. He won’t say what problem you have or he won’t say where he has to operate on but he only says you need a surgery. What will be your reaction? Don’t know how good an analogy this is but my point is it’s better to give all the details at the beginning itself so that no-one has any confusion.

Obviously the company will update us later but my question is why can’t they update us now? This is a very big decision and impacts the company a lot. What will they lose if they update now? It’s not a sensitive matter also. For sensitive things like Axis and Daum, they need not take our approval but for this they need it and it’s better to tell us at the beginning itself.

This is what Warren Buffett says about communication and it suits BCG perfectly:

“If you can’t communicate, it’s like winking at a girl in the dark — nothing happens. You can have all the brainpower in the world, but you have to be able to transmit it.”

The management may have good intentions but they should communicate well with the investors to gain trust. It’s the investors who will value the company. If they keep repeating these mistakes then the market won’t take them seriously. The price may go up to say 3-4PE but to get the right valuation the company deserves, the management has to be more transparent.

[JRS]

IN The letter issued to BSE it states

“ Warrant will be issued subject to the members and regulatory authority approval”

Who are the “members” mentioned in this letter.

Also in the same letter the management said “The details to whom this warranty will be issued will be circulated to Exchange and Shareholder before AGM”

Whether SKR has not revealed the Promoter to whom the Warrant will be issued is not approved by the Members??

And according to Corporate code of ethics they are not supposed to reveal it before the approval of Members and Regulatory authority.

Request that “somebody throw a light on this statement and give some understanding.”

[Author]

Posts