Tuesday, December 22, 2009

Allied Farmers: What's it Worth?




I didn't mean to write something else before Christmas but couldn't help myself over the plunging fortunes of ex Hanover investors and their allotment of 1.9 billion shares (yes that is billion with a capital "B") issued last week in lieu of a wind-up of Hanover Finance.

Allied Farmers Ltd [ALF.NZ] shares were always going to significantly drop in value as the new investors in the company headed for the hills and dumped their stock but existing investors in Allied sold shares last Friday after a trading halt was lifted dropping shares from 20c to 14.8c. Yesterday a small number of Hanover investors bailing took the share price down to 10c a share.

There will be a further drop today and further drops as Hanover investors get firm allocations confirmed and they are able to employ a broker to do the business -many Hanover investors would not have easy access to a sharebroker.

What is the company worth though?

Well, that is part of the problem, the market doesn't really know its true value because the "assets" folded into Allied from Hanover are of suspect and therefore unknown value and the prospects for the new Allied Farmers is uncertain at best.

Markets hate uncertainty with a passion.

Those former Hanover investors would have been advised to dump stock ASAP if they wanted some sort of immediate return because I don't think this company is going to stick around for any good length of time but if they think that there is hope for the company that it will survive then the best thing investors could do would be to hold what they have and wait for some concrete results to give the market an indication of true value -the share price will recover if the results are good.

At close of market yesterday Allied Farmers share price valued Hanover assets at around 35c in the dollar, so according to those commentators who eschewed a wind-up of Hanover in favour of a takeover by Allied a 35% return of your money is better than returns from a bankruptcy and they are probably right but the share prices aint going stay above 10c for much longer.





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Resisting Corporate Corruption: Lessons in Practical Ethics from the Enron Wreckage (Conflicts and Trends in Business Ethics)
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c Share Investor 2009