Post by
BlueJay2020 on Jan 06, 2021 1:59pm
So... buy, sell or hold
...are the three options I am grappling with. At a simplistic level, here is my thinking
The sell case is that this offer has effectively capped future gains from the current price, if the offer is accepted - which it probably will be thanks to newer shareholders wanting a quick buck. May as well get out now.
The hold case is that this is simply the first episode in a saga, as we have seen many times before, most recently with HBC and Brookfield - a lowball offer to start shaking the tree which is bumped up once or twice, to say $4.50 as a final offer. Worth holding for an extra buck a share, perhaps, with $3.55 as a reasonably firm (but not binding) backstop.
The buy case is that SIR management are telling us that this chain is not going ANYWHERE as they are prepared to shell out tens of millions of capital (and going into debt to do so) to purchase something that they have absolutely no need to - and at the same time as going cap in hand to the government for subsidies, by the way. They have obviously run the numbers and see a compelling case to get an asset (royalty stream) on the cheap. How long will it take for these early episodes to play out - what if the situation on the ground in Ontario has relaxed such that things are more back to normal, dividends start to be restored and $3.55 looks even more absurdly low. In other words, the fair asking price just keeps going up and up. If SIR decide it's getting too expensive, then we just carry on reaping the dividends and watch the SP keep climbing into the low single digits.
As it stands right now, there is no way I am selling. At a minimum it is a hold. I am not ruling out adding more, especially on any weakness. What are other people thinking?
Comment by
JohnFriesen on Jan 06, 2021 2:03pm
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