A quick fix

ANYTIME there is a battered-down stock that is supposedly below what its owners consider to be fair value or intrinsic value, you can bet that one of the cards pulled from its sleeve is privatisation.

Companies have resorted to share buybacks, and sessions with the media, analysts and fund managers to repair sentiment in a stock that has seen a severe selldown. But nothing works miracles like the privatisation card.

When talk surfaced that the controlling shareholder of Astro Malaysia Holdings Bhd was mulling a privatisation offer, it served to lift the beleaguered share price of the company. The pop in the share price helped what was announced later, which was the resignation of its long-serving CEO and a weaker set of financial results.

Astro’s shares have struggled to keep afloat of where they were listed at and have for long periods been submerged below that level.

The privatisation card has also been played a couple of times when AirAsia Bhd’s share price sank, and news of other companies contemplating making similar overtures to the market has also cropped up periodically in times of stress. At other times, companies have made ludicrous takeover offers that investors at one glance know will not materialise.

The thing with the market is that it will know the worth of a company’s share. Often, there will be irrational selldown of a company’s stock and it serves as a buying opportunity for investors.

The best signal a controlling shareholder can make is to buy the stock of the company when it has been battered. That will send a more tangible signal than talk of privatisation.