Sell Em

13 November 2009

Friday

Sell Em

The last time real estate companies tried to sell shares to the public the Sensex was 25% higher and promptly lost half its value. The boys are back this time asking for $5 billion.

Raising less money at 25% lower prices indicates either that they really need the money, really believe that prices are not going much higher, really need to use the auditors certificates from the end of the September quarter, or really a combination of all.

The certificates obtained at the end of September are valid for six months. An optimist may wait for the next half year certificate to obtain better valuations if the next six months were expected to be better. A pessimist, well, would rush the existing certificate into the hands of investment bankers and instruct them to sell while they can.

Indian companies have raised over $20 billion this year in direct placement to institutions (QIP’s) because there is less paperwork, environmentally friendly, and because the money was there.

The Government of India is joining the queue to sell another $10 billion in shares of Public Sector Undertakings.

The buyers are expected to be institutions well equipped to evaluate the potential value of land bank not owned by the companies asking for money, and the general public that will borrow money to invest in a Draft Red Herring Prospectus that it would not know from, well, a Herring.

The good news is that the US budget deficit is expected to be a tad less than $1.5 trillion in fiscal 2010.

$5 billion does not sound so bad after all