asymmetry of risk

There are some interesting views expressed on this forum of why TAP has underperformed in the past and but may perform in the future. I beg to differ and will explain why I hold this view.

I welcome critical review of my reasoning.

TAP is an example of Asymmetry of Risk and Agency Theory.
Its shareholders agents are the directors and staff who will be inclined to act in their own interests. Their personal risk/ reward is different to shareholders.

Shareholders buy an interest in the company and are rewarded for risking their capital by stock price rise and dividends.

Staff and directors invest nothing but are paid for their time with regular monthly cheques. Having money in the bank to pay salaries is important as are spectacular windfalls such as wildcat gushers causing option holder windfalls.

It would be logical to distribute cash reserves in order to utilise banked franking credits but dividends and steady price rises are of no value to staff and directors only to shareholders.

Like many companies trading at less than NTA TAP would benefit from directors who have the added perspective of "skin in the game". Until that time I don't expect its behaviour to change.

It will continue to trade at less than NTA.

bacci